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Trade and foreign exchange liberalization, investment climate and FDI in the MENA

Author

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  • Khalid Sekkat
  • Marie-Ange Veganzones

Abstract

The paper assesses the relative importance of trade and foreign exchange liberalization, infrastructure availability and economic and political stability in increasing Middle East and North African (MENA) countries attractiveness with respect to FDI. The analysis is conducted for total FDI and for FDI in manufacturing. The results show that trade and foreign exchange liberalization, infrastructure availability and sound economic and political conditions increase FDI inflows. Their effects are much higher for FDI in the manufacturing sector than for total FDI. This result is robust to alternative indicators of trade and foreign exchange liberalization, and to change in the specification. The message to MENA’s policy makers is twofold. First, efforts toward trade and foreign exchange liberalization should be initiated or further increased in order to make the region attractive to foreign investors. Second improvements in other aspects of the investment climate are important complements to liberalization and result in additional and sensitive increase of FDI inflows.

Suggested Citation

  • Khalid Sekkat & Marie-Ange Veganzones, 2005. "Trade and foreign exchange liberalization, investment climate and FDI in the MENA," DULBEA Working Papers 05-06.RS, ULB -- Universite Libre de Bruxelles.
    • Handle: RePEc:dul:wpaper:05-06rs
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    7. Régis Blazy & Laurent Weill, 2006. "The Impact of Legal Sanctions on Moral Hazard when Debt Contracts are Renegotiable," LSF Research Working Paper Series 06-09, Luxembourg School of Finance, University of Luxembourg.
    8. Ilan Tojerow, 2008. "Industry Wage Differentials Rent Sharing and Gender in Belgium," Reflets et perspectives de la vie économique, De Boeck Université, vol. 0(3), pages 55-65.
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    10. A. J. Khadaroo & B. Seetanah, 2010. "Transport infrastructure and foreign direct investment," Journal of International Development, John Wiley & Sons, Ltd., vol. 22(1), pages 103-123.
    11. Jérôme De Henau & Leila Maron & Danièle Meulders & Sile Padraigin O'Dorchai, 2007. "Travail et maternité en Europe: conditions de travail et politiques publiques," Brussels Economic Review, ULB -- Universite Libre de Bruxelles, vol. 50(1), pages 63-88.
    12. Carlos Martinez-Mongay & Khalid Sekkat, 2003. "The tradeoff between efficiency and macroeconomic stabilization in Europe," Working Papers CEB 04-024.RS, ULB -- Universite Libre de Bruxelles.
    13. Henri Capron, 2007. "Politique de cohésion et développement régional," DULBEA Working Papers 07-16.RS, ULB -- Universite Libre de Bruxelles.
    14. Pierre-Guillaume Méon & Laurent Weill, 2006. "Does financial intermediation matter for macroeconomic efficiency?," DULBEA Working Papers 06-13.RS, ULB -- Universite Libre de Bruxelles.
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    16. Bouoiyour, Jamal & Rey, Serge, 2005. "Régime de change, taux de change réel, flux commerciaux et investissements directs étrangers: le cas du Maroc [Real exchange rate, trade flows and foreign direct investments: the Moroccan case]," MPRA Paper 49503, University Library of Munich, Germany.
    17. Sile Padraigin O'Dorchai, 2008. "Pay inequality in 25 European countries," DULBEA Working Papers 0006, ULB -- Universite Libre de Bruxelles.
    18. Caroline Gerschlager, 2008. "Foolishness and identity: Amartya Sen and Adam Smith," DULBEA Working Papers 08-03.RS, ULB -- Universite Libre de Bruxelles.
    19. Pierre-Guillaume Méon & Friedrich Schneider & Laurent Weill, 2007. "Does taking the shadow economy into account matter to measure aggregate efficiency?," Working Papers CEB 07-027.RS, ULB -- Universite Libre de Bruxelles.
    20. Ghosh, Baidyanath N. & Li, Eric A.L., 2009. "Macroeconomic Vulnerability and Investment Risks in the Middle East and North Africa Region," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 62(1), pages 1-39.
    21. Belkacem Laabas and Walid Abdmoulah, "undated". "Determinants of Arab Intraregional Foreign Direct Investments," API-Working Paper Series 0905, Arab Planning Institute - Kuwait, Information Center.
    22. Heather D. Gibson & Nicholas T. Tsaveas & Thomas Vlassopoulos, 2006. "Capital Flows, Capital Account Liberalisation and the Mediterranean Countries," Working Papers 33, Bank of Greece.
    23. Abdeslam Marfouk, 2008. "The African brain drain: scope and determinants," DULBEA Working Papers 08-07.RS, ULB -- Universite Libre de Bruxelles.
    24. Chopra, Parvesh K. & Kanji, Gopal K., 2010. "On Measuring Country Risk: A new System Modelling Approach - La misura del rischio paese: un nuovo approccio system modelling," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 63(4), pages 479-515.

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    More about this item

    Keywords

    Reforms; MENA; FDI.;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F15 - International Economics - - Trade - - - Economic Integration
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law

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