Determinants of Foreign Direct Investment in Indonesia

2022 ◽  
pp. 097491012110678
Author(s):  
Barli Suryanta ◽  
Arianto A. Patunru
Keyword(s):  
Foreign Direct Investment ◽  
Direct Investment ◽  
Physical Capital ◽  
Unskilled Labor ◽  
Macroeconomic Factors ◽  
Factor Endowments ◽  
Open Policy ◽  
Vertical Fdi ◽  
Horizontal Fdi

We examine what determines the flow of foreign direct investment (FDI) in Indonesia, focusing on the role of institutional measures. A knowledge-and-physical-capital (KPC) model is applied to a panel dataset that covers 42 of Indonesia’s FDI partners from 2004 to 2012. Evidence shows that both horizontal and vertical FDIs coexist in the bilateral aggregate data of Indonesia’s FDI flows, but horizontal FDI appears to be dominant. This can be explained by the market size (proxied by the total GDP of both countries and similarity in incomes per capita) and the relative factor endowments (proxied by skilled labor and physical capital). The vertical FDI, on the other hand, could be only explained by the significant effect of unskilled labor. Institutional factors, particularly corruption, are apparently important in affecting Indonesia’s bilateral FDI flows. The results also show that a higher FDI level in Indonesia positively correlates with macroeconomic factors, open policy factors, and utility infrastructure factors.

scholarly journals Foreign Direct Investment In Transition Economies: An Institutional Approach

2011 ◽  
Vol 6 (12) ◽  
Author(s):  
Agim Kukeli
Keyword(s):  
Foreign Direct Investment ◽  
Transition Economies ◽  
Direct Investment ◽  
Physical Capital ◽  
Seemingly Unrelated Regression ◽  
Institutional Setting ◽  
Diffusion Of Technology ◽  
Institutional Approach ◽  
Unrelated Regression

Foreign direct investment (FDI thereafter) is very important for economic growth in transition economies. They have major impact in economic development as a source of physical capital, diffusion of technology, improvements in management and marketing techniques, and enhancing institutional setting of these economies toward market oriented. In this paper, an institutional approach to FDI inflow is investigated to identify relevant factors that have shaped and influenced transition economies. The role of institutions in the inflow of FDI in transition economies is estimated empirically by using Seemingly Unrelated Regression Estimation (SURE) technique.

scholarly journals DAMPAK FDI VERTIKAL DAN HORIZONTAL TERHADAP NILAI TAMBAH 18 SUB SEKTOR INDUSTRI MAKANAN DOMESTIK

2019 ◽  
Vol 13 (2) ◽  
pp. 233-258
Author(s):  
Fitria Yuliani ◽  
Hermanto Siregar ◽  
Widyastutik ◽  
Amzul Rifin
Keyword(s):  
Foreign Direct Investment ◽  
Cross Section ◽  
Direct Investment ◽  
Food Industry ◽  
Random Effect ◽  
Random Effect Model ◽  
Value Added ◽  
Effect Model ◽  
Vertical Fdi ◽  
Horizontal Fdi

Abstrak Untuk meningkatkan pertumbuhan ekonomi, Indonesia membutuhkan investasi asing langsung/Foreign Direct Investment (FDI) karena tingkat tabungan di Indonesia jauh lebih kecil dibandingkan kebutuhan investasi. FDI diyakini dapat meningkatkan nilai tambah suatu sektor atau industri. FDI terdiri dari dua jenis, yaitu FDI horizontal (intra industri) dan FDI vertikal (inter industri – dengan keterkaitan ke depan dan ke belakang). Penelitian ini bertujuan untuk mengetahui dampak FDI vertikal dan horizontal terhadap nilai tambah di 18 sub sektor industri makanan domestik. Dengan menggunakan metode estimasi fixed effect cross section SUR model dan random effect model, hasil penelitian menunjukkan FDI vertikal dengan keterkaitan ke belakang memberikan dampak paling besar terhadap nilai tambah perusahaan domestik dibandingkan FDI vertikal dengan keterkaitan ke depan dan horizontal. FDI vertikal dengan keterkaitan ke belakang berdampak positif terhadap nilai tambah perusahaan domestik dengan modal rendah dan padat tenaga kerja (padat karya). Oleh karena itu, investasi asing di industri makanan paling hilir, seperti industri minuman tidak beralkohol dan industri makanan lainnya perlu dibuka dengan persyaratan bagi investor asing melakukan kerja sama sub contracting dengan perusahaan domestik di industri makanan hulu. Kata kunci:   Industri Makanan Domestik, FDI Horizontal, FDI Vertikal, Keterkaitan ke Belakang, Keterkaitan ke Depan, Nilai Tambah   Abstract To boost its economic growth, Indonesia needs Foreign Direct Investment (FDI) since the national savings rate is relatively low compared to the high demand for investments. FDI has been proven to be able to enhance the value-added of a sector or industry. There are 2 types of FDI which are Horizontal FDI (intra-industry) and Vertical FDI (inter industry-with upstream and downstream linkages). This study aimed to analyze the impact of horizontal and vertical FDI on the value added to the 18 subsectors in the domestic food industry. By using the fixed-effect cross-section SUR and random effect model, the results showed that the vertical FDI on downstream linkages gives a more positive effect on value-added than vertical FDI on upstream linkages and horizontal FDI. The vertical FDI on downstream linkages gives a positive impact on local companies with a lower level of capital but higher labor (labor-intensive). Therefore, FDI on downstream linkages (for example other food industry, non-alcoholic beverages, etc) should be opened on conditions that it commits a sub-contracting cooperation with the domestic firms within the food processing industry in upstream sectors. Keywords: Domestic Food Industry, Downstream Linkages, Horizontal FDI, Vertical FDI, Upstream Linkages, Value Added JEL Classification: F21; E22; C23; O33

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