The impact of foreign direct investment on economic diversification in Saudi Arabia: An empirical study for the period (2005–2022)

Authors

  • Abdeldjouad Djermoun University of Ouargla, Algeria
  • Souad Djermoun University of El Oued, Algeria
  • Said Bouchoul University of El Oued, Algeria

Keywords:

Foreign Direct Investment, Productive Capacities, Economic Diversification, Saudi Arabia, ARDL

Abstract

This study aims to analyze the impact of Foreign Direct Investment (FDI) on economic diversification in Saudi Arabia during the period (2005–2022), with a focus on structural and institutional factors within the framework of Vision 2030, which seeks to reduce dependency on natural resources. The study employs the Autoregressive Distributed Lag (ARDL) model to examine the dynamic relationship between variables, using data on the Economic Diversification Index (DIV), Foreign Direct Investment (FDI), Productive Capacity Index (PCI), and Total Natural Resources (TNR). The results indicate that FDI has not had a significant impact on economic diversification due to its concentration in oil-related sectors. The findings also reveal a strong negative effect of natural resources (TNR), reflecting the "resource curse" phenomenon. Furthermore, the study highlights the weak influence of productive capacities (PCI) in the absence of supportive policies for innovation and infrastructure. The study recommends directing foreign investments toward non-traditional sectors (such as renewable energy and advanced manufacturing), enhancing technological infrastructure, reducing oil dependency by diversifying income sources, and activating international partnerships for technology transfer and local value chain development.

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Published

2025-04-11

How to Cite

Djermoun, A., Djermoun, S., & Bouchoul, S. (2025). The impact of foreign direct investment on economic diversification in Saudi Arabia: An empirical study for the period (2005–2022). International Journal of Economic Perspectives, 19(4), 1297–1321. Retrieved from https://ijeponline.org/index.php/journal/article/view/955

Issue

Vol. 19 No. 4 (2025)

Section

Peer Review Articles
Copyright & Licensing

Copyright (c) 2025 Abdeldjouad Djermoun, Souad Djermoun, Said Bouchoul

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