THE RELATIONSHIP OF FOREIGN DIRECT INVESTMENT AND MACROECONOMIC FACTORS IN INDONESIA PERIOD 2005-2009

Abstract

The Foreign Direct Investment in Indonesia experienced fluctuation over year 2005 until 2009. For a developing country like Indonesia, Foreign Direct Investment plays an important role for the development of the country, in addition to domestic savings and to increase investment activity. The Indonesian government issued a deregulation in investment policy to attract and give convenience to the foreign direct investor to invest in Indonesia. However, to investigate the fluctuation of Foreign Direct Investment that happened in period 2007-2009 in Indonesia, previous researchers suggest using the macroeconomic factors as variables that affect the Foreign Direct Investment. The information in this thesis is intended to be an overview of Foreign Direct Investment (FDI) and the macroeconomic factors those affect it, such as Gross Domestic Product, Unemployment Rate, Inflation Rate, Exchange Rate and Interest Rate. The information is based on government secondary sources (Badan Koordinasi Penanaman Modal/ BKPM, Biro Pusat Statistik/ BPS and government official website). By using the correlation method, the researcher tries to find out the correlation between the Foreign Direct Investment and Macroeconomic Factors that affect it. This research shows that the Foreign Direct Investment (FDI) Indonesia that affect by the macroeconomic factors will increase if gross domestic product also increase, FDI will increase followed by decreasing of unemployment rate, FDI will increase by the decreasing of inflation rate, FDI will increase if exchange rate also increase and FDI will increase if the interest rate decrease.