Determinants of Sustainable Foreign Direct Investment (FDI) in ASEAN-5 Countries

Ho, Hui Wen (2025) Determinants of Sustainable Foreign Direct Investment (FDI) in ASEAN-5 Countries. Final Year Project (Bachelor), Tunku Abdul Rahman University of Management and Technology.

Text Ho Hui Wen_Full Report.pdf Restricted to Registered users only Download (2MB)

Abstract

This paper explores the determinants of sustainable Foreign Direct Investment (FDI) in ASEAN-5 countries namely: Indonesia, Malaysia, Philippines, Singapore, and Thailand from 1990 to 2020. It identifies key determinants influencing sustainable FDI within each country and investigates the correlation between FDI, gross domestic product (GDP) growth, inflation rate (IR), human rights index (HR) and carbon dioxide (CO₂) emissions. The findings suggest that the impact of independent variables on FDI varies across the ASEAN-5 countries, with Malaysia, Singapore and Thailand exhibit cointegration in their FDI models while Indonesia and the Philippines show otherwise. Long-term findings indicate varied impacts of independent variables on FDI across ASEAN-5 countries. In Indonesia, the Philippines and Singapore, HR negatively affect FDI, while CO2 has a positive impact; GDP and IR are not significant. In Malaysia, both GDP and CO2 positively influence FDI, while HR negatively impacts it, and IR lacks significance. Thailand sees positive impacts on FDI from all variables. Short-term findings reveal further variations. In Indonesia, only current GDP significantly affects FDI while others show otherwise. In Malaysia, except for current GDP and IR with a lag of three periods, all other variables show significant relationships with FDI. Specifically, IR and CO2 are positively related to FDI in Malaysia while others show otherwise. The Philippines shows significant positive impacts on current FDI from lagged FDI, HR, and CO2 while others show otherwise. In Singapore, D(FDI(-1)), D(IR(-1)), D(HR), D(CO2(-1)) and D(CO2(-2)) have a significant negative impact while D(GDP), D(GDP(-1)), D(GDP(-2)) and D(CO2) positively influence FDI. Lastly, in Thailand, D(IR) and D(HR(-1)) are insignificant, D(FDI(-1)), D(GDP) and D(HR) significantly and positively affect current FDI while D(GDP(-1)), D(IR(-1)), D(CO2) and D(CO2(-1)) significantly and negatively influence FDI. Based on these findings, recommendations are proposed to enhance regulatory frameworks, foster Public-Private Partnerships (PPPs) and incentivize green finance initiatives aimed at promoting sustainable FDI in the ASEAN-5 countries.