Rule of Law: Foreign Investment and Development

Abstract

This articles examines 2 meanings of the term “rule of law;” the first being absence of lawlessness, and the second being the full range of laws, enforcement, that is described in the World Justice Project.

Using those concepts, the article then looks at whether the rule of law, based upon the World Justice Project concepts, attracts or repels foreign investment. It postulates that companies generally prefer to invest in states where rule of law is very low, as that often equates with low costs, whereas states with developed rule of law tend to be expensive for operations.

The article then looks at how rule of law is important for sustainable development in a developing state, but that may not attract the necessary foreign investment.

Keywords: Rule of Law, Foreign Investment, Sustainable Development

JEL Classification: K2, K42