UNDERSTANDING COUNTRY RISK TOWARD FOREIGN DIRECT INVESTMENT MODERATED BY EASE OF DOING BUSINESS RANKING (Study in ASEAN (Indonesia, Malaysia, Thailand, Philippines, and Vietnam))

Nanda Pertiwi, Kusuma Ratnawati, Siti Aisjah

Abstract


This research involves the phenomenon of Foreign Direct Investment. The purpose of this study is to analyze the determinants of country risk on Foreign Direct Investment (FDI), which is moderated by the rating of ease of doing business (EODB). The utilized sampling technique was purposive sampling. The objects of this research are Indonesia, Malaysia, Thailand, the Philippines, and Vietnam. Data analysis in this study utilized the Partial Least Squares (PLS) modeling approach. The results showed that 1) Political risk did not significantly influence FDI for Indonesia, Malaysia, and Vietnam, but did influence for Thailand and the Philippines. 2) Financial risk reflected by macroeconomic conditions significantly influenced Foreign Direct Investment for Indonesia, Malaysia, Thailand, the Philippines, and Vietnam. 3) The EODB rank moderated the influence of political risk on Foreign Direct Investment for Thailand but did not moderate for Indonesia, Malaysia, the Philippines, and Vietnam. 4) The EODB rating did not moderate the effect of financial risk on Foreign Direct Investment for all the studied countries. Finally, 5) the results of ranking the five studied countries based on country risk level from lowest to highest showed that Malaysia was first, followed by Thailand in second place, then the Philippines in third place and Vietnam in fourth, and the last was Indonesia in fifth (last) place. This means that Indonesia has the highest country risk value compared to the other ASEAN countries that became the objects of this research.

Keywords


Political risk; Financial risk; Rank of Ease of Doing Business

Full Text:

PDF

References


Adhikary, B. K. 2017. Factors influencing foreign direct investment in South Asian economies: A comparative analysis. South Asian Journal of Business Studies 6 (1): 8-37.

Anwar, C. J. 2016. Faktor-Faktor Yang Mempengaruhi Foreign Direct Investment (Fdi) Di Kawasan Asia Tenggara. Media Trend 11(2): 175-194.

Aprella, R. and S. Suhadak. 2017. Analisis Pengaruh Country Risk Terhadap Keputusan Melakukan Foreign Direct Investment (Studi Pada Negara Indonesia, Malaysia, Filipina, Thailand, Dan Vietnam Tahun 2004-2014). Jurnal Administrasi Bisnis 43 (1): 86-95.

Bouyahiaoui, N. and S. Hammache. 2014. The Impact of Country Risk On Foreign Direct Investments In The MENA Region. Economics, Commerce, and Trade Management: An International Journal 1 (1): 1-12.

Busse, M., and C. Hefeker. 2007. Political risk, institutions, and foreign direct investment. European journal of political economy 23 (2): 397-415.

Corcoran, A. and R. Gillanders 2015. Foreign direct investment and the ease of doing business. Review of World Economics 151(1): 103-126.

Devan, J. and Matsaert, F. 2013. Doing business in the East African Community 2013: smarter regulations for small and medium –size enterprises. World Bank report.

Gangi, Y. A. and R. S. Abdulrazak 2012. The impact of governance on FDI flows to African countries. World Journal of Entrepreneurship, Management, and Sustainable Development 8 (2/3): 162-169.

Griffin, Ricky W. 2015. Bisnis Internasional: Sebuah Perspektif Manajerial. Jakarta: Salemba Empat.

Gobinda Goswami, G. and S. Haider 2014. Does political risk deter FDI inflow? An analytical approach using panel data and factor analysis. Journal of Economic Studies 41(2): 233-252.

Haidar, J. I. 2012. The impact of business regulatory reforms on economic growth. Journal of the Japanese and international economies 26(3): 285-307.

Hornberger, K., Battat, J., and Kusek, P. 2011. Attracting FDI: How much does investment climate matter? Note Number 327. World Bank.

Jayasuriya, D. 2011. Improvements in the World Bank’s Ease of Doing Business Rankings: Do they Translate into Greater Foreign Direct Investment Inflows?. Policy Research Working Paper 5787, Washington, DC: World Bank.

Kumari, R. and A. K. Sharma 2017. Determinants of foreign direct investment in developing countries: a panel data study. International Journal of Emerging Markets 12 (4): 658-682.

Lemi, A. and Asefa, S. 2003. Foreign direct investment and uncertainty: evidence from Africa. African Finance Journal, Vol. 5 No. 1, pp. 36-67.

Madura, Jeff. 2011. International Corporate Finance, buku 1. Jakarta: Salemba empat

Madura, Jeff. 2011. International Corporate Finance, buku 2. Jakarta: Salemba empat

Mahdi Igamo, A. 2015. Pengaruh Resiko Ekonomi Terhadap Penanaman Modal Asing Di Negara Asean (Studi Kasus Perbandingan Antara Negara Indonesia, Malaysia, Singapura, Thailand, Filippina, Brunei Dan Myanmar). Journal of Economics & Development Policy 13(2): 75-85.

Muli and Aduda 2017. The Mediating Effect of Ease of Doing Business on the Relationship between Economic Integration and Foreign Direct Investment in the East African Community. Journal of Finance and Investment Analysis 6(4): 21-54.

Morris, R. and A. Aziz 2011. Ease of doing business and FDI inflow to Sub-Saharan Africa and Asian countries. Cross Cultural Management: An International Journal 18(4): 400-411.

OECD. 2014. Southeast Asia Investment Policy Perspectives. [On Line]. from: www.oecd.org/daf/inv/investment-policy/seasia.htm [September 25, 2016].

Shahadan, F., et al. 2014. Relationships between Doing Business Indexes and FDI Net Inflows: Empirical Evidence from Six Asian Countries (Afghanistan, Bangladesh, India, Iran, Pakistan, and Sri Lanka. Prosiding Persidangan Kebangsaan Ekonomi Malaysia ke-9.

Sjahrial, Dermawan. 2014. Manajemen Keuangan Lanjutan edisi revisi. Jakarta: Mita Wacana Media.

Vijayakumar, J., et al. 2009. Foreign direct investment and evaluation of country risk: An empirical investigation. Multinational Business Review 17(3): 181-204.




DOI: http://dx.doi.org/10.21776/ub.jam.2020.018.02.07

Refbacks

  • There are currently no refbacks.