Page 5 - Azerbaijan State University of Economics

Aboubaker Khoualed, Taher Makhloufi, Ahmed Makhloufi, Elyas Luqman: The Impact
of Foreign Direct Investment (FDI) on Economic Development: The Case of Algeria

The importance of FDI increased in 1990 as the opening of global markets facilitated
the free flow of capital between countries. Policy makers around the world seek to
attract FDI to address a range of challenges, including achieving high development
rates, which is one of the main challenges facing developing countries.

Algeria, like other developing countries in its strategy to support development, seeks
to attract as much FDI as possible by providing a suitable environment for attracting
FDI through offering a set of incentives and facilities to foreign investors.

Study problem:
The problem of this study can be formulated in the following main question:
What are the long-term and short-term effects of FDI on economic development
in Algeria?

LITERATURE REVIEW
Previous Studies
Governments of countries have shown interest in the role of FDIs in economic
development. Since economic development is one of their main objectives, they have
been motivated to develop policies that attract FDI during the economic development
process in these countries (Vo, Anh, & Zhang, 2019).

Researchers have conducted numerous studies to understand this role using data from
several countries or a single country. Unfortunately, they have not yet reached a
consensus on the empirical results. In a study by (Kovačević, Rebić, & Kurušić, 2021)
related to a single country, examined the impact of FDI inflows on the economic
development of Serbia during the period 2010-2019. The study found a positive link
between the inflow of FDI and the development of Serbia's GDP, and a positive link
between the inflow of FDI and the value of exports, and also shows a positive link
between the development of investments in the manufacturing industries and
development in productivity, employment, and total trade value. The same result was
obtained in the United States with a significant impact of FDI on economic
development (Parviz, 2004).

In analyzing FDI and economic development, evidence appears to support the
hypothesis that FDI can have a negative impact on economic development, a study by
(Dey & Awal, 2017) found no positive impact of FDI on economic development in
Bangladesh during the period 1990-2015.

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