Public Spending, Outcomes and Governance in ASEAN Economic Community

The study explored the link of sectoral public spending to development outcomes with the interaction of governance using panel data from nine countries of the ASEAN economic community from 1995 to 2013. Using path analysis, result shows that the total effect of sectoral public spending such as health, and investment spending to human development index is significant but negative and the direct effect of education spending to HDI is having a positive but non-significant path. These imply that sectoral spending does not directly effect to development outcome. Meanwhile, the direct effect paths from the education and investment spending to governance are positive and significant. These show that the interaction of governance result to positive and significant outcome such that increase in unit of governance result to increase in sectoral spending. Therefore, better governance performance is essential to translate spending to positive development outcome.