Factors affecting the foreign direct investment FDI : a case study of Libya

Abstract EN

This paper has empirically evaluated the relative impact of the factors, as identified in the literature, that influence FDI flows into Libya using set of questionnaires and direct interviews with the chief executives and managing directors of a group of selected foreign companies and Libyan senior government officials.

The results show that Libya's main national competitive advantages for instance political stability, location advantage, market growth and political potential in the African Continent received very high ratings by government officials and foreign investors.

Government concessions such as tax holidays, tariff concessions and privatisation were deemed to have a great influence on inward FDI location decisions by foreign investors.

Although, free trade zones concession, that received moderate ratings by foreign companies, but were considered by government officials to be the most important factor among investment concessions However, the main factors explain why Libya attracts FDI less than most other countries at a similar stage of development: a large government sector that breeds corruption and leads to bureaucratic red tape.

Other factors such asundeveloped infrastructure, competition from more attractive markets and lack of human capitalwere considered as having the highest importance rating by foreign investors.

The major findings of this paper, there are some conflicting in views between government officials and foreign investors regarding investment incentives in attracting FDI.