Assessing the Effect of Foreign Direct Investment on Export of Selective Petrochemical Products (Urea, Polyethylene, Methanol and Propane)

It is important for us to study the factors that impact the petrochemical industry, given its importance in nonoil exports in Iran.  The petrochemical industry requires heavy investments and most countries can not directly fund all the required investment, hence the importance of foreign direct investment in the sector.  Foreign direct investment also brings with it transfer of technology and employment. This paper assesses the responsiveness of foreign direct investment to the extent of openness of the economy and its impact on export of four selected products, using data for the period 1998 to 2017 and the SUR method.  Our results indicate that foreign direct investment has a positive effect on petrochemical exports, with the impact most marked for Polyethylene. We also find that trade openness has a positive impact on foreign direct investment.