This section relies on a dataset on green-field FDI projects into 17 Arab countries assembled from a unique type of online database developed by FDI Intelligence, a specialist division of the Financial Times, which monitors cross border investments in new projects and expansions of existing ventures, covering all sectors and countries worldwide in 2020.
The major advantage of the data source used with respect to UNCTAD data is the availability of a sectoral classification for each investment project. The data includes estimated values on capital investment and the number of jobs created in cases where information was not available at project announcement.
Abstract: In the literature, it has been common to use credit risk scores to investigate impacts of external sources of risk and political institutions on foreign investment location choice-decisions. However, only a few studies have specifically examined the relationship between importing country’s credit risk scores and exports. Side stepping the limited availability of statistics on ECAs activities in the Arab countries, this paper investigates empirically the relationship between merchandise exports and credit scores of importing countries. Based on a gravity equation augmented with the risks of default on international payments, measured by intra-country risk ratings, the principal contribution of the present research is to scrutinize the impact of commercial and political risks on merchandise trade in the Arab region. The findings suggest that in the absence of insurance contracts against the risk of defaulting payments, firms are more likely to export to countries with higher prior probabilities to secure payments. It logically follows that provisions of export credit guarantees well targeted towards reducing buyer risks are likely to boost-up exports.
