FOREIGN DIRECT INVESTMENT IN INDONESIA AND ITS IMPLICATIONS
Mikha Chandra, S.E., Prof. Fumio Yoshino,
2011 | Tesis | S2 Magister Ek.Pembangunan-
The existence of investment could not be avoided to boost the economic development. The investment will be accomplished both in domestic and foreign investment. The domestic investment is available from inside the country through public or private company, and foreign investment is accessed also in public and private company. The investment of capital could be conducted in direct and indirect investment. The indirect investment is supplied in stock market by buying stock and other derivative products. In direct investment is provided through building factory or fabric for producing products which are directly consumed or as complement product for next process which is called Foreign Direct Investment (FDI). This thesis proposes research that uses analytical in histories, legal and econometric data. The historical, legal and econometrical analyzes are related to the development in Foreign Direct Investment. The research will give the comprehensive result in the development of FDI particularly in Indonesia as developing country. The research will answer what caused of FDI in Indonesia in the beginning; how the regulation support the FDI in Indonesia; why the number of investment decrease or increase; and how the policy that legalized by authority affect to FDI in Indonesia. The main objective of this paper is, therefore, to examine the cause of foreign investors wanting to invest their capital (money) in the some countries particularly Indonesia. In addition, it analyze that the background condition of country has effect to the development of FDI. Moreover, the regime’s policy takes participation in the progress of FDI in current year and in the following year. The framework of research consists, initially the first chapter explanation of the background of research including research question, purpose of study, data resource and research framework. Secondly, describe the theoretical framework of Foreign Direct Investment. Next chapter, illustrate the development of FDI in Indonesia since the beginning. Forth chapter, give details the regulation of Foreign Direct Investment in Indonesia. Moreover in fifth chapter, provide numerical analysis through econometric tools. Finally the last chapter, summarize the interest of Foreign Direct Investment in Indonesia relating with historical, legal and econometrical data as contribution for policy recommendation. The meaning of Foreign Direct Investment is contribution of capital from abroad to support economic development. The investment of FDI is directly in the building the factory, machinery and equipment to maintain the production of goods to be consumed goods or to be used as complement goods for further process. In FDI to make the product in good through building factory is a goal. By generating the factory, its makes finished goods that are valuable for host country. The finished good can take or need next step for production as complementary product or can be just consumed directly. Foreign Direct Investment has impact to economic development. The realization of economic development can be seen through the movement of Gross Domestic Product. FDI is theorized to have positive impact to economic growth. FDI leads to attract for investor to invest more capital to make market becoming greater or called market size hypothesis, Market size hypothesis means that markets with expanding economic growth have a tendency to give foreign investor through multinational corporations to make more sales and profit to become attractive for FDI. To boost economic growth is needed investment through domestic fund and hand in hand with supported international funds. The international funds throughout Foreign Direct Investment can be attracted by the condition of host country such as potential demand and supply market, good infrastructure, openness economic and supported government’s regulation. As the outcome of foreign investment the economic growth in increasing Gross Domestic Product can be reached. To build foreign investment, Indonesia needs strong political will that drawn in legal basis through parliament policy, make transparent government regulation in investment mechanism. The regulation should be consistent in local and central government. The dual system could be implemented, but the spirit of development should not be avoided. The local government should not make any levies that tend to reduce the investment and the central government should not make the bureaucracy taking many permissions and time consuming. Government of Indonesia should focus the development of infrastructure that assist the distribution of product to be consumed and or to be complement product for continuing chain production. It has to develop and maintain the road and railway system to reach such potential-centralized industry and attain until to the remote area, integrate the road and railway to port for the purpose of export oriented. The good physical infrastructure could diminish the transaction cost. Government of Indonesia should maintain consistent regulation and mechanism in central and local regulation. The regulation that legalized in central government should be in line with local needs, and the local government should manage good regulation that not again to the national needs. Moreover, the government institution should be reform vertically and horizontally to reduce the long bureaucracy that make high cost economy.
Kata Kunci : Investment, Indonesia
