Conference Paper
The Impact of Soft Power on Inward Foreign Direct Investment in the MENA Region
No.
ERF_31_IE204
Publisher
ERF
Date
March, 2025
Topic
F. International Economics
In the recent years, the dynamics of global investment have undergone a significant shift. Influenced by climate change concerns, the transition toward renewable energy and green technology is becoming inevitable. This rapid change is particularly concerning for MENA countries, as the dependence on oil revenues exposes their economies to significant sustainability risks. In this context, soft power, which is an intangible form of influence that is rooted in countries’ attractive qualities, emerges as a critical, yet underexplored, factor influencing governments, policymakers and investors’ decisions in the MENA region. Using a descriptive and empirical approach, the research first analyzes data from 77 countries worldwide, then narrows the focus on the MENA region exclusively to explore the relationship between its soft power trends and its inward FDI flows. The Global soft power index, provided by Brand Finance, serves as the primary metric in our analysis as it captures the intangible and the multidimensional aspects of soft power. The descriptive analysis reveals that MENA countries are rapidly enhancing their soft power in the recent years, with new strategic investments allocated toward sports and entertainment. The empirical analysis, using system GMM estimation method, reveals that soft power has a positive and significant influence on inward FDI flows, with this effect being particularly strong in the MENA region. This study underscores the strategic importance for MENA countries to leverage their soft power assets in order to enhance their global appeal, attract foreign investors and move beyond dependence on oil revenues.
Authors
Monia Ghazali
Senior Lecturer, IHEC, University of Carthage