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This paper examines the relationship between Foreign Direct Investment (FDI) and per capita Gross Domestic Product (GDP) in the Middle East and North Africa (MENA) region for the period 1985-2009. The empirical evidence is based on an endoeneity-robust Generalised Method of Moments. Results show that the effect of FDI on per capita income in the Gulf Cooperation Council (GCC) countries is positive but negative in Non-GCC countries. Results also reveal that in contrast to the GCC countries, the financial openness policy in the Non-GCC countries have reduced the benefits of FDI on growth, this finding is explained by the fact that most of the Non-GCC countries that have engaged in the process of financial reforms have poor quality of institutions. These results are confirmed with both annual data and five year average data.

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