THE ROLE OF FOREIGN INVESTMENTS IN THE OIL

Abstract

The aim of this paper is to foster long-term growth in Libya and other developing countries, helping them transition into the ranks of developed nations. The two research questions that this paper deals with are: a) What role can foreign investments in the oil sector and manufacturing industries play in the economic diversification of Libya and some countries? b) What measures must be implemented to maximize the positive impact of foreign investments on productivity in Libya and other countries? The relevant literature guiding this research plays a crucial role in advancing the economic and social development of Libya and similar nations. Foreign direct investment (FDI) is regarded as a key mechanism for enhancing productivity, facilitating the transfer of expertise and technology, promoting employment, and boosting export value, particularly in the oil and manufacturing sectors. Two main outcomes emerge from this analysis are the following: firstly, continuing to encourage the prevailing industrial fabric (oil refining industry, food industries, and textile industries) in order to raise the value of exports and preserve jobs on the other hand; secondly, encouraging the development of new and diverse industrial specializations. The policy implications suggest that the impact of foreign investments on the economies of Arab countries varies across different sectors. Consequently, countries that experienced successful economic growth are those that effectively directed investments towards high-value-added economic activities, as exemplified by certain nations, in China and India. The negative effects of these foreign investments were that the presence of foreign investment companies negatively affected national companies. Despite their contribution to increasing exports, foreign investments have had a negative impact on the productivity of the sector. The practical implications highlight that the manufacturing sector plays a crucial role in absorbing the labor force, particularly the operational workforce with average competencies, thereby contributing to the formation and growth of the middle class globally. Foreign direct investments in this sector provide many opportunities to employ the national labour force and raise wages.