Foreign Direct Investment And Regional Economic Growth In Indonesia: A Panel Data Study

The main objective of this study is to determine the effects of foreign direct investment on economic growth of twenty-six provinces in Indonesia during 1987-2000 using panel data analysis. Quantitative and qualitative analysis were used in this research. Qualitative analysis describes the foreign direct investment in Indonesia. Panel data analysis with fixed effect method was used as a quantitative analysis to capture the main objective of this research. The results of this study are : (1) Foreign Direct Investment in Indonesia is positively correlated with the economic growth, although it is not statistically significant; (2) The factors that promote foreign direct investment in Indonesia are domestic investment; private consumption, export, import, and education; (3) There is a complementary relationship between foreign direct investment and domestic investment; (4) The quality of human resources gives a strong effect on economic growth and foreign direct investment.