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Risky Business : Political Instability and Greenfield Foreign Direct Investment in the Arab World

ACCOUNTING ADVERTISING AFFILIATED ORGANIZATIONS ALTERNATIVE INVESTMENT ALTERNATIVE METHODS AMOUNT OF CAPITAL APPROACH AUTOMOBILES AUXILIARY EQUIPMENT AVAILABILITY BATTERIES BIOMASS BIOMASS POWER BOILER BUILDING MATERIAL BUREAUCRATIC QUALITY CAPITAL ACCUMULATION CAPITAL FLOW CAPITAL FLOWS CAPITAL STOCK CEMENT CHECKS CHEMICAL PRODUCTS CIVIL WAR COAL COMMODITY COMMODITY PRICE COMPUTER SYSTEMS CONSUMER ELECTRONICS CONSUMER PRICE INDEX CORPORATE SOCIAL RESPONSIBILITY COUNTRY DUMMIES COUNTRY FIXED EFFECTS COUNTRY RISK CRUDE OIL CUSTOM DATA PROCESSING DECLINE IN INVESTMENT DEMOCRACY DEMOCRATIC ACCOUNTABILITY DEVELOPING COUNTRIES DIGITAL CONTENT DIMINISHING RETURNS DUMMY VARIABLE DUMMY VARIABLES E-MAIL ELECTRIC POWER EMPLOYMENT ENERGY RESOURCES ENFORCEMENT OF CONTRACTS EQUIPMENT EXCHANGE RATE EXCHANGE RATES EXPECTED RETURNS FINANCIAL CRISIS FINANCIAL INFORMATION FINANCIAL SERVICES FOREIGN COMPANIES FOREIGN DIRECT INVESTMENT FOREIGN DIRECT INVESTMENTS FOREIGN INVESTMENTS FOREIGN INVESTORS FOSSIL FOSSIL FUEL GAS GAS EXTRACTION GASOLINE GEOTHERMAL ELECTRIC GLOBAL ECONOMY GOVERNANCE INDEX GOVERNANCE INDICATORS GROSS DOMESTIC PRODUCT HARDWARE HEAT HOST COUNTRY HOST ECONOMY HUMAN CAPITAL HYDROELECTRIC POWER ID INDUSTRIAL PRODUCTION INFLATION INFORMATION PROVIDERS INSTRUMENT INSURANCE INTERNATIONAL BANK INTERNATIONAL BUSINESS INTERNATIONAL ECONOMICS INTERNATIONAL INVESTMENT INTERNATIONAL INVESTORS INTERNATIONAL TRADE INTERNATIONALIZATION INVESTING INVESTMENT BANKING INVESTMENT CLIMATE INVESTMENT FLOWS INVESTMENT FUNCTION INVESTMENT LOCATION DECISIONS INVESTMENT MANAGEMENT INVESTMENT OPPORTUNITIES INVESTMENT PROJECTS LIEN LIQUIDITY MACROECONOMIC CONDITIONS MACROECONOMIC MANAGEMENT MANAGEMENT SERVICES MANUFACTURING MANUFACTURING INDUSTRIES MARKET ENTRY MARKETS DATABASE MATERIAL MONETARY FUND MOTION PICTURE MULTINATIONAL CORPORATIONS NATURAL GAS NATURAL RESOURCE NATURAL RESOURCES NEGATIVE SHOCKS NEW TECHNOLOGY NUCLEAR ELECTRIC POWER NUCLEAR ELECTRIC POWER GENERATION OIL OIL COMPANY OIL PIPELINE OIL RESOURCE OPEN ACCESS OPEN ECONOMY OUTPUT PETROLEUM PIPELINE POLITICAL DETERMINANTS POLITICAL DISORDER POLITICAL ECONOMY POLITICAL RISK POLITICAL STABILITY POLITICAL UNCERTAINTY POLITICAL UNREST POLITICAL UPHEAVAL PORTFOLIOS POSTAL SERVICE POWER PRODUCTIVITY PROFIT MARGINS PROPERTY RIGHTS PUBLIC SPENDING RADIO RATE OF RETURN RATES OF RETURN REAL ESTATE RESIDENTIAL BUILDING RESULT RESULTS RETAIL BANKING RETURNS RISKY BUSINESS RULE OF LAW SATELLITE SEARCH SEMICONDUCTORS SITES STABLE ECONOMIES STATEMENT SUBSCRIPTION TAX TELECOMMUNICATION TELECOMMUNICATIONS TERRORISM TRANSMISSION TRANSPARENCY TURBINES URL USES UTILITIES VEHICLES VIDEO VIDEO GAMES VOLATILITY WEB WIND WOOD PRODUCTS WORLD DEVELOPMENT INDICATORS WORLD ECONOMY Greenfield FDI tradables non-tradables Dutch Disease
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World Bank, Washington, DC
Middle East and North Africa | North Africa | Middle East
2014-02-05T18:18:37Z | 2014-02-05T18:18:37Z | 2013-12

Which foreign direct investments are most affected by political instability? Analysis of quarterly greenfield investment flows into countries in the Middle East and North Africa from 2003 to 2012 shows that adverse political shocks are associated with significantly reduced investment inflows in the non-resource tradable sectors. By contrast, investments in natural resource sectors and non-tradable activities appear insensitive to such shocks. Consistent with these patterns, the significant reduction in investment inflows in Arab Spring affected economies was starkest in the non-resource manufacturing sector. Political instability is thus associated with increased reliance on non-tradables and aggravated resource dependence. Conversely, how intensified political instability affects aggregate foreign direct investment is critically contingent on the initial sector composition of these flows.

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