Effect of foreign direct investment on domestic enterprises in the gulf countries

Abstract

This study examines the impact of foreign direct investment (FDI) on privately owned domestic firms in the Gulf oil producing countries. It provides its analysis through an examination of the role of FDI in sustainable economic development and the extent to which the interaction between FDI and private sector enterprises can enhance their productivity and competitiveness in domestic markets. In doing so, this study underlines the conditional factors and challenges of productivity enhancement in domestic enterprises in an economic structure and environment characterized by weak private sector. Empirical evidence collected from 96 survey questionnaires and 42 interviews with government officials and executives underscores the limited effect of FDI on domestic firms due to passive government role and improper management of FDI, weak absorptive capacity, and unattractiveness of private sector firms to local labor force.