According to the World Economic Forum Financial Development Report 2012 Saudi Arabia (first place) and UAE (forth place) are in the top 5 list of the most stable financial markets in the world. European and other Western countries are way back in the ranking. Who ever is interested in the parameters the WEF used for this ranking, is advised to take a closer look at the report.
My question is: what kind of impact do these kind or reports have on the FDI flow? What do you think?
Mazdak, these reports only highlight one dimension of attracting FDI Inflows. It is true that stable financial markets are good for attracting FDI inflows into any country. But this is not enough. Capital flows follow other attractive environments such as the level of human capital development; the level of ICT development, the DEPTH of stable financial markets; the legal and regulatory framework (such as the strength of enforcement of intellectual and physical property rights and strict enforcement of fair commercial court judgements for foreigners and locals); Time Consistent Policy framework (where erratic policy reversals in a given time period are not rife); and level of Ostensible Independence of the Central bank or monetary authorities.
Therefore merely having a stable financial market is not enough to have huge FDI inflows into Saudi Arabia or UAE. See the World Bank or IMF statistics and you will notice that the Western European countries, Japan and USA have had the HIGHEST FDI inflows for the last 30 YEARS. These countries have the LION's SHARE of FDI inflows due to many of the points I have raised above. Please correct me if I am wrong with Statistics for the last 30 YEARS.
Barnabas Kiiza: Makerere University
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