The impact of good governance on foreign direct investment inflows in developing countries non-mining sectors

Abstract EN

It is widely agreed that good governance (henceforth governance) is one of the main determinants of foreign direct investment (FDI) inflows.

However there is no agreement between empirical studies on whether governance attracts or hurdle FDI inflows.

Both directions of the relationship have economic theories to support.

In this study, deductive approach is applied to analyze the impact of governance on non-mining FDI inflows in some selected resource-dependent developing countries.

Both of fixed effects and system generalized method of moments (henceforth S-GMM) models are estimated using panel macroeconomic data during the period 2000-2020.

Through estimating twelve models, the study proved that improvements in governance indicators accelerate non-mining FDI inflows.

Moreover, the impact differs depending on governance indicator used.

Additionally, the dynamic nature of non-mining FDI inflows that can be supported by having larger markets and restricted by investing in mining sectors in the ence of supporting policies is confirmed.