Impact of Foreign Direct Investment on Economic Growth: Evidence from Arab Region

Theoretical literature indicates that foreign direct investment can bring about major changes in host economies, especially in developing countries, because of its advantages in financing, transferring modern technology, contributing to the development of human capital, contributing to inventions through research and development activities, contributing to the openness of the host economy on the global markets, and other accompanying advantages, but these advantages cannot be benefited from unless certain conditions are met in the host economy. In this context, this paper sought to investigate the impact of inflow foreign direct investment on economic growth in the Arab countries region between 1990 and 2000, using ARDL bounds testing approach. The results showed that there was a very weak effect of foreign direct investment on economic growth in the long run, but in the short run there was no effect. The reasons for this are mainly due to the lack of appropriate and necessary conditions that attract and incubate foreign direct investments in most Arab countries.