A COMPARATIVE ANALYSIS OF FOREIGN DIRECT INVESTMENT INFLOWS BETWEEN SINGAPORE AND INDONESIA

Abstract

This study aims to investigate the competitive advantage in Foreign Direct Investment (FDI) inflows between Indonesia and Singapore by analyzing critical elements that shape their investment climates. Utilizing competitive advantage theory as the analytical framework, the research focuses on Porter Diamond Model determinants factors: factor conditions, demand conditions, related and supporting industries, and firm strategy, structure, and rivalry. Using a qualitative method, these determinants are further examined through eight variables to identify strengths and weaknesses in each country’s approach to attracting FDI. The findings reveal that Singapore demonstrates superior performance in six variables out of eight. In contrast, Indonesia performs better in two variables out of eight. Despite its strengths, Indonesia faces challenges in infrastructure and regulatory efficiency, which diminish its overall appeal to investors compared to Singapore. The study underscores the critical importance of targeted policy reforms in Indonesia to address these gaps, enhance its investment climate, and maximize the economic benefits of FDI. These insights provide valuable guidance for both nations in formulating strategies to sustain and improve their competitive positions in the global FDI landscape.