The Effect of Foreign Direct Investment on the GDP of the Agricultural Sector (Agriculture) in Developing ASEAN Countries

Abstract

Foreign Direct Investment is a long-term flow of foreign capital and is relatively not vulnerable to economic turmoil. Foreign direct investment encourages economic development, especially for developing countries that do not have sufficient funds to meet domestic investment needs. Almost all ASEAN member countries are foreign direct investment destinations in the world. The amount of foreign direct investment received fluctuates and tends to increase, if there is no world economic crisis. The amount of FDI also affects the GDP of each country both as a whole and by sector. One sector that is affected is the agricultural sector. For several developing countries in ASEAN, the agricultural sector is one sector that is considered for development, especially with the presence of FDI. This study aims to examine and examine the effect of FDI on the GDP of the agricultural sector in developing ASEAN countries by using panel data analysis techniques with the help of eViews software. This study is a causal associative study that uses data samples from 6 ASEAN developing countries namely Indonesia, Malaysia, Vietnam, Thailand, Cambodia and the Philippines for the last 14 years. The results showed that FDI had a positive and significant impact on the GDP of the agricultural sector with a coefficient of determination of 77.75%. Thus, it is concluded that FDI determines the amount of GDP in the agricultural sector in developing ASEAN countries.