Foreign direct investments and natural resources : an empirical study on the Gulf Co-operation Council (GCC)

Elheddad, Mohamed M.

Abstract

Foreign direct investment (FDI) is a key source of technology transfer, economic growth and development, but many resource-rich economies attract less FDI compared to resource-poor countries. In light of this, it is surprising that there are very few studies available on the effects of natural resources on both the composition and volume of FDI. This thesis investigates the impacts and determinants of sectoral FDI in oil-exporting and producing economies of the Gulf Cooperation Council (GCC), using three empirical papers and considering several aspects.
The thesis starts by investigating the impacts of natural resource abundance (oil) on the behaviour of FDI inflows to GCC countries, utilising two different data sets and different estimators to control for the issue of endogeneity. The empirical findings show that natural resources decrease aggregate inflows of FDI to GCC economies. More specifically, the resource sector (oil) attracts more FDI inflows but deters FDI to the nonresource sector. These results confirm the so-called FDI-Natural resource curse, through crowding out effect.
This thesis also examines the relationship between aggregate FDI and sectoral FDI (resource and non-resource) inflows on economic growth, using a unique data set on sector-level FDI developed by the Financial Times: fDi market. The empirical results indicate a negative relationship between total FDI inflows and GDP per capita growth in the GCC economies. Moreover, two-sector analysis (resource and non-resource) shows that resource-based FDI hinders economic growth and non-resource FDI has insignificant effects on GDP per capita growth. This gives an indicator of the presence of the natural resource curse via the FDI channel.
Finally, the third chapter of this thesis explores the effects of total FDI (inflows and outflows) and sectoral FDI inflows on public and private domestic investments in GCC countries. Aggregate estimations show that FDI inflows contribute significantly to public domestic investment but discourage private domestic investments. Also, FDI outflows promote private domestic economic activities, while in contrast, they negatively affect public domestic investment. Disaggregate data shows that greenfield FDI inflows to the oil sector yield a significant and positive effect on public domestic investment. Non-oil FDI has an ambiguous effect on domestic investment.

Citation

Elheddad, M. M. (2019). Foreign direct investments and natural resources : an empirical study on the Gulf Co-operation Council (GCC). (Thesis). University of Hull. Retrieved from https://hull-repository.worktribe.com/output/4267239

• Thesis Type: Thesis
• Deposit Date: Apr 20, 2023
• Publicly Available Date: Apr 20, 2023
• Keywords: Business
• Public URL: https://hull-repository.worktribe.com/output/4267239
• Additional Information: Business School, The University of Hull
• Award Date: 2019-06