Exploring Foreign Direct Investments in Developing Countries through a Comparative Analysis of Türkiye and Iran

This study explores the relationship between foreign direct investment (FDI) and the political and economic development of developing countries by focusing on the influence of regime types, democratic development, and security concerns, while seeking to explain why some developing nations attract more FDI than others despite similar levels of economic development. By comparing Türkiye and Iran as case studies, the research highlights how different regime types -democratic versus authoritarian- impact FDI inflows, particularly through the lens of military expenditure and levels of democratization. Türkiye, as a democratic and economically liberalizing country, generally attracts higher levels of FDI, whereas Iran, with its authoritarian governance and higher security prioritization, struggles to do so. The study demonstrates that variations in FDI inflows between these two countries are strongly associated with changes in military spending and democratization indices: as military expenditure increases and democratization declines, FDI levels tend to decrease. The findings suggest that greater transparency, stronger institutionalization, and lower emphasis on militarization are conducive to attracting foreign investment. By identifying these political and institutional drivers of FDI, this study provides critical insights for aligning investment policies with the United Nations Sustainable Development Goals (SDGs), particularly SDG 8 (Decent Work and Economic Growth) and SDG 16 (Peace, Justice and Strong Institutions). Based on this, the study recommends that developing countries aiming to increase FDI should focus on strengthening democratic institutions while limiting excessive military spending.