TY  - JOUR
AU  - Gangopadhyay, Partha 
AU  - Elafif, Mohamed 
PY  - 2016
TI  - Why is it so Difficult to Attract FDI to the MENA Countries?
JF  - American Journal of Applied Sciences
VL  - 13
IS  - 9
DO  - 10.3844/ajassp.2016.969.975
UR  - https://thescipub.com/abstract/ajassp.2016.969.975
AB  - In this study we constructively argue that the relationship between FDI flows and the per capita GDP for the MENA countries has a novel feature-hitherto unrecognised-which can partially explain the great difficulty of the MENA region in attracting FDI. We show the existence of a separatrix, or trap, in terms of the per capita GDP: To the left of the trap, the change in the flow of FDI as a percentage of GDP declines as the per capita GDP rises. To the right of the trap, the change in the flow of FDI as a percentage of GDP rises with an increase in per capita GDP. Thus, in order to attract FDI, as our results show, the MENA countries must achieve a critical level of economic development in terms of the per capita GDP-otherwise FDI flows will be extremely sluggish. From the dataset available for 16 countries during 1996-2013, we find the per capita income trap is at US$ 10,000. In other words, the FDI to GDP ratio is a non-linear function of the per capita GDP for the MENA region. In fact, we find the function to be inverse S-shaped: For per capita incomes less than $10,000, the function is concave-as per capita GDP rises, FDI as a percentage of GDP rises at a declining rate. Beyond this critical value of per capita GDP (trap/separatrix), the function becomes convex: As per capita GDP rises above the trap, FDI as a percentage of GDP then rises at an increasing rate.