IDEAS home Printed from https://ideas.repec.org/a/sae/sagope/v12y2022i1p21582440211067242.html
   My bibliography  Save this article

Factors in Saudi FDI Inflow

Author

Listed:
  • Nahla Samargandi
  • Mohammed A. Alghfais
  • Hadeel M. AlHuthail

Abstract

This study explores the driving factors for attracting Foreign Direct Investment (FDI) inflow in the Saudi Arabian economy in two stages. First, it applies a general to specific approach to form a model reflecting theoretical and anecdotal evidence of the Saudi Arabian economy. Second, we analyse time series data over the years 1984 to 2018. applying Autoregressive Distributed Lags (ARDL) approach, incorporating several structural breaks. This study explores Saudi membership of the World Trade Organization (WTO) and institutional quality, identifying them as promising factors in fostering FDI inflows in the economy. Our empirical investigation demonstrates that the Saudi economy experienced a higher inflow of FDI during the global financial crisis (GFC) due to economic stability. Trade openness is found to be conducive to promote FDI inflow. This study provides several policy implications.

Suggested Citation

  • Nahla Samargandi & Mohammed A. Alghfais & Hadeel M. AlHuthail, 2022. "Factors in Saudi FDI Inflow," SAGE Open, , vol. 12(1), pages 21582440211, January.
    • Handle: RePEc:sae:sagope:v:12:y:2022:i:1:p:21582440211067242
    DOI: 10.1177/21582440211067242
    as

    Download full text from publisher

    File URL: https://journals.sagepub.com/doi/10.1177/21582440211067242
    Download Restriction: no
    File URL: https://libkey.io/10.1177/21582440211067242?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Dirk Pilat & Anita Wölfl, 2005. "Measuring the Interaction Between Manufacturing and Services," OECD Science, Technology and Industry Working Papers 2005/5, OECD Publishing.
    2. Fathi Ali & Norbert Fiess & Ronald MacDonald, 2010. "Do Institutions Matter for Foreign Direct Investment?," Open Economies Review, Springer, vol. 21(2), pages 201-219, April.
    3. Dr. Nihal Bayraktar, 2015. "Importance of Investment Climates for Inflows of Foreign Direct Investment in Developing Countries," Business and Economic Research, Macrothink Institute, vol. 5(1), pages 24-50, June.
    4. Luis Rubalcaba & Henk Kox (ed.), 2007. "Business Services in European Economic Growth," Palgrave Macmillan Books, Palgrave Macmillan, number 978-0-230-22879-5.
    5. Alfalih, Abdullah Abdulmohsen & Bel Hadj, Tarek, 2020. "Foreign direct investment determinants in an oil abundant host country: Short and long-run approach for Saudi Arabia," Resources Policy, Elsevier, vol. 66(C).
    6. M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 289-326.
    7. Elliott, Graham & Rothenberg, Thomas J & Stock, James H, 1996. "Efficient Tests for an Autoregressive Unit Root," Econometrica, Econometric Society, vol. 64(4), pages 813-836, July.
    8. Waqar Ameer & Kazi Sohag & Helian Xu & Musaad Mansoor Halwan, 2020. "The Impact of OFDI and Institutional Quality on Domestic Capital Formation at the Disaggregated Level: Evidence for Developed and Emerging Countries," Sustainability, MDPI, vol. 12(9), pages 1-18, May.
    9. David W Loree & Stephen E Guisinger, 1995. "Policy and Non-Policy Determinants of U.S. Equity Foreign Direct Investment," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 26(2), pages 281-299, June.
    10. Waqar Ameer & Helian Xu & Kazi Sohag & Syed Hasanat Shah, 2021. "Outflow FDI and Domestic Investment: Aggregated and Disaggregated Analysis," Sustainability, MDPI, vol. 13(13), pages 1-19, June.
    11. World Bank, 2009. "World Development Indicators 2009," World Bank Publications - Books, The World Bank Group, number 4367.
    12. Allee, Todd L. & Scalera, Jamie E., 2012. "The Divergent Effects of Joining International Organizations: Trade Gains and the Rigors of WTO Accession," International Organization, Cambridge University Press, vol. 66(2), pages 243-276, April.
    13. Steven Globerman & Daniel Shapiro, 2003. "Governance infrastructure and US foreign direct investment," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 34(1), pages 19-39, January.
    14. Md. Al Mamun & Kazi Sohag, 2015. "Revisiting the dynamic effect of foreign direct investment on economic growth in LDCs," International Journal of Economic Policy in Emerging Economies, Inderscience Enterprises Ltd, vol. 8(2), pages 97-118.
    15. Omar G. Aziz & Anil V. Mishra, 2016. "Determinants of FDI inflows to Arab economies," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 25(3), pages 325-356, June.
    16. Root, Franklin R & Ahmed, Ahmed A, 1979. "Empirical Determinants of Manufacturing Direct Foreign Investment in Developing Countries," Economic Development and Cultural Change, University of Chicago Press, vol. 27(4), pages 751-767, July.
    17. Wang, Zhi, 2003. "The impact of China's WTO accession on patterns of world trade," Journal of Policy Modeling, Elsevier, vol. 25(1), pages 1-41, January.
    18. Buchanan, Bonnie G. & Le, Quan V. & Rishi, Meenakshi, 2012. "Foreign direct investment and institutional quality: Some empirical evidence," International Review of Financial Analysis, Elsevier, vol. 21(C), pages 81-89.
    19. Dilip Ratha & Sanket Mohapatra & Ani Silwal, 2009. "Outlook for Remittance Flows 2009-2011 : Remittances Expected to Fall by 7-10 Percent in 2009," World Bank Publications - Reports 10975, The World Bank Group.
    20. Uddin, Moshfique & Chowdhury, Anup & Zafar, Sheeba & Shafique, Sujana & Liu, Jia, 2019. "Institutional determinants of inward FDI: Evidence from Pakistan," International Business Review, Elsevier, vol. 28(2), pages 344-358.
    21. Moran, Theodore & Görg, Holger & Serič, Adnan & Krieger-Boden, Christiane, 2018. "Attracting FDI in middle-skilled supply chains," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 12, pages 1-9.
    22. Andrew K. Rose, 2004. "Do We Really Know That the WTO Increases Trade?," American Economic Review, American Economic Association, vol. 94(1), pages 98-114, March.
    23. Almas Heshmati & Ilham Haouas & Kazi Sohag & Muhammad Shahbaz, 2017. "Hiring and Separation Rates Before and after the Arab Spring in the Tunisian Labour Market," South African Journal of Economics, Economic Society of South Africa, vol. 85(2), pages 259-278, June.
    24. Douglas P Woodward & Robert J Rolfe, 1993. "The Location of Export-Oriented Foreign Direct Investment in the Caribbean Basin," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 24(1), pages 121-144, March.
    25. Faïz Gallouj & Faridah Djellal (ed.), 2010. "The Handbook of Innovation and Services," Books, Edward Elgar Publishing, number 12872.
    26. Tim Büthe & Helen V. Milner, 2008. "The Politics of Foreign Direct Investment into Developing Countries: Increasing FDI through International Trade Agreements?," American Journal of Political Science, John Wiley & Sons, vol. 52(4), pages 741-762, October.
    27. Okada, Keisuke, 2013. "The interaction effects of financial openness and institutions on international capital flows," Journal of Macroeconomics, Elsevier, vol. 35(C), pages 131-143.
    28. Schneider, Friedrich & Frey, Bruno S., 1985. "Economic and political determinants of foreign direct investment," World Development, Elsevier, vol. 13(2), pages 161-175, February.
    29. Aziz, Omar Ghazy, 2018. "Institutional quality and FDI inflows in Arab economies," Finance Research Letters, Elsevier, vol. 25(C), pages 111-123.
    30. W. A. Naude & W. F. Krugell, 2007. "Investigating geography and institutions as determinants of foreign direct investment in Africa using panel data," Applied Economics, Taylor & Francis Journals, vol. 39(10), pages 1223-1233.
    31. Udi Joshua & Mathew Ekundayo Rotimi & Samuel Asumadu Sarkodie, 2020. "Global FDI Inflow and Its Implication across Economic Income Groups," JRFM, MDPI, vol. 13(11), pages 1-15, November.
    32. Abdel-Latif, Hany, 2019. "FDI response to political shocks: What can the Arab Spring tell us?," Journal of Behavioral and Experimental Finance, Elsevier, vol. 24(C).
    33. Luis Rubalcaba & Henk Kox, 2007. "The Growth of European Business Services," Palgrave Macmillan Books, in: Luis Rubalcaba & Henk Kox (ed.), Business Services in European Economic Growth, chapter 1, pages 15-38, Palgrave Macmillan.
    34. Mina, Wasseem Michel, 2012. "The Institutional Reforms Debate and FDI Flows to the MENA Region: The “Best” Ensemble," World Development, Elsevier, vol. 40(9), pages 1798-1809.
    35. Sufian Eltayeb Mohamed & Moise G. Sidiropoulos, 2010. "Another Look At The Determinants Of Foreign Direct Investment In Mena Countries: An Empirical Investigation," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 35(2), pages 75-95, June.
    36. Dilip Ratha & Sanket Mohapatra, 2009. "Revised Outlook for Remittance Flows 2009?2011 : Remittances Expected to Fall by 5 to 8 Percent in 2009," World Bank Publications - Reports 10990, The World Bank Group.
    37. Wheeler, David & Mody, Ashoka, 1992. "International investment location decisions : The case of U.S. firms," Journal of International Economics, Elsevier, vol. 33(1-2), pages 57-76, August.
    38. World Bank, 2020. "Doing Business 2020," World Bank Publications - Books, The World Bank Group, number 32436.
    39. Begum, Rawshan Ara & Sohag, Kazi & Abdullah, Sharifah Mastura Syed & Jaafar, Mokhtar, 2015. "CO2 emissions, energy consumption, economic and population growth in Malaysia," Renewable and Sustainable Energy Reviews, Elsevier, vol. 41(C), pages 594-601.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Mwahib Gasmelsied Ahmed Mohammed, 2024. "Analyzing GDP Growth Drivers in Saudi Arabia: Investment or Consumption: An Evidence-Based ARDL-Bound Test Approach," Sustainability, MDPI, vol. 16(9), pages 1-18, April.
    2. Nadia Yusuf & Dareen Abdulmohsen, 2022. "Saudi Arabia’s NEOM Project as a Testing Ground for Economically Feasible Planned Cities: Case Study," Sustainability, MDPI, vol. 15(1), pages 1-16, December.
    3. Mohammad Anamul Haque & Syed Mehmood Raza Shah & Muhammad Usman Arshad, 2022. "Sustainable Economic Growth and FDI Inflow: A Comparative Panel Econometric Analysis of Low-Income and Middle-Income Nations," Sustainability, MDPI, vol. 14(21), pages 1-14, November.
    4. Hayat Khan & Ying Dong & Robeena Bibi & Itbar Khan, 2024. "Institutional Quality and Foreign Direct Investment: Global Evidence," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 15(3), pages 10547-10591, September.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Bersan Haliti & Safet Merovci, 2020. "The Impact of the Investment Environment on Foreign Direct Investment (FDI) in the European Transition Economies," Economic Alternatives, University of National and World Economy, Sofia, Bulgaria, issue 1, pages 138-147, March.
    2. Bailey, Nicholas, 2018. "Exploring the relationship between institutional factors and FDI attractiveness: A meta-analytic review," International Business Review, Elsevier, vol. 27(1), pages 139-148.
    3. Akhtaruzzaman, M. & Berg, Nathan & Hajzler, Christopher, 2017. "Expropriation risk and FDI in developing countries: Does return of capital dominate return on capital?," European Journal of Political Economy, Elsevier, vol. 49(C), pages 84-107.
    4. Nouha Bougharriou & Walid Benayed & Foued Badr Gabsi, 2021. "Under Which Condition Does the Democratization of the Arab World Improve FDI?," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 63(2), pages 224-248, June.
    5. Uddin, Moshfique & Chowdhury, Anup & Zafar, Sheeba & Shafique, Sujana & Liu, Jia, 2019. "Institutional determinants of inward FDI: Evidence from Pakistan," International Business Review, Elsevier, vol. 28(2), pages 344-358.
    6. Federico Carril-Caccia & Juliette Milgram-Baleix & Jordi Paniagua, 2019. "Foreign Direct Investment in oil-abundant countries: The role of institutions," PLOS ONE, Public Library of Science, vol. 14(4), pages 1-23, April.
    7. Chen, Hong & Gangopadhyay, Partha & Singh, Baljeet & Chen, Kairan, 2023. "What motivates Chinese multinational firms to invest in Asia? Poor institutions versus rich infrastructures of a host country," Technological Forecasting and Social Change, Elsevier, vol. 189(C).
    8. Fosu, Prince, 2016. "Infrastructure and Foreign Direct Investment Inflows: Evidence from Ghana," MPRA Paper 100375, University Library of Munich, Germany, revised 13 May 2020.
    9. David M. Gould & Congyan Tan & Amir S. Sadeghi Emamgholi, 2014. "Attracting Foreign Direct Investment," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 15(2), pages 133-174, September.
    10. Dimitra Mitsi & Constantina Kottaridi, 2022. "Fiscal and non-fiscal institutional context effects and foreign direct investment: empirical evidence in developing countries," SPOUDAI Journal of Economics and Business, SPOUDAI Journal of Economics and Business, University of Piraeus, vol. 72(1-2), pages 11-33, January-J.
    11. Federico Carril-Caccia & Juliette Milgram Baleix & Jordi Paniagua, 2019. "The foreign direct investment-institution nexus in oil-abundant countries," Working Papers 1903, Department of Applied Economics II, Universidad de Valencia.
    12. Tidiane KINDA, 2010. "Increasing Private Capital Flows To Developing Countries: The Role Of Physical And Financial Infrastructure In 58 Countries, 1970-2003," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 10(2).
    13. Assad Ullah & Yang Qingxiang & Mohammad Abdul Kamal & Zahid Ali4, 2015. "Domestic Investment Climate And Foreign Direct Investment In South Asia: A Panel Data Evidence," IBT Journal of Business Studies (JBS), Ilma University, Faculty of Management Science, vol. 11(2), pages 149-164.
    14. Cong Minh Huynh & Vu Hong Thai Nguyen & Hoang Bao Nguyen & Phuc Canh Nguyen, 2020. "One-way effect or multiple-way causality: foreign direct investment, institutional quality and shadow economy?," International Economics and Economic Policy, Springer, vol. 17(1), pages 219-239, February.
    15. Iamsiraroj, Sasi & Doucouliagos, Hristos, 2015. "Does growth attract FDI?," Economics Discussion Papers 2015-18, Kiel Institute for the World Economy (IfW Kiel).
    16. Groh, Alexander P. & Wich, Matthias, 2009. "A composite measure to determine a host country's attractiveness for foreign direct investment," IESE Research Papers D/833, IESE Business School.
    17. Groh, Alexander Peter & Wich, Matthias, 2012. "Emerging economies' attraction of foreign direct investment," Emerging Markets Review, Elsevier, vol. 13(2), pages 210-229.
    18. Ramesh Bommadevara & Akshay Sakharkar, 2021. "Do Good Institutions and Economic Uncertainty Matter to Foreign Direct Investment?," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 11(6), pages 471-487, June.
    19. Assad Ullah & Yang Qingxiang & Mohammad Abdul Kamal & Zahid Ali4, 2015. "Domestic Investment Climate And Foreign Direct Investment In South Asia: A Panel Data Evidence," IBT Journal of Business Studies (JBS), Ilma University, Faculty of Management Science, vol. 11(2), pages 11-12.
    20. Thomas, Douglas E. & Grosse, Robert, 2001. "Country-of-origin determinants of foreign direct investment in an emerging market: the case of Mexico," Journal of International Management, Elsevier, vol. 7(1), pages 59-79.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sae:sagope:v:12:y:2022:i:1:p:21582440211067242. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: SAGE Publications (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.