Factors in Saudi FDI Inflow

Abstract

This study explores the driving factors for attracting Foreign Direct Investment (FDI) inflow in the Saudi Arabian economy in two stages. First, it applies a general to specific approach to form a model reflecting theoretical and anecdotal evidence of the Saudi Arabian economy. Second, we analyse time series data over the years 1984 to 2018. applying Autoregressive Distributed Lags (ARDL) approach, incorporating several structural breaks. This study explores Saudi membership of the World Trade Organization (WTO) and institutional quality, identifying them as promising factors in fostering FDI inflows in the economy. Our empirical investigation demonstrates that the Saudi economy experienced a higher inflow of FDI during the global financial crisis (GFC) due to economic stability. Trade openness is found to be conducive to promote FDI inflow. This study provides several policy implications.