The Impact of Foreign Direct Investment on Sustainable Development: An Econometric Study of a Group of Arab Countries during the Period (2000–2023)

Abstract

This study aimed to analyze the impact of foreign direct investment (FDI) on sustainable development in 12 Arab countries, covering a sample of economically diverse nations (oil-exporting and non-oil) to ensure representation of various contexts during the period 2000–2023. The analysis focused on three dimensions: economic (unemployment), social (Human Development Index), and environmental (carbon emissions), using a panel data methodology.

Economically, the results showed that inward FDI contributed to reducing the unemployment rate by 0.17%, while government effectiveness reduced it by 1.6%. Socially, FDI did not have a statistically significant effect on the Human Development Index, whereas government effectiveness improved it by 0.05%. Environmentally, inward FDI was associated with an increase in carbon emissions by 0.0345%, while government policies reduced emissions by 0.92%.

The study recommends enhancing governance to align investments with sustainability goals through legislation that mandates strict environmental and social standards for investors, and by directing funding toward clean energy projects and sustainable infrastructure.