Alkhathlan, Khalid; Tarique, Md.
March 2009
Journal of International Business & Economics;2009, Vol. 9 Issue 2, p95
Academic Journal
Foreign Direct Investment (FDI) plays an important role in stimulating the growth potentials and providing stability to the economy of Saudi Arabia. Our findings show that there are mainly four factors which determine the net FDI flow to Saudi Arabia. These are - GDP, Privatization, Import and Export and Growth rate of GDP. There exists a positive relationship between FDI and GDP and GDP growth rate while it is negatively related to privatisation and imports plus exports taken together showing trade sensitivity. However, the relationship between FDI and GDP growth rate is very weak. The values for the GDP, privatisation and trade sensitivity elasticity to FDI is 1.36, -0.999 and - 0.068 respectively. The marginal effect of GDP growth on FDI is 0.004. The developmental efforts in the country have not been able to attract FDI in a desired amount except the oil sector. To provide stability, self reliance and sustainable growth to the Kingdom of Saudi Arabia (KSA) economy, FDI is needed in both import substitute and export promoting industries.


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