Good governance is a new perspective was introduced in mid 1990s after failure of governmentoriented and market-oriented growth theories. This perspective challenged that government and private sector are not held to be on the opposite ends of the continuum, but are considered to play complementary roles. Therefore, government is a social institution with institutionalization function which can in turn create efficient and capable institutions and is a suitable basis for adjusting economic relations of the society in a low-cost and simple way with low time wastage and act as a market lubricator to achieve economic growth (Compos and Nugent, 1999). Accordingly, economic development is not just affected by access to human, physical and financial capitals, but there is a close correlation between good governance and economic growth as the complete concept of growth surpasses accumulation of wealth and growth of GNI and other income-dependent variables Aristotle says “income and wealth are only useful to get other things”; thus, they are not to be held targets by themselves and development must be appraised in terms of improvement of peoples’ life (Martya, 1999). Along this concept, during the last decade international institutions have defined some indicators to measure governance quality in different countries to evaluate good governance effects on economic growth. Based on this approach economic growth process is affected by the performance and interaction of three large institutions namely, government, private sector and civil society. These institutions have their own duties and thus, their duties are to be identified and categorized correctly to have suitable performances for the society to burgeon politically, culturally, socially and economically; otherwise, economic, social, cultural and political development will be disturbed.

Relationship between good governance and economic growth, political stability had the highest positive effect on economic growth. It is evident when political stability is achieved, the environment for absorbing foreign capital will be ready and foreign inventors will be interested to invest and finally economic growth will be achieved. Therefore, authorities are advised to promote political stability to achieve economic growth. Next, corruption control shows the effect of good governance on development. World Bank experiences show that the most underdeveloped countries are the most corrupted ones.