THE IMPACT OF FOREIGN DIRECT

INVESTMENT
TO ENVIRONMENTAL QUALITY IN
INDONESIA

Hadi Sasana, Rr. Retno Sugiharti, & Y. Setyaningsih

1 ) DIPONEGORO UNIVERSITY, SEMARANG – INDONESIA
2 ) TIDAR UNIVERSITY, MAGELANG - INDONESIA
3 ) DIPONEGORO UNIVERSITY, SEMARANG – INDONESIA

3RD INTERNATIONAL CONFERENCE ON ENERGY, ENVIRONMENT AND INFORMATION SYSTEM

SEMARANG, 14-15 AGUSTUS 2018
 ISSUE
Contribution of GPD sectoral Economic Growth (%) 2010-
share (%) 2014-2017 2017
8

7
6.81
6.44 6.19
6

22.17% 5.56
5 5.02 4.79 5.02 5.07
40.45% 4

13.88% 3

13.36%
1

10.14% 2010 2011 2012 2013 2014 2015 2016 2017

Manufacturing Wholesales Agriculture Construction

CONTRIBUTION OF DDI VS FDI TARGET & REALITATION OF INVESTMENT IN
IN INDONESIA (2017) INDONESIA

37.64%

62.36%

Domestic investment
FDI
COMPOTITION OF INVESTMENT IN INDONESIA
2017
Degradation of
Environtment Quality by
CO2 Emisison in Indonesia
in 1990-2015
(Source: World Bank
Report 2016)

Industrializati
on become
the main
suspect of
environmenta
RESEARCH QUESTION

Is the more economic development

activities which leading to
industrialization has lowered the
enviromental quality?
OBJECTIVE

To examined the impact of Foreign

Direct Investment and Economic
Growth to the Environmental Quality
in Indonesia.
GROUND THEORY

Environmental Kuznets
Curve (Stern, “The Rise
and Fall of the
Environmental Kuznets
Curve,” World Dev., vol.
32, no. 8, pp. 1419–1439,
2004)
PREVIOUS STUDIES
Research Result Finding
Kim and Adilov (2012) FDI is significantly reduce CO2 emissions
per capita,
Wang Chen (2014) FDI tends to raise CO2 emissions but this
increase can be addressed by legal
institutions and the environment.
Shahbaz et al (2015) the higher level of FDI, it will increase CO2
emissions on the object of research of
developing countries.
Zugravu-soilita (2017) the impact of FDI on the environment
depends on the environmental regulations
that are set by the Government
RESEARCH MODEL & METHODS

 CO2 : Total emissions of carbon dioxide (CO2)

 FDI : Foreign Direct Investment
 GRDPG : Economic Growth
 POV : Poverty
 POPGR : Population Growth
Regression analysis using Ordinary Least Square (OLS)
Research object : Indonesia
Period of research period of 1990 – 2015.
RESULT & DISCUSSION
Variable Coef Robust t-Stat Prob.
Std. Error
FDI 8.823 4.525 1.950 0.065***
GDPGR -0.163 1.314 -0.120 0.902
POPGR -627.660 45.343 -13.840 0.000*
POV -3.735 1.538 -2.430 0.024**
C 1320.519 97.738 12.926 0.000*
R-squared 0.921
F-statistic 85.380
Prob(F-statistic) 0.000      
*significance on level 1%
** significance on level 5%
*** significance on level 10%
Estimation
Result:

Increase in the flow of FDI has positive impact to

increase of CO2 emisison and rather significantly in
observations of 1990-2015, ceteris paribus
Population growth has significant and negative
effect against CO2 emissions, ceteris paribus
Poverty and influential negative and significantly to
CO2 emissions, ceteris paribus
 CONCLUSION

 The flow of FDI effect positive significantly to CO 2 emissions,

 Population growth and poverty has negative effect through CO2
emissions
The result follows the pattern of the Environment Kuznet Curve
(EKC) where there are indications of changes in the pattern of
community life that is increasingly aware of the environment
 Need to look for factors affecting on environmental degradation,
use the proxy in addition to CO2 emissions and using the study
panel may become alternative development research this further.
TH A N K YO U