Foreign direct investment in the Middle East and North Africa region Said M. Elfakhani* School of Business, American University of Beirut, Bliss Street, P.O. Box 11-0236, Beirut, Lebanon E-mail: SE01@aub.edu.lb *Corresponding author Linda M. Matar The Economic and Social Commission for Western Asia, Riad el-Solh Square, Beirut, Lebanon E-mail: mattarl@un.org Abstract: This paper examines foreign direct investment (FDI) inflows in the Middle Eastern and North African (MENA) region, and attempts to identify their possible explanatory determinants. Nineteen countries are sampled for an 11-year period (1990–2000), and then we present an overview of the relationship between these foreign inflows and gross fixed capital formation (domestic investment) of MENA countries. Our test findings show that the previous year’s FDI, country openness, return on investment, membership of the World Trade Organisation, and being an oil-exporting country are all valuable predictors of country FDI inflows, and this relationship has been positive in the 1990–2000 period. These results, however, were found to be time-dependent as some variables were significant in the first sub-period 1990–1995, while other variables were significant in the 1996–2000 sub-period. Keywords: economic integration; foreign direct investment and determinants; funds flows; GCC; international trade; investment drivers; MENA. Reference to this paper should be made as follows: Elfakhani, S.M. and Matar, L.M. (2007) ‘Foreign direct investment in the Middle East and North Africa region’, J. Global Business Advancement, Vol. 1, No. 1, pp.49–70. Biographical notes: Said Elfakhani is Professor of Finance and Associate Dean, Olayan School of Business at the American University of Beirut (AUB), Lebanon. He earned his BBA from the Lebanese University, MBA from University of Texas at Arlington, and MSc and PhD in Finance from University of Texas at Dallas. He taught at the University of Saskatchewan (1988–1998), and held visiting appointments at Indiana State University and King Fahad University of Petroleum and Minerals (Saudi Arabia). He has published 23 papers in international journals, 12 papers in international proceedings, and presented 30 papers in international conferences world wide. He has served as an Academic and Professional Consultant for AUB in several projects undertaken within AUB Regional External Programmess. He is listed as an ‘International Scholar in Finance’ with the Organisation of Arab Academic Leaders for the Advancement of Business and Economic Knowledge. 111 2 3 4 5 6 7 8 9 1011 1 2 3 4 5 6 7 8 9 2011 1 2 3 4 5 6 7 8 9 30 1 2 3 4 5 6 7 8 9 40 1 2 3 4 5 6 711 8 J. Global Business Advancement, Vol. 1, No. 1, 2007 49 Copyright © 2007 Inderscience Enterprises Ltd.