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Natural Resources and FDI in GCC Countries

Author

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  • Mohamed Elheddad

    (University of Hull, Hull Business School (HUBS), United Kingdom)

Abstract

Natural resources are a blessing for some countries to attract FDI but cursed for others. Existing literature argues the suggestion that resource-rich countries attract less FDI because of resource (oil) price volatility. This study examines that natural resources discourage FDI in GCC countries (the FDI-Natural resources curse hypothesis), using panel data analysis for six oil dependent countries during 1980-2013 and applying several econometrics techniques. The main findings of this paper is that natural resources measured by oil rents have a negative association with FDI inflows; this negative impact is robust even when other FDI determinates of FDI are included. FDI inflows decreased between 0.15 and 0.92% when oil rents increased by 1%. In addition, the empirical results show that trade openness and labour force are the main factors that encourage FDI, while political instability and corruption deter FDI inflows into GCC countries.

Suggested Citation

  • Mohamed Elheddad, 2016. "Natural Resources and FDI in GCC Countries," International Journal of Business and Social Research, LAR Center Press, vol. 6(7), pages 12-22, July.
    • Handle: RePEc:lrc:larijb:v:6:y:2016:i:7:p:12-22
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    References listed on IDEAS

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    More about this item

    Keywords

    Economic growth; endogeneity; FDI; GCC region; natural resources; panel data.;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • Q33 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Resource Booms (Dutch Disease)
    • Q35 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Hydrocarbon Resources
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • L72 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Mining, Extraction, and Refining: Other Nonrenewable Resources
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products

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