FDI, governance and development: the case of Lesotho emerging from the periphery

ABSTRACTWhen the developing countries have relaxed their FDI regimes, the latent potential ofFDI to spawn economic development remains in the type of governance that a particularcountry has adopted. It is not about the regime type (democracy or autocracy) butwhether the type of governance has capabilities of improving human abilities. The typeof governance with requisite strategies to accelerate development beyond the rhetoric ofthe so called good governance is essential for building a strong developmental state.This study investigates the relationship between FDI and governance and its impact oneconomic development in Lesotho. Central to the debate, the study brings the importanceof a role of the state in accelerating development. It compares both the market enhancinggovernance (good governance) and growth enhancing governance in order to distinguisha difference in the contribution that FDI makes towards economic development ofLesotho. It finally compares Lesotho with its peers in the sub-Saharan Africa which are atthe same as Lesotho in relation to income size as classified by the World Bank.