The Association between Foreign Investment and Gross Domestic Product in Ten ASEAN Countries

Abstract

Although empirical studies of the link between foreign direct investment, foreign portfolio investment, and economic development have long influenced economic studies, the results have been inconclusive. Focusing on ten countries, this study contributes to our understanding of foreign investment as a determinant of regional economic performance. More specifically, this study seeks to analyze the short- and long-term relationship between foreign direct investment, foreign portfolio investment, and Gross Domestic Product (GDP) in ten ASEAN member states using data from the 2009–2020 period. For this examination, this study employs a cross-sectional dependency test, followed by panel unit root and panel cointegration testing. From the results of this test, Dumitrescu–Hurlin Panel Causality (DHPC) analysis is conducted. These results show that FDI and GDP have a positive bilateral association, i.e., FDI positively affects GDP and GDP positively affects FDI, as presumed by the theory. Testing also finds bilateral causality between FPI and GDP in the ten analyzed nations. This study contributes to the literature by testing the association between FDI/FPI and GDP using fully modified least squares (FMOLS) and dynamic least squares (DMOLS) panel testing. These results show that FPI and FDI have significantly influenced GDP in ten ASEAN member states. Foreign investment has thus been shown to be the most potent means of accelerating economic development in the studied nations, and thus the governments of these ASEAN member states should formulate policies that attract foreign investors and better direct their investments.

Paradigma Ekonomi berkelanjutan di Negara Berkembang Dalam Perspektif Islam

“…Pembangunan ekonomi di negara-negara berkembang bukan hanya tentang pertumbuhan produk domestik bruto (PDB) semata, tetapi juga melibatkan aspek-aspek sosial, lingkungan, dan kesejahteraan masyarakat (Sijabat, 2023). Sebagai contoh, perbaikan pendidikan, kesehatan masyarakat, pengurangan kemiskinan, dan perlindungan lingkungan adalah komponen penting dalam pembangunan berkelanjutan (Az'har & Nawawi, 2022;Devita et al, 2022;Siti Rama Hasibuan, Isnaini Harahap, 2023;Syahnan et al, 2019).…”

The Regulation of Foreign Ownership of National Banks in Indonesia and Its Impact on National Development

“…However, The collective GDP of ASEAN member countries in 2022 stands at US$ 3.6 trillion, making it the fourth largest globally. [5] Responding to changes in global economic patterns, Indonesia has actively issued policies supporting financial liberalization, especially in the banking sector. The global economic crisis that occurred at the end of 1990 has made the process of financial liberalization increasingly intensive in various countries in the world.…”