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Volume :15 Issue : 59 1989      Add To Cart                                                                    Download

A SUGESTED MODEL FOR THE POLICY OF ATTRACTING DIRECT FOREIGN INVESTMENT APPLIED TO SAUDI ARABIA

Auther : By: Dr. Mohammed Hussasin Mattar

  
          There is no doubt that Direct Foreign Investment (DFI) made by Multinational Enterprises (MNE) play a great role in the development of Host Countries (HC).  Recognizing the importance of this role, many Developed as well as Developing countries issue policies and promulgate laws to attract and organize the flow of DFI.  Such policies could be classified into four main groups as follows:

a)     Policies giving full encouragement with no restrictions whatever on the flow of DFI.

b)    Policies encouraging the flow of DFI but with some restrictions imposed on some operation MNE.

c)     Policies preventing the flow of DFI with some exceptions given to certain MNE.

d)    Policies completely prohibiting the flow of DFI.

 Most nations follow policies of the first and second groups, while very few apply policies of the third and fourth groups.  Because of the sever competition to attract DFI, many countries issue policies that offer financial incentives and guarantees to DFI without considering the motives and objectives of MNE.  Such policies resulted in a low flow of DFI especially to Developing countries and disagreement between MNE and Host Countries.

 This study suggests a model for a policy of attracting DFI that incorporates both the objectives of MNE and HC.

 The study is divided into three parts.  Part one is a highly selective review of the literature on the effects of DFI on HC and is concluded with a summary of the positive effects of the operations of MNE on HC

 While part two critically examines the existing policy adopted by the Kingdom of Saudi Arabia to attract DFI, part three introduces the suggested new policy that could be applied by any country.

  The suggested policy has the following advantages:

1.     It takes into account the development and changes in the economy of the Host Country.

2.     It also takes into consideration changes in the international environment.

3.     It capitalizes on the points of strength that the HC enjoys over other countries.

4.     It co-ordinates the Law organizing the flow of DFI with other Laws and legal rules that affect the operations of MNE the flow of DFI.

5.     The policy also suggests some specific aims for DFI based on the economic objectives of HC.

6.     The aims of DFI take into considerations the movies and objectives of MNE.

7.     An independent organization is suggested to be established to deal with DFI.  The organizational chart as well as the main functions of the different departments are suggested by this study.

8.     The policy also suggests some promotional activities that can be used to promote the policy and economic projects needed by HC.

9.     In addition, the suggested policy is dynamic and flexible that helps to create a good investment climate.

 Many reasons make this study important.  Providing a good literature review, filling the gap in the Arabic literature of DFI in general and MNE in particular, and guiding policy makers in setting up a good policy to deal with DFI are only some of the reasons.

 

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May 18, 2017

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