Analysis of the Determinants of Foreign Direct Investment in IMS-GT (Indonesia, Malaysia, Singapore Growth Triangle)

Abstract

This study is to examine the factors that influence FDI inflows in the Indonesia-Malaysia-Singapore Growth Triangle (IMS- GT) region between 2014 and 2023. FDI is the dependent variable in this study, which also uses GDP, inflation, interest rates, and trade openness as independent factors. The results of a panel data regression employing the Common Effect Model (CEM) as the best specification based on the Chow, Hausman, and Lagrange Multiplier tests demonstrate that trade openness, GDP, and inflation all significantly boost foreign direct investment. Interest rates, on the other hand, have a detrimental but statistically inconsequential effect. The findings imply that in order to draw in more foreign investment, the IMS-GT countries must improve macroeconomic metrics, especially economic growth and openness to international commerce. These insights can guiede policymakers in improving investment invironments to boost FDI inflows in the region.