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Foreign Direct Investment Determinants in Oil Exporting Countries: Revisiting the Role of Natural Resources

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  • Mohamed Abdelaziz Eissa
  • Mohammed M. Elgammal

Abstract

This article explores the determinants of foreign direct investment (FDI) in oil-dependent economies and revisits the role of natural resources in attracting FDI to countries of this kind. Panel data from the six Gulf Cooperation Council (GCC) countries, namely Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates, have been employed, covering the period from 1990 to 2015. First, we investigate the FDI determinants during the entire sample period, and then run another investigation starting from the beginning of 2000, when the FDI in the GCC region increased substantially. The results show that there is a positive nexus between market growth, trade openness, inflation, infrastructure, oil price and FDI. Interestingly, oil reserves have a negative impact on FDI; this may be because countries with large reserves of oil like the GCC countries have enough financial resources to finance their economic development. This leads these governments to set up restrictions to protect their resources, thus reducing the amount of resource-seeking FDI. JEL Codes: E22, F21, F23, F43, O13

Suggested Citation

  • Mohamed Abdelaziz Eissa & Mohammed M. Elgammal, 2020. "Foreign Direct Investment Determinants in Oil Exporting Countries: Revisiting the Role of Natural Resources," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 19(1), pages 33-65, April.
    • Handle: RePEc:sae:emffin:v:19:y:2020:i:1:p:33-65
    DOI: 10.1177/0972652719880153
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    2. Valentine, Soumtang Bime & Itchoko Motande, Mondjeli Mwa Ndjokou & Salim Ahmed, Vessah Mbouombouo, 2024. "Revisiting natural resources and economic complexity nexus: Does financial development matter in developing countries?," Resources Policy, Elsevier, vol. 93(C).
    3. Faiez Ahmed Elneel & Abdullah Fahad AlMulhim‎, 2022. "The Effect of Oil Price Shocks on Saudi Arabia’s Economic Growth in the Light of Vision 2030 “A Combination of VECM and ARDL Models”," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 13(4), pages 3401-3423, December.
    4. Ofori-Sasu, Daniel & Adu-Darko, Eunice & Asamoah, Michael Effah & Abor, Joshua Yindenaba, 2023. "Oil rents, trade environment and financial development: An international evidence," Resources Policy, Elsevier, vol. 82(C).
    5. Tolkyn Kakizhanova & Zhanar Askarova & Ainur Amirova & Bakhyt Baitanayeva & Gulmira Andabayeva, 2024. "Impact of Oil Price, CO2 Emissons, Inflation and Economic Growth on FDI Inflow: Case of Kazakhstan," International Journal of Energy Economics and Policy, Econjournals, vol. 14(6), pages 484-491, November.
    6. Kimiagari, Salman & Mahbobi, Mohammad & Toolsee, Tushika, 2023. "Attracting and retaining FDI: Africa gas and oil sector," Resources Policy, Elsevier, vol. 80(C).
    7. Mohammad Imdadul Haque, 2021. "Do Oil Rents Deter Foreign Direct Investment? The Case of Saudi Arabia," International Journal of Energy Economics and Policy, Econjournals, vol. 11(1), pages 212-218.
    8. Vincent Tawiah & Jeleta Kebede & Anthony Kyiu, 2022. "Corruption, Chinese Investment, and Trade: Evidence from Africa," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 21(2), pages 123-151, June.

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    More about this item

    Keywords

    Foreign direct investment (FDI); Gulf Cooperation Council (GCC); natural resources; oil exporting countries;
    All these keywords.

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products

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