Risky Business : Political Instability and Greenfield Foreign Direct Investment in the Arab World

Which foreign direct investments are most affected by political instability? Analysis of quarterly greenfield investment flows into countries in the Middle East and North Africa from 2003 to 2012 shows that adverse political shocks are associated with significantly reduced investment inflows in the non-resource tradable sectors. By contrast, investments in natural resource sectors and non-tradable activities appear insensitive to such shocks. Consistent with these patterns, the significant reduction in investment inflows in Arab Spring affected economies was starkest in the non-resource manufacturing sector. Political instability is thus associated with increased reliance on non-tradables and aggravated resource dependence. Conversely, how intensified political instability affects aggregate foreign direct investment is critically contingent on the initial sector composition of these flows.

Bibliographic Details

Main Authors:	Burger, Martijn, Ianchovichina, Elena, Rijkers, Bob
Language:	English en_US
Published:	World Bank, Washington, DC 2013-12
Subjects:	ACCOUNTING, ADVERTISING, AFFILIATED ORGANIZATIONS, ALTERNATIVE INVESTMENT, ALTERNATIVE METHODS, AMOUNT OF CAPITAL, APPROACH, AUTOMOBILES, AUXILIARY EQUIPMENT, AVAILABILITY, BATTERIES, BIOMASS, BIOMASS POWER, BOILER, BUILDING MATERIAL, BUREAUCRATIC QUALITY, CAPITAL ACCUMULATION, CAPITAL FLOW, CAPITAL FLOWS, CAPITAL STOCK, CEMENT, CHECKS, CHEMICAL PRODUCTS, CIVIL WAR, COAL, COMMODITY, COMMODITY PRICE, COMPUTER SYSTEMS, CONSUMER ELECTRONICS, CONSUMER PRICE INDEX, CORPORATE SOCIAL RESPONSIBILITY, COUNTRY DUMMIES, COUNTRY FIXED EFFECTS, COUNTRY RISK, CRUDE OIL, CUSTOM, DATA PROCESSING, DECLINE IN INVESTMENT, DEMOCRACY, DEMOCRATIC ACCOUNTABILITY, DEVELOPING COUNTRIES, DIGITAL CONTENT, DIMINISHING RETURNS, DUMMY VARIABLE, DUMMY VARIABLES, E-MAIL, ELECTRIC POWER, EMPLOYMENT, ENERGY RESOURCES, ENFORCEMENT OF CONTRACTS, EQUIPMENT, EXCHANGE RATE, EXCHANGE RATES, EXPECTED RETURNS, FINANCIAL CRISIS, FINANCIAL INFORMATION, FINANCIAL SERVICES, FOREIGN COMPANIES, FOREIGN DIRECT INVESTMENT, FOREIGN DIRECT INVESTMENTS, FOREIGN INVESTMENTS, FOREIGN INVESTORS, FOSSIL, FOSSIL FUEL, GAS, GAS EXTRACTION, GASOLINE, GEOTHERMAL ELECTRIC, GLOBAL ECONOMY, GOVERNANCE INDEX, GOVERNANCE INDICATORS, GROSS DOMESTIC PRODUCT, HARDWARE, HEAT, HOST COUNTRY, HOST ECONOMY, HUMAN CAPITAL, HYDROELECTRIC POWER, ID, INDUSTRIAL PRODUCTION, INFLATION, INFORMATION PROVIDERS, INSTRUMENT, INSURANCE, INTERNATIONAL BANK, INTERNATIONAL BUSINESS, INTERNATIONAL ECONOMICS, INTERNATIONAL INVESTMENT, INTERNATIONAL INVESTORS, INTERNATIONAL TRADE, INTERNATIONALIZATION, INVESTING, INVESTMENT BANKING, INVESTMENT CLIMATE, INVESTMENT FLOWS, INVESTMENT FUNCTION, INVESTMENT LOCATION DECISIONS, INVESTMENT MANAGEMENT, INVESTMENT OPPORTUNITIES, INVESTMENT PROJECTS, LIEN, LIQUIDITY, MACROECONOMIC CONDITIONS, MACROECONOMIC MANAGEMENT, MANAGEMENT SERVICES, MANUFACTURING, MANUFACTURING INDUSTRIES, MARKET ENTRY, MARKETS DATABASE, MATERIAL, MONETARY FUND, MOTION PICTURE, MULTINATIONAL CORPORATIONS, NATURAL GAS, NATURAL RESOURCE, NATURAL RESOURCES, NEGATIVE SHOCKS, NEW TECHNOLOGY, NUCLEAR ELECTRIC POWER, NUCLEAR ELECTRIC POWER GENERATION, OIL, OIL COMPANY, OIL PIPELINE, OIL RESOURCE, OPEN ACCESS, OPEN ECONOMY, OUTPUT, PETROLEUM, PIPELINE, POLITICAL DETERMINANTS, POLITICAL DISORDER, POLITICAL ECONOMY, POLITICAL RISK, POLITICAL STABILITY, POLITICAL UNCERTAINTY, POLITICAL UNREST, POLITICAL UPHEAVAL, PORTFOLIOS, POSTAL SERVICE, POWER, PRODUCTIVITY, PROFIT MARGINS, PROPERTY RIGHTS, PUBLIC SPENDING, RADIO, RATE OF RETURN, RATES OF RETURN, REAL ESTATE, RESIDENTIAL BUILDING, RESULT, RESULTS, RETAIL BANKING, RETURNS, RISKY BUSINESS, RULE OF LAW, SATELLITE, SEARCH, SEMICONDUCTORS, SITES, STABLE ECONOMIES, STATEMENT, SUBSCRIPTION, TAX, TELECOMMUNICATION, TELECOMMUNICATIONS, TERRORISM, TRANSMISSION, TRANSPARENCY, TURBINES, URL, USES, UTILITIES, VEHICLES, VIDEO, VIDEO GAMES, VOLATILITY, WEB, WIND, WOOD PRODUCTS, WORLD DEVELOPMENT INDICATORS, WORLD ECONOMY, Greenfield FDI, tradables, non-tradables, Dutch Disease,
Online Access:	http://documents.worldbank.org/curated/en/2013/12/18621884/risky-business-political-instability-greenfield-foreign-direct-investment-arab-world https://hdl.handle.net/10986/16932
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