The Impact of Recognizing Morocco's Sovereignty Over Western Sahara on Bilateral Foreign Direct Investment: An Empirical Analysis Using Panel Data From 2007 to 2022

Abstract

ABSTRACT The paper examines the impact of recognizing Morocco's sovereignty on Western Sahara on bilateral FDI with 72 countries during the period 2007–2022, employing robust weighted least squares (RWLSs). The findings reveal that recognizing Morocco's territorial integrity, particularly, its sovereignty over Western Sahara, significantly enhances bilateral FDI. Conversely, recognizing the Polisario front as the legitimate authority in Western Sahara, or adopting a neutral stance on the issue, exerts a negative impact on outward Moroccan FDI to countries that endorse this separatist movement. These outcomes carry significant policy implications for Morocco, highlighting the effectiveness of its FDI utilization as leverage. For partner countries, it underscores the importance of enhancing their relations with Morocco to bolster bilateral FDI by recognizing its sovereignty over the Sahara.