Bilateral investment treaties are contracted to strengthen property rights protection and reduce political risk. This paper examines how property rights protection institutions and bilateral investment treaties affect Foreign Direct Investment (FDI) flows to the MENA region. The author uses panel data from 13 MENA countries.
The author highlights that the empirical results of the study show how human resources and world oil price are important to FDI flows in the MENA. He explains that the productive and low cost labor have a positive influence. He further adds that FDI flows can also be improved when world oil price is controlled by the countries of upper hand. The economic growth in industrialized countries is associated with these flows, on the contrary to the global business cycle. He also finds that in addition to the many location advantages that MENA countries have; the natural and human resources stand out to be the most valuable gifts.
The author considers in his study four dimensions of Property Rights Protection based on the International Country Risk Guide’s political risk index: investment profile, corruption, law and order, and bureaucracy quality. He illustrates that Investment profile refers to the risk of investment expropriation, profits repatriation and payment delays, all clearly influencing PRP. He refers to Corruption as being a threat. High scores of the law and order and of the bureaucracy governing, with no drastic changes in policy when governments change, indicate better performance in the PRP.
The author finally concludes that reducing the expropriation of private investments by the government appears to encourage foreign investors to target MENA countries. In addition, the bilateral investment treaties help in reducing corruption and in improving the bureaucracy quality. He also highlights that government efforts in this field are giving positive results.