A Comparative Analysis of the Determinants of Foreign Direct Investment in The Arab World and in Asia

The paper investigates the determinants of FDI to Arab countries in order to single out policies that allow continuing attraction of more FDI. The analysis is conducted in a comparative perspective to comparable Asian countries and distinguishes two levels. The first level concerns the whole Arab world compared to Asia while the other concerns the differences within the Arab world. It was found that the Arab world is different relative to the Asian and that the different Arab sub-groups (Oil-rich-labor-poor countries, oil-rich-labor-rich countries and oil-poor-labor-rich) are treated differently by foreign investors. For the Arab world as whole to attract or maintain as much FDI as Asia, infrastructure availability, the quality of institutions and foreign exchange policies should be improved. However, in the oil- rich labor-poor countries better availability of human capital has the highest impact while in the oil-rich labor-rich countries better availability of infrastructure and sound foreign exchange policies are the most important. In the oil-poor labor-rich countries the main driver of FDI inflows is the quality of institutions.  

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