Investment climate and its role in attracting foreign direct investment in Libya

A benchmark study

Abstract

Foreign Direct Investment (FDI) is a tributary of development, if the appropriate climate is available to make the most of foreign capital flows in achieving economic development. Therefore, it is of utmost importance to study the investment climate of host countries, which is what the paper seeks to achieve through studying, analyzing, and trying to diagnose the reality of the investment environment in Libya and analyzing its attractiveness by identifying the available capabilities according to the infrastructure and business environment index to attract foreign direct investment. The paper also aims primarily to identify the most important factors determining foreign direct investment in Libya during the period (1990-2020). To achieve this goal, the study used the descriptive approach based on studying and analyzing the problem, as well as the quantitative approach using a standard model to measure the impact of the most important factors determining foreign investments, using the ARDL model, (Bounds-test & (ECM). Among the most important results reached by the study is the existence of a joint integration relationship between foreign investment and internal economic variables such as economic activity, political stability and FDI, but the relationship between inflation and FDI was contrary to expectations, a direct relationship. Also, among the important conclusions is the necessity of improving the investment climate in Libya to achieve better performance for indicators of attracting foreign investments to the country, through wise and effective policies in the short and long term.