Mutual Reinforcement of FDI and Tourism in the GCC.

Abstract

This dissertation investigates the dynamic relationship between Foreign Direct Investment FDI inflows and tourism in GCC countries, with a focus on their strategic efforts to diversify economies traditionally dependent on oil. By employing the Tourism-Led Growth Hypothesis and the FDI-led tourism concept, this study examines the mutual reinforcement between FDI and tourism. A range of econometric tools, including co-integration analysis, Granger causality tests, Pooled Ordinary Least Squares POLS, and Fixed Effects FE estimations, are employed. The results indicate a bidirectional relationship between FDI and tourism, marked by lagged effects. Specifically, Fixed Effects estimation reveals that FDI stimulates the growth of the tourism sector, and a thriving tourism industry, in turn, attracts additional FDI after a two-period lag. This positive feedback loop enhances economic resilience and supports diversification. The findings suggest that GCC countries should consider integrated policies that concurrently promote tourism and attract FDI.