FDI on Economic Growth: Indonesia Case Study

Samsul Haris, Nevi Danila


FDI is one of the factors that encourage the growth of the economy, especially for developing countries. Indonesia has prepared an economic policy package and a taxation policy for booting the investments, including FDI. This paper investigates whether the FDI is one of the essential instruments to improve the growth of Indonesia economy. Multiple regression with GDP as a dependent variable; and FDI, Trade, Government Expenditure, and Inflation as independent variables are employed. The data is from 1985 up to 2015 period. FDI does not have any impact on GDP, while others variables influence the growth of the economy. It suggests that the goals of FDI, namely technology transfer, development of human resources, are not achieved entirely. It implies that the package of economic policy and taxation are not enough for FDI to have the impact on GDP, but others factors, such as wage rate, labor skills, transport and infrastructure, and property rights, must be developed.


Full Text:



A. A. Ramadhan, Z. H. Jian, and Y. K. Thales Pacific. 2016. Impact of FDI on GDP: A Comparative Study of Mozambique and South Africa. J. Econ. Sustain. Dev., vol. 7, no. 2.

C. Dritsaki and E. Stiakakis. 2014. Foreign Direct Investments, Exports, and Economic Growth in Croatia: A Time Series Analysis. Procedia Econ. Financ.

C. E. Umeora. 2013. Effects of Foreign Direct Investment (Fdi) on Economic Growth in Nigeria. Umeora Chinweobo Emmanuel, no. 2010, pp. 1–14.

E. Borensztein et al. 1998. How does foreign direct investment affect economic 1 growth? We are grateful for comments from,” J. Int. Econ., vol. 45, no. 45, pp. 115–135.

H. W. Mun, T. K. Lin, and Y. K. Man. 2009. FDI and Economic Growth Relationship: An Empirical Study on Malaysia. Int. Bus. Res.

J.-E. Chen and S. A. M. Zulkifli. 2012. Malaysian Outward FDI and Economic Growth,” Procedia - Soc. Behav. Sci.

L. Hong. 2014. Does and How does FDI Promote the Economic Growth? Evidence from Dynamic Panel Data of Prefecture City in China. IERI Procedia.

M. A. Almfraji, M. K. Almsafir, and L. Yao. 2014. Economic Growth and Foreign Direct Investment Inflows: The Case of Qatar. Procedia - Soc. Behav. Sci..

M. Carkovic and R. Levine. 2002. Does Foreign Direct Investment Accelerate Economic Growth?.

N. Saqib, M. Masnoon, and N. Rafique. 2013. Impact of Foreign Direct Investment on Economic Growth of Pakistan. Adv. Manag. Appl. Econ., vol. 3, no. 1, pp. 35–45.

P. H. Mo. 2007. Government expenditures and economic growth: The supply and demand sides. Fisc. Stud., vol. 28, no. 4, pp. 497–522.

P. Nistor. 2014. FDI and Economic Growth, the Case of Romania. Procedia Econ. Financ.

P. Nunnenkamp and J. Spatz. 2003. Foreign Direct Investment and Economic Growth in Developing Countries: How Relevant Are Host-country and Industry Characteristics? Foreign Direct Investment and Economic Growth in Developing Countries.

Q. Abbas et al. 2011. Impact of Foreign Direct Investment on Gross Domestic Product Impact of Foreign Direct Investment on Gross Domestic Product Impact of Foreign Direct Investment on Gross Domestic Product (A Case of SAARC Countries). Glob. J. Manag. Bus. Res., vol. 11, no. 8.

R. J. Elliott and H. Miaox. 2009. VaR and expected shortfall : a non - normal regime switching framework. Quant. Financ., vol. 9, no. 6, pp. 747–755.

S. MISRA. 2011. Study of Implications of FDI on Indian Economy. Postmod. Openings, vol. 3, no. 4, p. 2012.

S. S. Makki. 2004. Impact of Foreign Direct Investment and Trade on Economic Growth. Am. J. Agric. Econ., vol. 86, no. 3, pp. 795–801.

Worldbank. 2016. The World Bank. p. 4.

Z. Szkorupová. 2014. A Causal Relationship between Foreign Direct Investment, Economic Growth and Export for Slovakia. Procedia Econ. Financ.

DOI: http://dx.doi.org/10.18860/mec-j.v0i1.5081


  • There are currently no refbacks.

Copyright (c) 2018 Nevi Danila

Creative Commons License
This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Editorial Office:
Faculty of Economics,
State Islamic University of Maulana Malik Ibrahim Malang
Gajayana Street 50, Malang-East Java, Indonesia 65144
Phone (+62) 341 558881, Facsimile (+62) 341 558881
e-mail: mecjournal@uin-malang.ac.id

P-ISSN 2599-3402
E-ISSN 2598-9537

Lisensi Creative Commons

MEC-J is licensed under CC-BY-SA
© All rights reserved 2017.