Impact of Good Governance Indicators on the Inflow of Foreign Direct Investment (FDI) In Pakistan

Foreign Direct Investment (FDI) occupies extensive importance in the socio-economic development of any economy. High inflow of Foreign Direct Investment (FDI) helps in the reduction of poverty, unemployment, and in achieving high economic growth in developing countries, like Pakistan. In home country, a good governance environment significantly affects the inflow of FDI. In this connection, the purpose of this study is to analyze the scenario of good governance in Pakistan and its impact on attracting FDI. For this study, time series data was used covering the period from 1996 to 2017. ABDL approach was used for estimation, the findings prove that there is a significant impact of Political Instability, Regulatory Quality, and Effectiveness of Government, whereas, Rule of Law (RL) as well as Corruption (CC) and exert an insignificant effect on the inflow of FDI in Pakistan during the mentioned time period. The study suggested that the Pakistani government needs to develop a good governance environment through better law and order situations, a transparent legal system, and effective policies with proper implementation; to ensure high FDI inflows in the country.