ANALYZING THE DETERMINANTS OF INWARD, OUTWARD, AND BILATERAL FOREIGN DIRECT INVESTMENTS IN MENA COUNTRIES: THE ROLE OF TRADE OPENNESS

Abstract

This dissertation delves into the dynamics of Foreign Direct Investment (FDI) in the Middle East and North Africa (MENA) region, focusing on the role of trade openness as a determinant. It consists of three chapters, each contributing to a comprehensive understanding of FDI patterns in MENA countries. The first chapter explores the determinants of inward FDI in MENA countries from 1990 to 2022, emphasizing the significance of trade openness. Employing panel data analysis and Two-Stage Least Squares (2SLS) methodology, the study reveals a positive correlation between FDI inflows and trade openness. Moreover, it identifies other influential factors such as market size, infrastructure, human capital, and government policies. By addressing the heterogeneity of trade openness across various memberships, including OPEC and WTO, this chapter provides valuable insights for policymakers and investors seeking to stimulate economic development in the MENA region. Building upon these findings, the second chapter investigates the determinants of outward FDI from MENA countries over the period 1990-2021. This chapter fills a gap in the literature by analyzing factors influencing outward investment flows. Contrary to conventional expectations, the study finds a negative relationship between trade openness and outward FDI. Additionally, it uncovers significant impacts of market size, infrastructure, industry dynamics, and tax policies. Through consideration of heterogeneity in trade openness across subsets of MENA countries, this chapter offers insights into fostering economic growth through outbound investment. In the third chapter, a gravity model approach is employed to analyze bilateral FDI flows, focusing on the impact of trade openness and Bilateral Investment Treaties (BITs). By examining annual data from 48 countries between 1990 and 2021, the study uncovers nuanced relationships between trade openness, BITs, and FDI flows. Through comprehensive analysis, it highlights the significance of investment treaties in promoting cross-border investment and provides valuable insights into bilateral FDI dynamics among countries.