Determining Factors of Inward Foreign Direct Investment (FDI) in Selected Muslim Countries

Title : Determining Factors of Inward Foreign Direct Investment (FDI) in Selected Muslim Countries

Authors :
1. Muhammad Ubaidillah Al Mustofa
2. Raditya Sukmana
3. Sri Herianingrum
4. Ririn Tri Ratnasari
5. Imron Mawardi
6. Siti Zulaikha

Department : Ekonomi Syariah

Journal Name : Journal of Economic Cooperation and Development,

Kinds of Journal : Q3

Keywords : Country Governance, Country Risk, Foreign Direct Investment, Institutional Quality

ABSTRACT

This study analyzed the impact of country risk, regulatory quality, and selected macroeconomic factors on the inflows of Foreign Direct Investment (FDI) into selected Muslim countries. A quantitative study was applied using the panel regression method on data of 13 Organization of Islamic Cooperation (OIC) countries from 2002 to 2019. The developed panel regression models evaluated the country risk, institutional quality, and selected macroeconomic factors which included the country’s inflation level, exchange rate, economic output, and political system. These factors are deemed important in many Muslim
countries which are known to be associated with poor institutional quality and high exposure to risks due to a multitude of factors such as political instability, wars, and poor management of natural resources. The composite score of the International Country Risk Guide was applied to analyze the impact of country risk on the inflows of FDI and to provide managerial relevancies for different stakeholders. The results showed that in general, Muslim countries tend to have a moderate level of country risk exposure and a low level of institutional quality. As investors prefer to invest in countries with low exposure to risks, the institutional quality must be enhanced to play a vital role in enhancing the flow of foreign investments. Countries with higher economic output have moreopportunities to receive higher investment flows.

For details : https://www.sesric.org/publications-jecd-articles.php?jec_id=121