AMF study reveals key factors in drawing FDI to the Arab Region

By Rahul Vaimal, Associate Editor
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Arab region’s prominent economic entity, the Arab Monetary Fund (AMF) has released a new study that provides insights into various factors which attract foreign direct investment (FDI) to Arab nations.

The report, titled “The Role of Economic Freedom, Governance, and Business Environment in Attracting Foreign Direct Investment to the Arab Region”, is in line with the AMF’s consistent efforts to support decision-making in the Arab countries.

With nations across the globe updating their policies to make their country attractive to FDIs, the global environment for foreign direct investment has become extremely competitive, creating a challenging period for Arab nations to attract investments.

The AMF study intends to assess the role of economic freedom indices and governance indicators in attracting foreign direct investment into the Arab region.

Key factors of Attraction

The study highlights that economic freedom indices like the monetary and the financial freedom indices are significantly and positively related to foreign direct investment attractiveness in the Arab region.

Moreover, according to the AMF study, the regulatory quality index outperforms all other governance factors in attracting foreign direct investment inflows into the Arab region.

The results of this study have policy implications for policymakers in the Arab region. To foster foreign direct investment inflows into these countries, policymakers should ensure a high level of economic freedom, the effectiveness of their governance systems, the quality of their institutions, and the stability of their business environment by strengthening and reforming relevant laws and regulations, lowering the barriers to business entry, limiting risks, and improving cooperation policies.

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