The determinants of foreign direct investment in the Middle East North Africa region

The purpose of this paper is to test the determinants of foreign direct investment (FDI) into countries of the Middle East North Africa (MENA) region.

The research is based on an econometric model that includes factors that potentially drive FDI flows into countries in the MENA region.

Energy endowments have a negative impact on FDI flows into a country. GDP per capita, openness to trade and oil prices have a positive impact on FDI inflows, while aggregate measures of environmental risk are not a differentiating factor among countries in the region.

This paper demonstrates that the “Dutch disease” concept applies to FDI in resource rich countries in the MENA region. Countries with large amounts of oil and gas have are more likely to have policies and institutions that inhibit FDI. Countries that value the spillover effects from FDI need to reconsider legislative and institutional hurdles that remain.