Country Risk Components On Algeria Attractiveness For Foreign Direct Investments (1990-2012)

Abstract

All business transactions involve some degree of risk. But, when business transactions occur across international borders, they carry additional risks called the country risk.

The two main objectives of this paper are to explain and to examine the impact of Country risk (CR) subcategories including political risk, economic risk, and financial risk on foreign direct investments (FDI) attractiveness towards Algeria during (1990 2012).

Our second objective is to determine which component matters most for the attractiveness of FDI inflows. We used indices sourced (Data Sources) from the International Country Risk Guide (ICRG) and the multiple regression analysis revealed that R2 = 0.83 and just two components were statistically significant. While using stepwise option, We found that The political variable wasn’t statistically significant. This means that Government stability, and absence of internal conflicts beside corruption Don’t have a high influence on the (FDI) inflow towards Algeria .However, the Financial and Economic factors do . Finally, the results suggest that the increase in FDI is associated with the improvements in only two major components.