The Determinants of FDI Inflows into the GCC Countries 1990 - 2013

Over the past several decades the rapid growth in the rate of globalisation has resulted in a marked increase in foreign direct investment (FDI) flows around the world. Foreign direct investment is increasingly seen as a sustainable method of improving as well as maintaining economic growth and contributes to the overall diversification of revenue sources. This especially holds true for emerging economies which are increasingly the main targets of FDI flows around the world, resulting in a healthy competition by a significant amount of countries for a limited amount of investment. Towards the end of the past century all of the six Gulf Cooperation Council (GCC) countries have implemented long term economic plans and within each of these plans the diversification of their economies - which are overwhelmingly dependent on finite hydrocarbons - is seen as a priority. Attracting and maintaining a favourable level of foreign direct investment has been presented as one of the solutions to the problems facing the GCC countries. Therefore, it is important to deduce the determinants of FDI inflows in order for policy makers to act accordingly and maximise FDI inducing measures. Historically, FDI inflows have varied considerably between the GCC countries and this study seeks to determine the reasoning behind this. An analysis of possible macroeconomic determinants of FDI into the GCC countries is conducted using data compiled from several sources from the years 1990-2013. Following a modified regression model based on previous studies, a panel data analysis is used to answer the research questions in order to ascertain the impacts between the chosen explanatory variables on FDI inflows into the GCC countries