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Foreign Trade And Investments With Indonesia

902 words - 4 pages

Aulia Akbar Ramadhan
2B3206

POSSITIVE IMPACT OF INTERNATIONAL TRADE, FOREIGN DIRECT INVESTMENT FOR INDONESIA

I. INTRODUCTION
Indonesia always received a large amount of FDI. This FDI came from several developed countries such as Japan, United States of America and the European Union. FDI inflow has confirmed the activity of trade between countries through development of export (export expansion). In addition , FDI can also replace trade by become import substitution, especially if FDI that brought in aims to develop the domestic market or as to avoid trade impediments such as tariffs. FDI impact for a country is is always in a favorable state of the the country especially in terms of development and economic growth. Many empirical evidence in South Korea , Malaysia , Thailand , China , and many other countries shows that the presence of FDI gave a lot of positive things to economy of the host country . For the case of Indonesia , the most prooving evidence is during the reign of New Order goverment . Indonesian economy may not be able to bounce back from the devastation created by the Old Order goverment and could experience an average economic growth of 7 % per year during the period if not because FDI. Several Literature theory also gives a strong argument that there is a positive correlation between FDI and economic growth in the recipient country .
There are four fundamental problems that often lead for researcher to do studies about the relationship with FDI inflows of a country. First is the factors that determine FDI inflows in the country in a well developed country or in the developing country. Second, the relationship between FDI and country trade activity (exports and imports). Third, the contribution of FDI to economic growth. Last is what is the appropriate role by the government to attract FDI flows. to explain these four questions. Majority of the previous studies are using aggregate data which is the result of using regression analysis method. This study will answer for the question number two, which is about the relationship between FDI and International trade of Indonesia in 2000 until 2013.

II.BACKGROUND and THEORY
The reason for a country to do the international trading with other countries is basically the same. The reason is to take advantage of the exchange goods and the services produced in the field of specialization of a country which has the comparative advantage in each of the country itself. This specialization will be improving the living standards of a country. While foreign direct investment is considered as the main element for the industrial development and economic growth of a hostcountry. According to Rosa Portela Forte , " Foreign direct investment (FDI) influences the host country’s economic growth through the...

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