Foreign direct investment essay

Document Type:Essay

Subject Area:Economics

Document 1

However, Foreign Direct Investment (FDI) inflows pose significant impacts on the economy of Saudi Arabia both directly and indirectly by stimulating growth and providing stability to the kingdom economy. In 2016, the government of Saudi Arabia launched its Saudi vision 2030 aimed at reducing the state reliance on oil products and expand its economy means (Alam, 2016). Traditionally, Saudi Arabia is one of the biggest recipients of FDI in West Asia and has the biggest economy in the Arab domain. In 2017, the leading venture capitalist in Saudi Arabia had been Japan, Kuwait, Singapore, Malaysia, France, the United States, and The United Arabs Emirates. The nations invested mainly in machinery, automobiles, fossil fuels, tourism, real estate, and the chemical industry. To attain bearable and fast economic growth, Saudi Arabia has placed reliance on the private sector as its dynamic motive.

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To facilitate the participation of the private in the economy, enhancing the business climate is essential. An overview of the Saudi economy Saudi Arabia economies rely heavily on the hydrocarbon sector. According to Albassam (2016), the performance of the state is therefore dependent on the performance of the hydrocarbon sector which means that its pros and cons determine the overall performance of the economy. The kingdom has therefore embarked on an alternative venture approach where various liberalization procedures have been implemented to advance the investment condition of the state. The role of FDI in Saudi Arabia’s growth of GDP and non-oil GDP The economic development of Saudi Arabia has been facilitated greatly by the production and exportation of oil. In a research by Albassam (2016), this economic development has significantly attracted the amount of inward FDI which is encouraged by policymakers.

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Saudi Arabia is among the leading economies in both central and North Africa and oil revenues range from 90-95% of the total earnings from the exports. Saudi Arabia hence depends heavily on the oil revenues. However, Amri (2016) found that the revenues account only an approximate 35-40% of the county GDP. Countries that show increased GDP growth rates, high proportion of international trade and are business friendly have a higher probability of attracting maximum foreign direct investment. FDI is therefore determined by numerous influences that include; political factors, policies of industrial sectors, policies of the state and the economic environment. Political issues play a significant role in determining the political stability of the state as it aids to direct the effect of FDI investment in the country.

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The policies set by the industrial sectors influence the trends of investment state policies include the policies, laws, regulations or rules of the state that significantly influence the FDI policy. Finally, the economic environment includes the abundance f natural resources, economic structure and the economic development which are factors that greatly limit the attraction of foreign direct investment. Saudi Arabia can create a positive business environment by attracting more FDI with that aid of diversifying its growth economically. Policy implications of FDI Numerous competitive factors are essential in enticing FDI in The Kingdom of Saudi Arabia. In his research, Mahalik (2017) found that through multiple regression analysis, the impacts of the perceived factors show significant results that align with the signs as anticipated with theoretical contemplations.

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