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Trade and foreign exchange liberalization, investment climate and FDI in the MENA countries

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  • Khalid Sekkat
  • Marie-Ange Veganzones

Abstract

The paper assess 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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Bibliographic Info

Paper provided by ULB -- Universite Libre de Bruxelles in its series Working Papers CEB with number 04-023.RS.

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Length: 22 p.
Date of creation: May 2004
Date of revision:
Publication status: Published by: Centre Emile Bernheim, Bruxelles
Handle: RePEc:sol:wpaper:04-023

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Keywords: Reforms; MENA; FDI.;

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References

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  1. Jamuna Agarwal, 1980. "Determinants of foreign direct investment: A survey," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 116(4), pages 739-773, December.
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  3. Khalid Sekkat & Aristomene Varoudakis, 2002. "The impact of exchange and trade policy reforms on manufactured exports in North Africa," ULB Institutional Repository 2013/7348, ULB -- Universite Libre de Bruxelles.
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  14. Gastanaga, Victor M. & Nugent, Jeffrey B. & Pashamova, Bistra, 1998. "Host Country Reforms and FDI Inflows: How Much Difference do they Make?," World Development, Elsevier, vol. 26(7), pages 1299-1314, July.
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Citations

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Cited by:
  1. Hisarciklilar, Mehtap & Kayam, Saime Suna & Kayalica, Ozgur, 2006. "Locational Drivers of FDI in MENA Countries: A Spatial Attempt," MPRA Paper 2085, University Library of Munich, Germany.
  2. Heather D. Gibson & Thomas Vlassopoulo, 2007. "Capital Folws, capital account liberalisation and the southern Mediterranean countries," BNL Quarterly Review, Banca Nazionale del Lavoro, vol. 60(241), pages 137-165.
  3. Miria Pigato, 2009. "Strengthening China's and India's Trade and Investment Ties to the Middle East and North Africa," World Bank Publications, The World Bank, number 2626, September.
  4. Abid, Fathi & Bahloul, Slah, 2011. "Selected MENA countries' attractiveness to G7 investors," Economic Modelling, Elsevier, vol. 28(5), pages 2197-2207, September.
  5. Daniele, Vittorio & Marani, Ugo, 2006. "Do institutions matter for FDI? A comparative analysis for the MENA countries," MPRA Paper 2426, University Library of Munich, Germany.
  6. Heather D. Gibson & Nicholas T. Tsaveas & Thomas Vlassopoulos, 2006. "Capital Flows, Capital Account Liberalisation and the Mediterranean Countries," Working Papers 33, Bank of Greece.

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