What Drives Foreign Direct Investments in Indonesia?
This note identifies some of the main determinants of foreign direct investments (FDI) to Indonesia, focusing in particular on the role of economic policies. To that end it develops a novel empirical analysis on the effects of various provisions in...
| Main Author: | |
|---|---|
| Format: | Policy Note |
| Language: | English |
| Published: |
World Bank, Washington, DC
2018
|
| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/360411540797707636/Policy-Note-What-drives-Foreign-Direct-Investments-in-Indonesia http://hdl.handle.net/10986/30944 |
| Summary: | This note identifies some of the main
determinants of foreign direct investments (FDI) to
Indonesia, focusing in particular on the role of economic
policies. To that end it develops a novel empirical analysis
on the effects of various provisions in Indonesia’s Negative
Investment List (DNI) on planned FDI inflows. It also
assesses the impact of Bilateral Investment Treaties (BITs)
and specific trade policy actions on FDI inflows to
Indonesia. The results suggest that restrictions on foreign
equity limits, investment locations, on the size of
investors and the types of licenses required all deter
planned FDI, with the first two having the strongest
effects. The analysis also suggests that terminating a BIT
reduces substantially FDI inflows from the affected country
and that trade policy can also play an important role in
attracting FDI. On the basis of the results of the analyses
and the existing empirical evidence, the note draws some
policy suggestions to increase FDI inflows to Indonesia. |
|---|