Does Sudan’s Removal from State Sponsors of Terrorism Designation Affect Foreign Direct Investment (FDI)? “A Multivariate Analysis Combining VECM and ARDL Analysis” (1974–2019)

Abstract

Thanks to the great political and economic global openness that Sudan witnessed in late 2020, the USA decided to remove Sudan from the terrorism sponsors designation. The paper seeks to investigate whether Sudan’s removal from the state sponsors of terrorism designation affects foreign direct investment (FDI). Data covered the 1974–2019 period, using a multivariate analysis combining VECM and ARDL models. Evidence reveals that the political and economic global openness headed by the removal of Sudan from state sponsors of terrorism designation, agricultural and oil investment as well as minerals investment opportunities are key variables that attract foreign direct investment in Sudan and affect FDI inflows positively and significantly in the long run. Policymakers should benefit from the global openness opportunities that offer a respectable environment for FDI inflows. Meanwhile, lifting the political and economic restrictions that were imposed, such as the state of a sponsor of terrorism and further economic restrictions, can boost investment in the agriculture, oil, and mineral sectors in the long run by creating some effective policies that are likely to lure foreign direct investment inflows and enhance sustainable economic development. Policymakers should emphasize implementing agriculture, oil, and mineral investment policies that must be accompanied with fundamental infrastructure restructuring policies by reforming the government system through the adoption of effective financial policies to combat corruption. Also, policymakers should develop towards geographic diversification of foreign investment flows to Sudan by focusing on European countries as essential partners given their crucial role in supporting Sudan and the strength of efficient companies in all areas that Sudan needs.