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Trade and Foreign Exchange Liberalization, Investment Climate and FDI in the MENA

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Author Info
Khalid Sekkat () (DULBEA, Université libre de Bruxelles, Brussels)
Marie-Ange Veganzones-Varoudakis (CERDI and World Bank)

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Abstract

The paper assesses the relative importance of trade and foreign exchange liberalization, infrastructure availability and economic and political stability in increasing Middle East and North African (MENA) countries attractiveness with respect to FDI. The analysis is conducted for total FDI and for FDI in manufacturing. The results show that trade and foreign exchange liberalization, infrastructure availability and sound economic and political conditions increase FDI inflows. Their effects are much higher for FDI in the manufacturing sector than for total FDI. This result is robust to alternative indicators of trade and foreign exchange liberalization, and to change in the specification. The message to MENA’s policy makers is twofold. First, efforts toward trade and foreign exchange liberalization should be initiated or further increased in order to make the region attractive to foreign investors. Second improvements in other aspects of the investment climate are important complements to liberalization and result in additional and sensitive increase of FDI inflows.

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Paper provided by Université libre de Bruxelles, Department of Applied Economics (DULBEA) in its series Working Papers DULBEA with number 05-06.RS.

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Length: 23 pages
Date of creation: Feb 2005
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Handle: RePEc:dul:wpaper:05-06rs

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Related research
Keywords: Reforms; MENA; FDI.;

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Find related papers by JEL classification:
F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
F15 - International Economics - - Trade - - - Economic Integration
K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law

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  2. Carlos Martinez-Mongay & Khalid Sekkat, 2005. "The Tradeoff Between Efficiency and Macroeconomic Stabilization in Europe," Working Papers DULBEA 05-04.RS, Université libre de Bruxelles, Department of Applied Economics (DULBEA). [Downloadable!]
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