Political Risk and Foreign Direct Investment in Tunisia: The Case of the Services Sector 2004-2016

Political Risk and Foreign Direct Investment in Tunisia: The Case of the Services Sector 2004-2016

Marwa BenGhoul (Anadolu university, Eskişehir, Turkey)
Copyright: © 2019 |Pages: 13
DOI: 10.4018/IJSEM.2019070104
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Abstract

Political risk factors have been considered as important factors which impact the foreign direct investment (FDI). But, the relationship between the political risk and FDI still not highly covered as expected. In this context, it is crucial to measure the political risk factors impact on the FDI especially for the Arab Spring countries which embraced radical political change after the revolution in 2011. This article aims to investigate the relationship between political risk and the FDI in Tunisia for the case of service sectors. The research is based on aggregate variables that represent six pillars of Governance Indicators. The data was extracted from the Worldwide Governance and the Tunisian Central Bank websites, the data frequency is yearly from 2004 to 2016. The research confirms that the political factors notably the government effectiveness and voice and accountability have significant impact on the FDI and on the FDI in the services sector.
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A Theoritical Framework For Fdi And Political Risk Indicators

Foreign direct investment (FDI) could be defined as the direct investment equity flows in an economy. FDI is the sum of equity capital, reinvestment of earnings and other capital (IMF, 2003). It is defined in the World bank as a sort of cross-border investment related to an enterprise or an investor governing or impacting an investment in a foreign country (Worldbank, 2018). Ownership of 10 percent or more of the ordinary shares of voting stock is the criterion for determining the existence of a direct investment relationship (IMF, 2003). Farrell (2008) defined FDI as a set of capital, technology, management, and entrepreneurship, that allows a firm to be functionnal and to provide goods and services in a foreign market.

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