Terrorism can negatively impact growth, investment and trade flows. This paper attempts to test the impact of Conflict on State Fragility and on FDI inflows to the LDC receiving countries in all economic sectors with a special look into Natural resource. Political instability plays an important role in investment decisions and investors believe political instability in the host country is important for choosing investment locations and the same applies on terrorist attacks. We define three major types of political risk discourage foreign investment in oil sector since they damage its profitability and survival: first, nationalization, second, policy instability and arbitrary regulation in FDI-related policies, and, third, war and political violence, including terrorist activities. There is a compound role of political instability, corruption and bureaucracy in making the host country unattractive to foreign investors by increasing the cost of entry and adding uncertainty, as well as by distorting incentives to investment which came to be a reality in the oil sector in Iraq where we looked into its investment environment using Business Climate Development Strategy (BCDS) and International Country Risk Guide (ICRG) to show the retreating stand of Iraq on the overall investment environment and on the risk criteria in particular, which is still discouraging foreign investment in the oil sector despite numerous auctions held by Iraq's oil ministry.
To add to the current problems that Iraq is facing now, a dispute between Iraq‘s‟ federal government and Kurdistan‘s regional government over foreign investment in Kurdistan‘s oil reserves have risen even more with very fast developments in the country which will show its effect on the FDI patterns in petroleum sector.
ايسر ياسين فهد | aysar Y. FAHAD | 1689