The Ranking of the OIC Member Countries Based on Factors Influencing Their Inward Foreign Direct Investments

Reza Najarzadeh and Vaheed Shaghaghi Shahri
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Reza Najarzadeh: Assistant professor at Tarbiat Modares University, Tehran, Iran
Vaheed Shaghaghi Shahri: Ph.D. student at Tarbiat Modares University, Tehran, Iran

Iranian Economic Review (IER), 2008, vol. 13, issue 1, 107-122

Abstract: Foreign investments play a significant role in the economy of developing countries. In this article, an attempt is made to classify the member countries of the Organization of the Islamic Countries (OIC) based on the factors influencing their inward foreign direct investments. At first the relevant economic, social and political factors were introduced. Then by using a Numerical Taxonomy Method the OIC member countries were classified. Based on empirical studies, we have selected some of the most important factors (compound & single) influencing foreign investments for the ranking purpose. These factors are: Economic freedom index, the per Capita Number of Tourists, Regionalism index, Trade openness index, Market Size & Economic Stability index. Based on the results, Malaysia is the state with the highest chance of attracting foreign direct investments. Because of her high economic growth rate & the implementation of trade openness policies in recent years, this country has been able to gain the top position visa-vies other OIC member states As for the countries at the bottom of the ranking such as Libya & Uzbekistan the economic freedom index, as put out by the Heritage Foundation, shows that these countries have had the worst status when it comes to the compound economic freedom index among all the Islamic countries in the past years. Inappropriate policies of the public sectors in controlling financial markets, the goods and services markets, the labor market & the foreign sector have had a negative impact on foreign investments inflows. The results also indicate that among 46 OIC countries Iran is ranked in the 44th place.

Keywords: The OIC member countries; Foreign Direct Investment; Numerical Taxonomy; Globalization and Regionalism (search for similar items in EconPapers)
Date: 2008
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