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Volume :37 Issue : 3 2009      Add To Cart                                                                    Download

FDI Inflows to the UAE: Determinants and Policy Issues

Auther : Kamal El-Wassal

The papers purpose is to define the main determinants of FDI flows to the United Arab Emirates (UAE), to examine FDI impact on the UAE economy and to explore how the representatives of Multinational Enterprises (MNEs) operating in the UAE perceive government initiatives towards FDI. The paper examines FDI flows to the UAE over the last three decades. Then, it reports on an empirical study based on 101 MNEs which have conducted FDI. Based on the electic paradigm, it aims at finding out the main characteristics of the company, internalization, and location factors which affect MNEs decision to undertake FDI in the UAE. The results show the importance of factors such as the existence of specific assets of an intangible nature, human capital, skills, reputation and public image, and technological and innovative capabilities. They also show that entering new markets, being located close to markets, reducing costs, and securing strategic alliances are relevant in the choice of FDI over alternative forms of FDI. Institutional factors (political stability), business environment factors (business attitudes and access to banking services), infrastructure factors (telecommunications and transportation/logistics factors) are key factors for selecting the UAE. Meanwhile, foreign investors> representatives think that a more liberalized FDI regime is needed. Further, the co-integration test results suggest a negligible role for FDI on the UAE economy. This paper has important policy implications, not only for policy makers in the UAE, but also for policy makers in other countries with similar circumstances, especially the Gulf Co-operation Council (GCC) ones.


Keywords: Foreign Direct Investment (FDI); United Arab Emirates (UAE), Electic paradigm, Co -integration analysis.

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