DETERMINANTS OF FOREIGN DIRECT INVESTMENT IN INDONESIA

As a developing country, Indonesia can benefit from foreign direct investment (FDI) as an alternative financing source to aid its development. The goal of this research is to investigate the determinants of FDI in Indonesia. This research aims to determine the primary factors that affect FDI in Indonesia in the period of 2011 - 2022. These factors include economic growth, inflation, interest rate, exchange rate, and labor cost. The research used a quantitative approach and time series data sourced from the Bank of Indonesia and the Central Bureau of Statistics. The data is analyzed using the multiple linear regression method through IBM SPSS. The result shows that economic growth and inflation significantly positively affect FDI. On the other hand, interest and exchange rates have a positive but insignificant effect on FDI. Meanwhile, the test results on labor costs have a negative insignificantly on FDI. These findings may assist the government in strengthening policies and regulations regarding foreign investment, which should align with policies aimed at promoting foreign investment.
Keywords: FDI, economic growth, inflation, interest rate, exchange rate, and labor cost.