Is There Anything Special With Intra-Arab Capital Flows?

The paper examines the determinants if intra-Arab FDI inflows as compared to inflows from non-Arab countries. To this end, the analysis is conducted on two samples separately: one concerns intra-Arab FDI while the other focuses on FDI flows to Arabs from non-Arab countries. The results show a difference in the determinants of FDI inflows to Arab countries depending on the suppliers (Arab or non-Arab) and that Arabs are investing more than they should in other Arab-countries. However, the more striking result of the analysis is the difference in the determinants of Arab FDI inflows according to the supplier. Such a difference suggests that human capital, quality of institutions, infrastructure and openness don’t affect an Arab investor’s decision to locate in a given Arab country while they affect non-Arab investors. Hence, for an Arab country to attract more Arab FDI it doesn’t need necessarily to comply with the literature and international organization’s recommendations regarding openness and institutions.  

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