Foreign Direct Investment (FDI) in Oil-Exporting Countries: Long-run Determinants and Causal Relationship with Economic Growth

This thesis examines the long-run determinants of FDI in oil-exporting countries, and the causal relationship between FDI and economic growth in that group of countries. It focuses on the “traditional” determinants of FDI that have been examined within the literature as well as on a number of other determinants which specifically relate to oil-exporting countries, with a special focus given to political and institutional risk determinants. The thesis relies on two theories as a theoretical background; the Eclectic Paradigm and the Rentier State theory. It contributes to the existing literature of the determinants of FDI. That is to say, it is the first to investigate the long-run determinants of FDI in oil-exporting countries. It also provides a further test for the Eclectic Paradigm particularly by analysing the locational advantages (L) of that theory, taking into the account the long-run effect of these advantages upon FDI in host countries. Finally, it contributes to the literature on economic growth by empirically testing the relationship between FDI and economic growth; considering the impact of FDI on economic growth and vice versa. The data sample in the thesis comprises 44 oil-exporting countries over 30 years from 1984-2012. The thesis reports a number of findings regarding the determinants of FDI. It firstly finds that “openness to trade” and “composite risk” are the most important variables (amongst the overall determinants) for FDI inflows in oil-exporting countries in the long-run, while “law and order” is the most important variable amongst the institutional and political determinants. It also concludes that FDI does not contribute to economic growth in oil-exporting countries; the only contribution is observed within non-rentier and non-Islamic oil-exporting countries