ANALYSIS OF DETERMINANTS OF FOREIGN DIRECT INVESTMENT IN EGYPT (1970-2013)

Abstract

Egyptian economic conference came (the future of Egypt) to prove the importance and necessity of Foreign Direct Investment (FDI) for Egyptian economy development. Actually, the strong competition between the different countries to attract more of (FDI) is considered an important factor that forces us to identify the environment of the investment in Egypt. This competition requires not only exerting efforts to attract these investments, but also using it as efficiently as possible. The Arab world is an important source for this investment, which focuses on infrastructure, industry, hotels and services. Although, it is obvious to all the importance of (FDI) in increasing the domestic capital accumulation, its role in Egyptian economy is still limited and this requires more work to attract the biggest and the best (FDI) to achieve economic and political stability in Egypt. The importance of this study is to help the decision-makers to know the properties and appropriateness of the climate of (FDI) in Egypt, its international indicators, the quality and effectiveness of economic and legislative policies. This study aims to identify and measure the most important economic factors affecting the inflow of (FDI) to Egypt during the period (1970-2013). The study used SPSS, Eviews and Statgraphics software to select the optimal econometric model that explains the functional relationships between (FDI) as the dependent variable and 13 economic independents variables related to (FDI). The study also attempts to predict the size of (FDI) and its determinants for the next five years, which helps economic responsible personnel to improve the environment of (FDI) in Egypt. Co-integration equation shows that the variables (Gross Domestic Production, Households' Expenditure, and Degree of Commercial Exchange) have a positive impact on (FDI), while the variables (Inflation, Unemployment, General Government Expenditure, Exchange Rate, and Interest Rate) have negative effect on (FDI), also the significant effect of the variables (Population, Domestic investment, Savings, and the Balance of Goods and Services) does not appear. The explanatory power model is 83.3%; which is high.