Unraveling the determinants of FDI in the GCC: a multifaceted analysis of economic, regulatory, and institutional factors

The remarkable surge of Foreign Direct Investment (FDI) in the non-oil sectors of the Gulf countries over the past decade signifies a pivotal shift in their economic landscape. This surge has been driven by the urgent need to diversify these economies and ensure sustainable growth, given the challenges posed by depleting oil resources and volatile prices. In response to this imperative, there arises a critical need to investigate and comprehend the "other" factors that exert influence over FDI inflows in the region. To address this knowledge gap, a comprehensive study was conducted, employing advanced panel data techniques and analyzing data from the six Gulf Cooperation Council (GCC) countries over the period from 2000 to 2015.
The findings of this study sheds significant light on the determinants that shape FDI inflows in the Gulf countries. Notably, market size, infrastructure development, trade openness, inflation levels, and political stability emerged as crucial factors driving FDI. These factors were found to have a statistically significant impact on FDI inflows, underscoring their importance in attracting foreign investment to the region. Conversely, the study did not find a significant association between FDI inflows and the variables of risk and competition.
The insights provided by this research hold immense value for policymakers, investors, and other stakeholders interested in fostering economic diversification and attracting further foreign investment in the Gulf countries. Such measures can serve as catalysts for attracting higher FDI inflows, stimulating economic growth, and reducing dependence on the volatile oil sector.