The Effect of Foreign Direct Investment on Sustainable Development ASEAN 3 and ASEAN 5: A Conceptual Study

Abstract

Sustainable development is part of ASEAN 2025 vision. It is actively debated amongst ASEAN leaders due to the economic fluctuation, increasing in environmental pollution and wide income gap in ASEAN countries that can hinder the achievement of sustainable development. Therefore this study tries to analyse three indicators of sustainable development which are economic, environment and income distribution and the effect of foreign direct investment on these three indicators between ASEAN3 (Cambodia, Laos and Vietnam) and ASEAN5 (Malaysia, Indonesia, Philippines, Thailand and Singapore) based on the different levels of economic growth. Foreign direct investment is expected to have a different impact on the three indicators of sustainable development due to the different economic levels between ASEAN 3 and ASEAN 5. Previous researches have failed to show a consistent relationship between foreign direct investment and the three indicators of sustainable development. Moreover previous researches mostly looks at the effects of foreign direct investment on each individual indicator of sustainable development separately, but very little is done comprehensively by looking at the effects of foreign direct investment on all three sustainable development indicators. Especially on the comparative impact on ASEAN 3 and ASEAN 5. This paper is based on extensive literature. It is expected to prove that the dominant effect of foreign direct investment towards sustainable development and the effect might be different between ASEAN3 and ASEAN5 countries. Future studies should validate empirically the proposed research framework.