n Journal of Emerging Trends in Economics and Management Sciences - Impact of FDI in U.A.E over the main elements of sustainable development : economy and environment

Volume 6, Issue 7
  • ISSN : 2141-7024
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During the past few years the Emirates has witnessed a buoyant economic growth by which it is considered as one of the most developing countries in the GCC1. The country accounts 40 percent of its export towards oil and natural gas contributing it to a massive 38 percent of country's GDP1. In order to diversify its economy and reduce its future dependence on oil revenues which are exhaustible, the UAE's government has placed several strategies in place. One of the strategies of the government is to attract FDI in the country by giving foreign investors some attractive incentives. However, there is a debate over the impacts of FDI on the host country. One of the main concerns in such debates is its effect on environmental degradation. In this paper, the aim of research is to show the contribution of FDI over the main elements of sustainable development: economy and environment, of U.A.E. The GDP per capita of the country is used as the indicator representing the economy of the country whereas the CO emission in kilo tons is used as the indicator representing environmental condition of the country. Paper researches the direction of the relationship between the variables by using several econometric tests such as Augmented Dickey-Fuller (ADF), Johansen co integration and Granger Causality tests. The results showed that there is no causality between the growth rate of GDP and FDI, growth rate of FDI and CO. The only causality found is a uni-directional causality between the growths of GDP and the growth rate of CO. The direction is from growth rate of pollution to the growth rate of GDP. This paper concludes that government should make policy that will ensure that transnational companies use equipment that is environmentally friendly.

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