Abstract
This study investigates the influence of human development and institutional quality on the foreign direct investment net inflows on the gross domestic product in Iraq for the period (2004-2016) by using OLS regression. The empirical results show that governance sub-indicators do not actually matter much in attracting Foreign Direct Investment (FDI) inflows in Iraq. This variable shows fixed results with a different sign; the Political Stability (PS), Government Effectiveness (GE) and Rule of Law (RL) are the sub-indicators of the governance with a positive sign which is insignificant, while the Voice and Accountability (VA), Regulatory Quality (RQ) and Control of Corruption (CC) are the sub-indicators of the governance index with a negative sign and an insignificant impact on FDI inflows. The value of Worldwide Governance Indicators (WGI) coefficient is negative and significant at 10% level. Hence it has been concluded that the explanatory variables are negatively associated with the dependent variable FDI. In contrast, the Human Development Index (HDI) has a positive and significant impact on FDI inflows. This study found that Islamic State of Iraq and Syria (ISIS) emergence after (2013) had a significant coefficient, meaning that ISIS has affected the level of FDI inflows.
Highlights
Foreign direct investment (FDI) has the potential to affect host countries’ economic and political conditions (Pinto & Zhu, 2013)
Regression result in Table [4] and [5] show the effect of the dimensions of worldwide governance and Human Development Index and Islamic State of Iraq and Syria (ISIS) emergence on foreign direct investment (FDI) net inflows of GDP in Iraq
The value of the composite index of governance coefficient is negative and significant at 10% level, it can be concluded that the explanatory variables are negatively associated with the dependent variable FDI net inflow of GDP meaning that good governance not lead to being a factor to attract FDI to Iraq
Summary
Foreign direct investment (FDI) has the potential to affect host countries’ economic and political conditions (Pinto & Zhu, 2013). According to Dacloush’s study (2013) foreign investors were exposed to risks in Iraq Such risks are related to high governmental corruption rates; lack of moral principles of the Iraqi leadership, unacceptable laws and regulations and lack of qualified local human resources. 2. Literature Review There have been several studies that concentrated on the classical determinants of foreign direct investment in developed and developing countrie such as, macroeconomic factors GDP, unemployment, interest rate, exchange rate, money supply and trade (Shah & Afridi, 2015; Asaad, 2017), while the relationship between the current study variables which was ignored by previous studies (Claessens & Yurtoglu, 2013), and the empirical results were an inconsistent or ambiguous between the institutional quality and foreign direct investment (Sedik, 2012; Berden, et al, 2012; Saidi, Ochi & Ghadri; 2013; Zeshan & Talat, 2014; Chaib & Siham, 2014; Shah & Afridi, 2015; Das, 2017). There are many empirical studies as shown in the table [1]
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