Moustafa, Eman (2017) FDI, privatization, corruption, and economic growth in Egypt. (PhD thesis), Kingston University, .

Abstract

This thesis investigates, theoretically and empirically, the impact of FDA and privatization on economic growth in Egypt and identifies the channels through which FDI affects economic growth over the period 1970-2015. In addition, the thesis investigates the impact of corruption on FDI in Egypt over the period 1970-2015. The literature survey in chapter two argues that both FDI and privatization increase the rate of economic growth, while corruption has a negative impact on FDI. After reviewing institutional and regulatory frameworks of FDI and privatization in Egypt in chapter three, the econometric framework of cointegration and error correction mechanism are used in chapter four to capture the linkages between FDI, privatization and economic growth in Egypt. Our results reveal that privatization has a positive effect on the long run economic growth in Egypt. The effect of FDI on economic growth, however, depends on the sectoral distribution of these FDI inflows. FDI inflows have a positive impact on the short run economic growth in Egypt. However, in the long run, FDI inflows indicate a negative, yet limited, impact on the economic growth as FDI inflows are concentrated in the primary sector, mainly the petroleum sector. Thus, we conclude that the focus of FDI policies in Egypt is misspecified. The challenge should not only be to attract FDI, but also to derive macroeconomic benefits from FDI by focusing on the sectors that derive positive spillovers of FDI. Finally, the determinants of FDI in Egypt are identified in chapter five to explore how corruption affects FDI inflows. The time series framework of cointegration and error correction mechanism are applied. Our results indicate a positive yet insignificant relationship between FDI and corruption in Egypt. Since corruption is not found to hinder FDI inflows, treating corruption should be based on sound legal procedures that infringe neither the freedom of FDI nor on the degree of openness of the economy, which are the real stimulants of FDI in Egypt.

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