The Relationship of Good Public Governance and Easy of Doing Business Performance: An Exploratory Study

Sofik Handoyo

Abstract

This study aims to investigate the relationship of good public governance and easy of doing business
performance. Motivation of the study was driven by slowing down global economy and competition among
countries around the world to attract Foreign Direct Investment (FDI). Foreign investors will consider investing
their capital in certain country if in that country adopting easy of doing business practice. The study was intended
to reveal, whether the country that apply good practice of public governance will also lead good practice in
terms of easy of doing business for foreign investor.
The study adopted exploratory research design which are public governance and easy of doing business
performance treated as two independent variables. Public governance variable was represented by attributes
namely public governance, effectiveness government, regulatory quality, control of corruption, rule of law and
political stability. World Governance Index (WGI) was adopted to measure Public Governance and Distance to
Frontier (DtF) value is representing measurement of easy of doing business performance. The study applied
bivariate correlation analysis and involved 188 countries member of World Bank
The results show that all public governance attributes are positively and significantly associated with easy of
doing business performance. Pearson correlation coefficient indicates that all attributes of public governance
have strong correlation (Pearson correlation (r) > 0.6), except for political stability attribute (Pearson correlation
(r) = 0.584). The result implies that practice of good public governance in governmental institution have
potential impact on performance of the government in terms of streamlining bureaucracy of doing business in
that country.

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