A recent academic study investigates the relationship between ease of doing business and sustainable economic development in Algeria, particularly in the context of terrorism and instability. The research focuses on how factors such as foreign direct investment (FDI), tourism, and regulatory efficiency influence economic growth in a nation exposed to security threats. Using data from 2006 to 2020, the analysis employs a non-linear autoregressive distributed lag (NARDL) model to assess both short- and long-term impacts. n nThe findings suggest that a favorable business environment, measured by the number of newly registered enterprises, positively affects GDP per capita. However, terrorist activity exerts a significant negative influence on both economic performance and entrepreneurial activity. Each increase in terrorism-related fatalities correlates with reduced business formation and slower income development. n nAlgeria’s economy remains heavily reliant on oil and gas, which account for 96% of exports, making it vulnerable to global price fluctuations. Meanwhile, tourism contributes about 8.1% to GDP and 4% to exports, but remains sensitive to security conditions. The study confirms that FDI and tourism can stimulate growth, but their effectiveness depends on institutional stability and policy coherence. n nThe research highlights asymmetric effects: positive shocks in FDI and tourism boost growth more strongly than negative shocks hinder it, while the reverse is true for terrorism. The study recommends strengthening institutional frameworks, streamlining business registration, and improving investor confidence through enhanced security and transparent regulations. By addressing structural barriers and mitigating risks, Algeria could better leverage its natural and geographic advantages for long-term development. n nThis work contributes to the literature by applying a dual-model approach—analyzing both economic growth and ease of doing business as interdependent variables—and by quantifying the impact of terrorism using fatality data. It underscores the importance of integrated policy design in fragile economic environments.
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Achieving sustainable economic development amidst conflicts: a study of the role of ease of doing business in development plan
Sustainable economic development, which is central to the United Nations’ Sustainable Development Goals (SDGs) for 2030, remains a priority for developing and emerging economies. This has led researchers and organizations to employ several strategies for achieving the sustainable goal. Researchers are of the opinion that the key economic indicators like technology, financial sectors, energy industries, and natural resources have been identified as critical drivers to achieving this (Scarpellini et al., 2016; Szopik-Depczyńska et al. 2018; Omri, 2020; Udemba and Tosun, 2022). Beyond these factors, ease of doing business, tourism, and foreign direct investment (FDI) are considered to play vital roles in fostering sustainable economic development (Biglaiser et al. 2023; Chafia and Djamila, 2024; El Maiss, 2024). n nEase of doing business is identified as a fundamental factor of sustainable economic development. An enabling business environment fosters investment, economic growth and development, to enhancing productivity (Hanusch, 2011; United Nations, 2014; Chambers and Munemo, 2017). Economic growth contributes to poverty alleviation by facilitating income distribution and improving the overall living standard of nations (Hasan and Tucci 2010). Canare (2018) and Dwumfour (2020), in their separate research, opined that sustainable economic growth and development reduces income inequality and poverty in an economy. However, the rising importance of small and medium-scale businesses on sustainable economic development has met with both environmental (Sarkar and Sarkar, 2020; Sarkar et al., 2024) and social factors from hostile and insecurity-prone environments and many unfavourable governmental policies (such as the process of official registration of businesses, the cost and time spent in the process, the minimum capital requirement of registering and starting new businesses, fiscal policies such as taxation, etc.). Not many studies have been carried out on sustainable economic development amid the interplay of terrorism and the ease of doing business. n nAlthough some studies indicate that business activity thrives in a terrorism-prone (Nikšic Radić 2018) environment, several empirical studies have consistently highlighted the disruptive impact of terrorism and a risk-prone environment (Sarkar et al. 2024b; Hogetoom and Gerritse, 2021) on the economy. Since the turn of the twenty-first century, terrorism has grown to be a significant threat to the entire globe, particularly to industries, weakening investor confidence and distorting market performance. The reoccurrence of terrorism attacks impacts financial markets, where news of terrorist attacks adversely affects the stock market and leads to a negative impact on investor sentiment that decreases the motive to invest (Ali et al., 2018; Nikšic Radić 2018). Given the interconnected nature of global trade, such disruptions pose a significant risk to economic stability. n nAlso, the interaction between tourism and FDI is vital to understanding the broader economic implications of ease of doing business, particularly in terrorist-prone regions like Algeria. Although tourism and FDI are among the largest contributors to economic development, they are more vulnerable sectors to terrorism attacks. The tourism industry is projected to reach $1.8 billion by 2030 (World Trade Organisation, 2018). Similarly, FDI serves as a crucial mechanism for integrating host countries into international economic networks, attracting capital flows and facilitating technological exchange (Salleh et al., 2011). FDI supports the development of important infrastructures that aid tourism activities like the transportation sector, hotels, and leisure facilities while a robust tourism industry enhances a country’s international image, making it more attractive to investors (Shang et al., 2024). Shang et al. (2024), ascertained that FDI has a long-term effect on the sustainable tourism index in China. And Sokhanvar and Jenkins (2022) found that the growth rate of Estonia’s economy will be positively affected by FDI and tourism in the long-run. However, Ogbuabor et al. (2024) in their study in Africa found that FDI inflow has not contributed significantly to the growth of tourism demand in Africa. This relationship between FDI and tourism is inherently mutual and, when well-managed, can generate substantial multiplier effects across the economy (Drakos and Kutan, 2003). n nIt is crucial to understand how terrorism influences these key drivers of economic growth (Park and Woo, 2024; Park and Moon, 2023) for policymakers seeking to strengthen resilience and promote sustainable development (Tahir Suleman 2012). It is very important to highlight that the tourism industry is unpredictable; the volatile nature, coupled with threats from terrorism and natural epidemics such as COVID-19, is a threat to the industry. Amid the threat of terrorism, Algeria’s officials are striving to keep pace with the 21st-century trend of economic development. n nAgainst this background, we seek to investigate the effect of ease of doing business on Algeria’s sustainable economic development. By extension, due to exposure of the economy to terrorist attacks, the study considers the impact of terrorism on Algeria’s sustainable economic development. Aside from the bottlenecks from stringent rules that can frustrate or inhibit the registration of new businesses, terrorism can make the business environment unhealthy for nurturing new businesses, and tourism activities Due to its attractive economic features, richness in oil deposits, and tourist site attractions, the economy can boast of generating revenue and resources capable of sustaining its economic development through the policy of ease of doing business, tourism and FDI. The tourism sector accounts for approximately 4% of export volume and 8.1% of gross domestic product (Chehat and Akacem, 2022) in Algeria. The country’s economy is driven mainly by oil and gas. This accounts for 96% of the country’s exports and the unstable nature of the oil price poses a concern to the country (State, 2015). Besides the attractiveness of tourists and FDI to Algeria’s economy, the present study posits to analyse these dynamics by employing a two-model approach: one focusing on economic growth as the dependent variable and the other on ease of doing business as the endogenous instrument, integrating terrorism, tourism, and FDI as key factors. n nNot many studies have investigated sustainable development in a two-way approach for Algeria. By extension, the objective of this study is structured to contain the following: (a) to determine the effect of ease of doing business on Algeria’s sustainable economic development. (b) to directly test the effect of terrorists’ activities on both income development and ease of doing business in Algeria. (c) to determine the impact of tourism on both economic growth and ease of doing business amid terrorism. (d) to determine the effect of FDI on income development and ease of doing business in Algeria. The novelty of this study is the adoption of a two-way approach (growth model and ease of doing business model) in studying Algeria’s sustainable economic development. The novelty of this study can also be seen from the parameter adopted to quantify the ease of doing business, the number of new businesses, and the quantitative test of the impact of terrorism on Algeria’s sustainable development. Employing the non-linear autoregressive distributed lag (NARDL) method, the study uncovers asymmetric relationships between endogenous and exogenous factors, offering a comprehensive analysis of Algeria’s economic sustainability. n nThe rest of this study is the literature review, data, and method. Results and discussions, conclusions, and policy framing. n nTheoretical background, data and variables n nPart of the theoretical basis of this study is institutional theory that is embedded in norms and rules to shape individual and organizational activities towards sustainable development of any society (Scott, 2004). The theory is built on the strength and role of institutions towards the provision of stability and sustainable socio-economic life of any society. Institutional theory details how the institutions guide and shape the organizations to conform to rules and social expectations (DiMaggio, Powell (1983)). Institutional theory is centred on three pillars; regulative principles, normative principles and cognitive principles (Scott, 2001). Following the focus and objective of this study – testing the impact of ease of doing business on Algeria’s economic sustainable development, the authors reference the regulative principle of institutional theory as a yardstick in exposing the rate of development of new businesses in the country. Through institutional machineries, rules and regulations are made which can either facilitate the registration and starting of new business or hamper the registration of new businesses. Most times, institutions are considered tools through which authorities initiate and control policies that affect the entire economy, and hence, the flourishing or declining of registration of new businesses depends on the regulative modalities from the institutional arms of the government. The impact of ease of doing business on Algeria’s sustainable economic development will largely depend on the conditions that affect the business environment through the rules applicable in the country. n nThis research work is targeted at the best method of achieving post-COVID-19 economic recovery and maintaining sustainable economic development for Algeria. Apart from the negative effect of COVID-19 on many nations of the world, there are other militating factors (such as terrorism, climate change, and political instability) that are capable of distorting the sustainable development of those economies, hence the need to embark on recovering and sustaining research to aid the affected countries in mitigating the impacts of the mentioned issues. The country is among the countries faced with the terrorism problem, which is a socioeconomic problem distorting the economic progress of countries. For this, the authors seek to investigate the capability of Algeria to attain its lasting economic development amid terrorism. By extension, ease of doing business, tourism, and FDI were incorporated into the model to ascertain their effectiveness in aiding the country’s sustainable development. n nThe proliferation of small businesses and ease of doing business are considered among the measures to achieve economic recovery from the global economic meltdown and enhance sustainable economic development for the case of Algeria. Theoretically, the ease of doing business is compared to the ability to stay in business without experiencing market failure amidst government regulations (Jalilian et al. 2007; Hertog, 2010). Ease of doing business as adopted in this study is proxied as new businesses registered. Ability to do business can impact the income development of a country either positively or negatively, and this can be represented as GDP/NBUS > 0 OR GDP/NBUS < 0. This shows that the rise in the number of businesses registered can increase or reduce economic growth and development in Algeria, depending on the policies in place. n nTerrorism is selected as one of the variables in this study. The purpose of adding terrorism to this study is to test its impact on economic development and ease of doing business. Terrorism impacts economic development through its effect on the business environment, which has the potential to create fear that could diminish the investors’ confidence. This probably will amount to a decrease in business registrations and establishments and will invariably impact negatively on macroeconomic performance. The negative impact of terrorism on the economic development of Algeria is represented as GDP/TERO < 0. n nFDI and tourism are considered in this study. These are among the indicators relevant and significant to Algeria’s economic performance. The structure and positioning of the country as among the largest countries in North Africa with abundant natural resources has placed it as a tourism- and investment-attracting nation. The variables (FDI and tourism) impact the macroeconomic performance of any country through revenue generation and the transfer of capital. As a developing economy, the attraction of foreign investors and visitors through the viability of the country’s market and the availability of natural resources creates avenues for increasing economic growth and development. The impact can be either positive or negative, and this can be represented as GDP/FDI > 0 OR GDP/FDI < 0 and GDP/FDI > 0 OR GDP/TOR < 0. This shows that the increase in FDI and tourism can cause an increase or decrease in economic growth and development in Algeria depending on the policies in place. Data collection and cleaning was duly done by the team before the final decision on the appropriate duration and period of the study. First, considering the nature of this study, raw data was collected with the intention of extending the study period to cover the latest time and events. After the data gathering, data cleaning was done to remove years/periods with missing data. After the cleaning of the data, authors chose 2006 to 2020 as the confirmed study period due to non-availability of data beyond 2020. Due to the problem of data availability, especially for tourism and ease of doing business, which results in low frequency in our selected period, Algeria’s annual data were converted to quarterly data from 2006Q1 to 2020Q4 to increase the frequency. Nevertheless, the authors are aware of some constraints – loss of information, measurement error, matching of the data, discontinuities or jumps etc., in converting annual data to quarterly data, which can affect the accuracy of estimations and findings, and perhaps, lead to adoption and execution of wrong policies. In order to minimize the occurrence of the above-mentioned measurement issues, this study adopts the sum match method with the Eviews software to convert the annual data to quarterly data. Other diagnostic estimations were applied to circumvent these issues. This study adopts quantitative analysis with secondary data sourced from different organizational data archives. Apart from terrorism data, which is sourced from the/OurWorldInData.org/terrorism, all other data are sourced from World Bank data. The definition of data and the variables are presented in Table 1 and Fig. 1 below. n nResearch methods and modelling n nThe scientific approaches implemented in our research were both traditional and asymmetric methods. Traditional unit root methods such as Dickey-Fuller (1979) and Perron (1990) are utilized in estimating and testing the stationarity of the series in this study. The stationarity of the instruments implemented in this research is tested with both traditional and structural break methods. Specifically, the Perron (1990) and Augmented Dickey-Fuller (1979) and Zivot-And