Selected MENA Countries' Attractiveness to G7 Investors

Economic Modelling, Vol. 28, No. 5, 2011

ERF working paper series, 531

27 Pages Posted: 26 Apr 2014 Last revised: 28 Apr 2014

See all articles by Fathi Abid

Fathi Abid

University of Sfax, Faculty of Economic and Management Sciences, Probability & Statistics Laboratory

Slah Bahloul

University of Sfax - Higher Institute of Business Administration

Date Written: April 25, 2014

Abstract

The objective of this paper is to evaluate the relative attractiveness of seven MENA countries (Algeria, Egypt, Iran, Saudi Arabia, Morocco, Tunisia and Turkey) as a location for foreign portfolio investment (FPI) from the G7 investors' viewpoints over the period 2001-2005. We suggest a methodology based on the combination of the gravity model, the analytic hierarchy process (AHP) and the goal programming model (GP). The gravity model is used to determine the attractiveness factors of a country with respect to FPI for 30 investing and 43 receiving countries. Results show the importance of information costs and bilateral trade in the determination of the bilateral asset holdings. The AHP method is applied to prioritize the set of FPI location alternatives according to variables' significance in the gravity model outcome; information costs, bilateral trade, GDP, investment freedom, institutional quality, and geographic distance. Results show that in general Saudi Arabia is the best destination for Japanese and US investors, Turkey is the favorite location for French, German, Italian and British investors and Algeria is the preferred country for Canadian investors. A combined AHP-GP model has been used to determine the degree of portfolio investment in each MENA country from the viewpoint of G7 investors. The relative attractiveness of MENA countries varies over time and across investors. In general, over the period 2001-2005, the most attractive country is Iran for Canadian, French and Italian investors, Turkey for German and British investors and Saudi Arabia for Japanese and US investors. For a MENA country to attract more FPI it should especially improve bilateral trade and institutional quality and reduce foreign investment restrictions and information costs.

Keywords: Foreign portfolio investment, Attractiveness, Middle East and North Africa, G7 investors, Gravity model, Analytic hierarchy process, Goal programming

JEL Classification: F30, G11

Suggested Citation

Abid, Fathi and Bahloul, Slah, Selected MENA Countries' Attractiveness to G7 Investors (April 25, 2014). Economic Modelling, Vol. 28, No. 5, 2011. Available at SSRN: https://ssrn.com/abstract=2429195

Fathi Abid

University of Sfax, Faculty of Economic and Management Sciences, Probability & Statistics Laboratory ( email )

Road of Airport, Km 4
Sfax, sfax 3018
Tunisia
+216 7427 9154 (Phone)

Slah Bahloul (Contact Author)

University of Sfax - Higher Institute of Business Administration ( email )

Road of the Airport 4
Sfax, BP 1013
Tunisia

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