Foreign Direct Investment (FDI) and Natural Resources: Blessing or Curse? Empirical Evidence from the Gulf Cooperation Council (GCC)

Abstract

This paper investigates why foreign direct investment (FDI) inflows are disproportionate among resource and non-resource sectors in oil-rich countries over the period 1980-2017. We constructed a balanced panel of data for Gulf Cooperation Council (GCC) countries from the database of the United Nations Conference on Trade and Development (UNCTAD) and disaggregate data from The Financial Times. We regress total and sectoral FDI inflows on oil rents to a GDP ratio, controlling other socio-economic variables. Our results first consider oil rents. This proxy for natural resources is negatively associated with total FDI inflows. The oil rents/GDP share and resource-based FDI have a significantly positive correlation. However, the adverse effect of oil rents remains true in the case of the non-resource sector foreign investment. Second, oil price fluctuations lead to a rise in the non-resource FDI but discourage resource-related FDI inflows. These empirical results confirm that FDI-Natural resources curse through the crowd-out effect of natural resources in the Gulf Cooperation Council (GCC) countries. Our results are robust to different panel data estimators.

Factors of Foreign Direct Investment Inwards: The Case of Saudi Arabia

“…There many studies in the literature tested the factors of FDI inwards (e.g., Azam and Haseeb, 2021;Elheddad et al, 2020;Izadi et al, 2020) but lack of studies focused on Saudi Arabia, therefore, this study finds the factors of FDI in Saudi Arabia. FDI inwards indicators were examined by Izadi et al (2020) for 33 developed and developing countries over the period 2001-2017.…”

“…This study estimates the determinants of FDI inwards in Saudi Arabia during the period 1990-2020 by using ordinary least square (OLS) through STATA 17 software. The FDI determinants have been found in the literature by many studies such as the studies of Elheddad et al (2020) for GCC countries, Vadlamannati et al (2018) Where, FDIit is the foreign direct investment inflows in Saudi Arabia, i is the country that Saudi Arabia in this case, t is the time (period); α is the constant; β is the coefficient;…”

“…In contrast, the Saudi Arabia may encounter several problems, including political unrest in the Middle East. To enhance economy, it is very important to identify the drivers of FDI and in the literature review, there are many studies focused on finding the determinants of FDI (e.g., Azam & Haseeb, 2021;Elheddad et al, 2020;Izadi et al, 2020). However, this study makes significant additions to the area, including (1) the fact that few studies have focused on Saudi Arabia.…”

Spillover effects of FDI inflows on output growth: An analysis of aggregate and disaggregated FDI inflows of 13 MENA economies

“…The majority of prior research indicates that FDI in service sectors does not affect growth (Alfaro, 2003; Aykut & Sayek, 2007; Doytch & Uctum, 2019; Elheddad et al, 2020; Hanafy & Marktanner, 2019; Wang, 2009). However, a small number of studies demonstrate that FDI services may facilitate growth.…”

Determinasi Investasi di Negara Mayoritas Islam Berpendapatan Menengah Ke Bawah Asia

“…Hubungan PMA dan sumber daya alam digambarkan dalam dua mahzab (Elheddad et al, 2020). Pertama, investor akan tertarik untuk menanamkan modalnya jika negara tersebut memiliki SDA yang melimpah.…”