Foreign Direct Investment, Institutional Quality and Economic Growth: Empirical Evidence from ASEAN

Several phenomena have occurred over the last ten years in ASEAN countries. First, foreign direct investment (FDI) inflows from ASEAN countries that are part of the East Asia and Pacific region are still low compared to East Asian countries. Second, some phenomena in ASEAN countries, such as corruption, coups, ethnic conflicts, and terrorism, are bad for political institutions. Third, the average value of economic freedom in ASEAN countries in the last ten years has yet to reach the highest average. This study aims to analyze the influence of FDI and the quality of institutions (political and economic institutions) on economic growth in ASEAN countries from 2011 to 2020. This study's panel data analysis uses fixed effect model. The analysis results show that inflows of FDI and political and economic institutions significantly and positively affect economic growth in ASEAN countries. Good quality institutions will be able to attract more foreign investment and can increase a country's economic growth.