Publication: Risky Business : Political Instability and Greenfield Foreign Direct Investment in the Arab World
Loading...
Published
2013-12
ISSN
Date
2014-02-05
Author(s)
Editor(s)
Abstract
Which foreign direct investments are most affected by political instability? Analysis of quarterly greenfield investment flows into countries in the Middle East and North Africa from 2003 to 2012 shows that adverse political shocks are associated with significantly reduced investment inflows in the non-resource tradable sectors. By contrast, investments in natural resource sectors and non-tradable activities appear insensitive to such shocks. Consistent with these patterns, the significant reduction in investment inflows in Arab Spring affected economies was starkest in the non-resource manufacturing sector. Political instability is thus associated with increased reliance on non-tradables and aggravated resource dependence. Conversely, how intensified political instability affects aggregate foreign direct investment is critically contingent on the initial sector composition of these flows.
Link to Data Set
Citation
“Burger, Martijn; Ianchovichina, Elena; Rijkers, Bob. 2013. Risky Business : Political Instability and Greenfield Foreign Direct Investment in the Arab World. Policy Research Working Paper;No. 6716. © World Bank. http://hdl.handle.net/10986/16932 License: CC BY 3.0 IGO.”
Digital Object Identifier
Associated URLs
Associated content
Other publications in this report series
Publication The Economic Value of Weather Forecasts: A Quantitative Systematic Literature Review(Washington, DC: World Bank, 2025-09-10)This study systematically reviews the literature that quantifies the economic benefits of weather observations and forecasts in four weather-dependent economic sectors: agriculture, energy, transport, and disaster-risk management. The review covers 175 peer-reviewed journal articles and 15 policy reports. Findings show that the literature is concentrated in high-income countries and most studies use theoretical models, followed by observational and then experimental research designs. Forecast horizons studied, meteorological variables and services, and monetization techniques vary markedly by sector. Estimated benefits even within specific subsectors span several orders of magnitude and broad uncertainty ranges. An econometric meta-analysis suggests that theoretical studies and studies in richer countries tend to report significantly larger values. Barriers that hinder value realization are identified on both the provider and user sides, with inadequate relevance, weak dissemination, and limited ability to act recurring across sectors. Policy reports rely heavily on back-of-the-envelope or recursive benefit-transfer estimates, rather than on the methods and results of the peer-reviewed literature, revealing a science-to-policy gap. These findings suggest substantial socioeconomic potential of hydrometeorological services around the world, but also knowledge gaps that require more valuation studies focusing on low- and middle-income countries, addressing provider- and user-side barriers and employing rigorous empirical valuation methods to complement and validate theoretical models.Publication The Macroeconomic Implications of Climate Change Impacts and Adaptation Options(Washington, DC: World Bank, 2025-05-29)Estimating the macroeconomic implications of climate change impacts and adaptation options is a topic of intense research. This paper presents a framework in the World Bank's macrostructural model to assess climate-related damages. This approach has been used in many Country Climate and Development Reports, a World Bank diagnostic that identifies priorities to ensure continued development in spite of climate change and climate policy objectives. The methodology captures a set of impact channels through which climate change affects the economy by (1) connecting a set of biophysical models to the macroeconomic model and (2) exploring a set of development and climate scenarios. The paper summarizes the results for five countries, highlighting the sources and magnitudes of their vulnerability --- with estimated gross domestic product losses in 2050 exceeding 10 percent of gross domestic product in some countries and scenarios, although only a small set of impact channels is included. The paper also presents estimates of the macroeconomic gains from sector-level adaptation interventions, considering their upfront costs and avoided climate impacts and finding significant net gross domestic product gains from adaptation opportunities identified in the Country Climate and Development Reports. Finally, the paper discusses the limits of current modeling approaches, and their complementarity with empirical approaches based on historical data series. The integrated modeling approach proposed in this paper can inform policymakers as they make proactive decisions on climate change adaptation and resilience.Publication Labor Demand in the Age of Generative AI: Early Evidence from the U.S. Job Posting Data(Washington, DC: World Bank, 2025-11-18)This paper examines the causal impact of generative artificial intelligence on U.S. labor demand using online job posting data. Exploiting ChatGPT’s release in November 2022 as an exogenous shock, the paper applies difference-in-differences and event study designs to estimate the job displacement effects of generative artificial intelligence. The identification strategy compares labor demand for occupations with high versus low artificial intelligence substitution vulnerability following ChatGPT’s launch, conditioning on similar generative artificial intelligence exposure levels to isolate substitution effects from complementary uses. The analysis uses 285 million job postings collected by Lightcast from the first quarter of 2018 to the second quarter of 2025Q2. The findings show that the number of postings for occupations with above-median artificial intelligence substitution scores fell by an average of 12 percent relative to those with below-median scores. The effect increased from 6 percent in the first year after the launch to 18 percent by the third year. Losses were particularly acute for entry-level positions that require neither advanced degrees (18 percent) nor extensive experience (20 percent), as well as those in administrative support (40 percent) and professional services (30 percent). Although generative artificial intelligence generates new occupations and enhances productivity, which may increase labor demand, early evidence suggests that some occupations may be less likely to be complemented by generative artificial intelligence than others.Publication The Lasting Effects of Working while in School(Washington, DC: World Bank, 2025-08-18)This paper provides the first experimental evidence on the long-term effects of work-study programs, leveraging a randomized lottery design from a national program in Uruguay. Participation leads to a persistent 11 percent increase in formal labor earnings, observable seven years after the program. Effects are stronger for youth who participate during pivotal educational transitions and are larger for vulnerable youth and men, while remaining positive for women and non-vulnerable youth. The program is highly cost-effective, with average impacts exceeding those of job training programs and comparable to early childhood investments.Publication It’s Not (Just) the Tariffs: Rethinking Non-Tariff Measures in a Fragmented Global Economy(Washington, DC: World Bank, 2025-10-22)As tariffs have declined, non-tariff measures (NTMs) have become central to trade policy, especially in high-income countries and regulated sectors like food and green technologies. Although NTMs may serve legitimate goals, they could also sort countries and firms into or out of markets based on compliance capacity and differences in product mix. Documenting recent advances in the estimation of ad valorem equivalents (AVEs), this paper uncovers new patterns of use and exposure of NTMs. High-income countries rely more heavily on NTMs relative to tariffs, while low- and middle-income countries face steeper AVEs on their exports. Firm-level evidence shows that NTMs disproportionately affect smaller firms, leading to market exit and concentration. Poorly designed NTMs can harm productivity and welfare, while coordinated, capacity-aware use can deliver inclusive outcomes. Policy design, transparency, and diagnostics must evolve to reflect the growing role—and risks—of NTMs in a fragmented global trade landscape.
Journal
Journal Volume
Journal Issue
Collections
Related items
Showing items related by metadata.
Publication Bhutan Hydropower Sector Study : Opportunities and Strategic Options(Washington, DC, 2007-12)The objective of this study is to analyze the opportunities and strategic options available to the Royal Government of Bhutan (RGoB) to implement the hydropower projects included in its power master plan. It accounts for the relevant legal, technical, environmental, social and financial issues, as well as Bhutan's overall macroeconomic framework, and with full recognition that this resource is critical to Bhutan's economy. The scope of the study is to: (i) review and understand the framework for the existing agreement between India and Bhutan to finance the development of hydropower; (ii) review the power sector master plan to determine the competitiveness of planned projects, and their chances of being developed under a non-subsidized and/or private finance environment; (iii) review the options open to Bhutan in terms of power markets and trading; and (iv) propose some options for hydropower development in the medium to long term.Publication Greenfield Gas Distribution : Cross-country Experience(Washington, DC, 2007-12)The study aims to present information about specific countries which have initiated gas distribution projects rather than suggestions. However, by drawing on the experience of a large number of countries, it also aims to provide practical lessons about issues which could potentially foster or impede gas distribution projects. The study emphasizes how countries vary in terms of the level of development of gas distribution networks. Chapter 3 outlines the major factors contributing to such diversity. These factors fall into three categories which form the basis for analyzing gas distribution in the countries selected in the study : supply-side factors, demand-side factors and policy choices of governmentsPublication Revisiting Public-Private Partnerships in the Power Sector(Washington, DC: World Bank, 2013-03-22)As the world demand for energy continues to grow, a big question is where will all the energy come from and what will the price tag be. With such enormous sums needed, public-private partnerships (PPPs) could play a big role. But the financial crisis has raised worries about funding, and much is still not known about how best to attract PPPs. This report reviews the evidence to date with sectoral reforms and considers different approaches in varying circumstances to help outline the potential role of the private and public sector in: 1) strengthening the corporate governance of private and public utilities; 2) helping governments to establish legal, regulatory, contractual, and fiscal frameworks; and 3) improved market governance to attract private investment. Chapter one reviews the impact of the recent financial crisis on PPP investment compared with what happened in earlier financial crises. It also looks out the latest projections for additional power sector investment needed because of climate change and the possible sources of financing. Chapter two examines how PPP investment in the power sector has fared. It also gives the results of an econometric study that explores which types of incentives and variables matter most to PPPs when they are weighing entering the power sector, especially in renewables, and what influences the ongoing level of investment. The idea is to provide a powerful benchmarking tool at the sector and country levels against which governments and policy makers can evaluate progress on this issue. Chapter three examines four case studies-in China, Brazil, Peru, and Mexico-to identify, disseminate, and promote best practices on alternative ways to attract PPPs.Publication Green Infrastructure Finance : Framework Report(Washington, DC, 2012)The report estimated that in the East Asia and Pacific (EAP) region alone about US$80 billion a year of additional investments would be required in low-emission projects (green investments), resulting in a significant financing challenge. The report argues that the solution lies in understanding the causes of the financial viability gap, and then investigating how specific actions, including strategic subsidies, concessional financing, and public policy interventions and reforms, can bridge this gap to make green investment transactions viable. The green infrastructure finance framework also underscores the benefits of valuing and monetizing carbon externalities. Moreover, it recognizes the effects of policy distortions and other negative factors that impinge on financial viability, emphasizing the need for an approach to analyze and explain the gap and to attribute its components to different stakeholders. This report shows that it is essential to measure global and local externality benefits against the causes of the viability gap such as perceptions of added risks, cost differentials, policy distortions, and other factors. Once these elements are fully considered, policy makers can identify practical ways to better structure the financing of green investment projects that can be supported by the market. Three key principals have guided the development of the framework: (i) targeting green finance resources on sectors that have large numbers of projects with low abatement costs; (ii) setting ceilings on the value of support that will be provided for a tone of greenhouse gas (GHG) abatement in any sector or project; and (iii) using competitive mechanisms to ensure that projects do not receive more support than needed to make them financially attractive. This report is the second of a continuing series of green infrastructure finance publications. The first part undertook a stocktaking of leading initiatives and literature related to the green infrastructure finance theme. This second part is a conceptual piece that bridges ideas and concepts between environmental economics and project finance practices. Work will continue over the next months by operationalizing this framework (analytical methodology and assessment of green infrastructure investment climate) through a pilot in a selected EAP developing country. Given a better understanding of the financing challenges of different green projects, work will also continue in developing more customized and innovative financing instruments that can be specifically tailored to address the requirements of these projects.Publication Concentrating Solar Power in Developing Countries : Regulatory and Financial Incentives for Scaling Up(Washington, DC: World Bank, 2012-06-28)Concentrating Solar Thermal power (CST) has a tremendous potential for scaling up renewable energy at the utility level, diversifying the generation portfolio mix, powering development, and mitigating climate change. At present, different CST technologies have reached varying degrees of commercial availability. This emerging nature of CST means that there are market and technical impediments to accelerating its acceptance, including cost competitiveness, an understanding of technology capability and limitations, intermittency, and benefits of electricity storage. Many developed and some developing countries are currently working to address these barriers in order to scale up CST-based power generation. This report: a) analyzes and draws lessons from the efforts of some developed countries and adapts them to the characteristics of developing economies; b) assesses the cost reduction potential and economic and financial affordability of various technologies in emerging markets; c) evaluates the potential for cost reduction and associated economic benefits derived from local manufacturing; and d) suggests ways to tailor bidding models and practices, bid selection criteria, and structures for power purchase agreements (PPAs) for CST projects in developing market conditions. The report also presents a review of typical cost structures for parabolic trough and power tower plants, which was derived from projects developed or under preparation in Spain and the United States specifically for this report, and an in-depth assessment of the respective cost drivers.
Users also downloaded
Showing related downloaded files
Publication World Development Report 2006(Washington, DC, 2005)This year’s Word Development Report (WDR), the twenty-eighth, looks at the role of equity in the development process. It defines equity in terms of two basic principles. The first is equal opportunities: that a person’s chances in life should be determined by his or her talents and efforts, rather than by pre-determined circumstances such as race, gender, social or family background. The second principle is the avoidance of extreme deprivation in outcomes, particularly in health, education and consumption levels. This principle thus includes the objective of poverty reduction. The report’s main message is that, in the long run, the pursuit of equity and the pursuit of economic prosperity are complementary. In addition to detailed chapters exploring these and related issues, the Report contains selected data from the World Development Indicators 2005‹an appendix of economic and social data for over 200 countries. This Report offers practical insights for policymakers, executives, scholars, and all those with an interest in economic development.Publication Remarks to the Annual Meetings 2020 Development Committee(World Bank, Washington, DC, 2020-10-16)David Malpass, President of the World Bank Group, announced that the Board approved a fast track approach to emergency health support programs that now covers 111 countries. Most projects are well advanced, with average disbursement upward of 40 percent. The goal is to take broad, fast action early. The operational framework presented back in June has positioned the Bank to help countries address immediate health threats and social and economic impacts and maintain our focus on long-term development. The Bank is making good progress toward the 15-month target of 160 billion dollars in surge financing. Much of it is for the poorest countries and will take the form of grants or low-rate, long-maturity loans. IFC, through the Global Health Platform, will be providing financing to vaccine manufacturers to foster expanded production of COVID-19 vaccines in both part 1 and 2 countries, providing production is reserved for emerging markets. The Development Committee holds a unique place in the international architecture. It is the only global forum in which the Governments of developed countries and the Governments of developing countries, creditor countries and borrower countries, come together to discuss development and the ‘net transfer of resources to developing countries.’ The current International Financial Architecture system is skewed in favor of the rich and creditor countries. It is important that all voices are heard, so Malpass urged the Ministers of developing countries to use their voice and speak their minds today. Malpass urged consideration of how we can build a new approach to debt restructuring that allows for a fair relationship and balance between creditors and debtors. This will be critical in restoring growth in developing countries; and helping reverse the inequality.Publication Classroom Assessment to Support Foundational Literacy(Washington, DC: World Bank, 2025-03-21)This document focuses primarily on how classroom assessment activities can measure students’ literacy skills as they progress along a learning trajectory towards reading fluently and with comprehension by the end of primary school grades. The document addresses considerations regarding the design and implementation of early grade reading classroom assessment, provides examples of assessment activities from a variety of countries and contexts, and discusses the importance of incorporating classroom assessment practices into teacher training and professional development opportunities for teachers. The structure of the document is as follows. The first section presents definitions and addresses basic questions on classroom assessment. Section 2 covers the intersection between assessment and early grade reading by discussing how learning assessment can measure early grade reading skills following the reading learning trajectory. Section 3 compares some of the most common early grade literacy assessment tools with respect to the early grade reading skills and developmental phases. Section 4 of the document addresses teacher training considerations in developing, scoring, and using early grade reading assessment. Additional issues in assessing reading skills in the classroom and using assessment results to improve teaching and learning are reviewed in section 5. Throughout the document, country cases are presented to demonstrate how assessment activities can be implemented in the classroom in different contexts.Publication Argentina Country Climate and Development Report(World Bank, Washington, DC, 2022-11)The Argentina Country Climate and Development Report (CCDR) explores opportunities and identifies trade-offs for aligning Argentina’s growth and poverty reduction policies with its commitments on, and its ability to withstand, climate change. It assesses how the country can: reduce its vulnerability to climate shocks through targeted public and private investments and adequation of social protection. The report also shows how Argentina can seize the benefits of a global decarbonization path to sustain a more robust economic growth through further development of Argentina’s potential for renewable energy, energy efficiency actions, the lithium value chain, as well as climate-smart agriculture (and land use) options. Given Argentina’s context, this CCDR focuses on win-win policies and investments, which have large co-benefits or can contribute to raising the country’s growth while helping to adapt the economy, also considering how human capital actions can accompany a just transition.Publication Digital Africa(Washington, DC: World Bank, 2023-03-13)All African countries need better and more jobs for their growing populations. "Digital Africa: Technological Transformation for Jobs" shows that broader use of productivity-enhancing, digital technologies by enterprises and households is imperative to generate such jobs, including for lower-skilled people. At the same time, it can support not only countries’ short-term objective of postpandemic economic recovery but also their vision of economic transformation with more inclusive growth. These outcomes are not automatic, however. Mobile internet availability has increased throughout the continent in recent years, but Africa’s uptake gap is the highest in the world. Areas with at least 3G mobile internet service now cover 84 percent of Africa’s population, but only 22 percent uses such services. And the average African business lags in the use of smartphones and computers as well as more sophisticated digital technologies that catalyze further productivity gains. Two issues explain the usage gap: affordability of these new technologies and willingness to use them. For the 40 percent of Africans below the extreme poverty line, mobile data plans alone would cost one-third of their incomes—in addition to the price of access devices, apps, and electricity. Data plans for small- and medium-size businesses are also more expensive than in other regions. Moreover, shortcomings in the quality of internet services—and in the supply of attractive, skills-appropriate apps that promote entrepreneurship and raise earnings—dampen people’s willingness to use them. For those countries already using these technologies, the development payoffs are significant. New empirical studies for this report add to the rapidly growing evidence that mobile internet availability directly raises enterprise productivity, increases jobs, and reduces poverty throughout Africa. To realize these and other benefits more widely, Africa’s countries must implement complementary and mutually reinforcing policies to strengthen both consumers’ ability to pay and willingness to use digital technologies. These interventions must prioritize productive use to generate large numbers of inclusive jobs in a region poised to benefit from a massive, youthful workforce—one projected to become the world’s largest by the end of this century.