The impact of country risk on FDI in the mena region: panel data analysis on opec and non-opec countries

Abstract

The rise in country risk, particularly political risk, has severely influenced the inflow of FDI into the Middle East and North Africa (MENA) region, in fact several studies have shown the inverse relationship between country risk and FDI flows. However, these studies do not focus on the particularities and specificities of the countries of the MENA region. In this article we investigate whether country risk similarly impacts FDI in OPEC member countries and non-OPEC countries and whether the determinants of FDI are similar or rather different in the two classified member countries. A panel data analysis is applied to both OPEC and non-OPEC countries. Our study suggests that several factors determine FDI in the MENA region, in particular, GDP, political stability and economic freedom. Up to the present day when political risk impacts FDI in OPEC countries, institutional quality as well as economic freedom seem to impact non-OPEC member countries.