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Selected MENA countries' attractiveness to G7 investors

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  • Abid, Fathi
  • Bahloul, Slah
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    Abstract

    The objective of this paper is to evaluate the relative attractiveness of seven MENA countries (Algeria, Egypt, Iran, Saudi Arabia, Morocco, Tunisia and Turkey) as a location for foreign portfolio investment (FPI) from the G7 investors' viewpoints over the period 2001-2005. We suggest a methodology based on the combination of the gravity model, the analytic hierarchy process (AHP) and the goal programming model (GP). The gravity model is used to determine the attractiveness factors of a country with respect to FPI for 30 investing and 43 receiving countries. Results show the importance of information costs and bilateral trade in the determination of the bilateral asset holdings. The AHP method is applied to prioritize the set of FPI location alternatives according to variables' significance in the gravity model outcome; information costs, bilateral trade, GDP, investment freedom, institutional quality, and geographic distance. Results show that in general Saudi Arabia is the best destination for Japanese and US investors, Turkey is the favorite location for French, German, Italian and British investors and Algeria is the preferred country for Canadian investors. A combined AHP-GP model has been used to determine the degree of portfolio investment in each MENA country from the viewpoint of G7 investors. The relative attractiveness of MENA countries varies over time and across investors. In general, over the period 2001-2005, the most attractive country is Iran for Canadian, French and Italian investors, Turkey for German and British investors and Saudi Arabia for Japanese and US investors. For a MENA country to attract more FPI it should especially improve bilateral trade and institutional quality and reduce foreign investment restrictions and information costs.

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    Bibliographic Info

    Article provided by Elsevier in its journal Economic Modelling.

    Volume (Year): 28 (2011)
    Issue (Month): 5 (September)
    Pages: 2197-2207

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    Handle: RePEc:eee:ecmode:v:28:y:2011:i:5:p:2197-2207

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    Web page: http://www.elsevier.com/locate/inca/30411

    Related research

    Keywords: Foreign portfolio investment Attractiveness Middle East and North Africa G7 investors Gravity model Analytic hierarchy process Goal programming;

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    Cited by:
    1. Milenkovic, Nemanja & Vukmirovic, Jovanka & Bulajic, Milica & Radojicic, Zoran, 2014. "A multivariate approach in measuring socio-economic development of MENA countries," Economic Modelling, Elsevier, vol. 38(C), pages 604-608.

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