An Analysis Of Elements Affecting FDI Decision

In a world characterized by expanding globalization through the continuing expanding of international economic relations, the increasing liberalization of global economy, increasing the interrelation of international markets, expanding dominace of TNCs over the global flows of goods and services.The FDI became an important strategy for TNCs to ensure keeping and increasing their competitiveness in foreign markets, and also it has been considered to be as one of the most effective elements to push countries to development and growth and an indication to the economic openness.Although the world FDI flows has increased dramatically and rapidly during recent years, but the big portion of these flows went to the developed countries and only a small portion went to the developing countries. Among the developing countries only a small number from these countries attracted the big share of these flows which means that the developing countries face a lot of difficulties in attracting FDI. The characteristics of FDI flows pushed the researchers to study and to analyze the elements affecting the FDI flows toward the countries. This research is among many researches which studied this topic; especially it tries to study, to analyze and shed light on the elements affecting the foreign direct investment decision. So study the elements affecting the investor's decision related to guide its investment outward has a big importance because it help host countries to ameliorate its investment climate.This thesis has five sections. The first part shows an overview about FDI through showing a general concept of FDI, and some of the theories which explain the outward movement of capitals such as: monopolistic advantage theory, product life cycle theory, electic theory of international production. The second part analyzes the various elements which affect the investor decision related to guide the investment outward, which are: the location elements constituting the foreign investment climate of host countries include, economic factors, political factors, legal and regulatory factors and the international investment treaties which related to guarantee the investments. The international and the regional economical indexes as optimizers for FDI decision, include: the index of economic freedom, the corruption perception index, the composite country risk index, the global competitiveness index, the network readiness index and the ease of doing business index. Then using some standards to study the financial feasibility for the projects as also optimizer for the FDI decision. The third part analyzes the current situation of FDI in Algeria by analyzing the recent developments of FDI volume in Algeria, the most important countries which invest in Algeria, the distribution of these investments in the various sectors, and the most important obstacles which face FDI in Algeria. The fourth part analyzes the components of FDI climate in Algeria and the nature of granted incentives and guarantees. The fifth part shows some policies and suggestions to go over the obstacles and to promote the investment climate in Algeria, include: The promotion policy of targeted investment, the policies which related to the external economy, incentives and exemptions policies, legal and regulatory institutions which related to FDI and other policies.