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Oct 13, 2025 by thesweetdesigns.com 32 views

The Influence of Foreign Debt and Direct Foreign Investment on Economic Growth in Five ASEAN Member Countries

Introduction

Economic growth is a crucial aspect of a country's development, as it enables governments to meet the needs of their citizens and cover budget deficits. However, achieving stable and positive economic growth is a challenging task, as it is influenced by various factors. This study aims to analyze the impact of foreign debt and direct foreign investment on economic growth in five ASEAN member countries, namely Indonesia, Malaysia, Thailand, Vietnam, and the Philippines.

Background

The Association of Southeast Asian Nations (ASEAN) is a regional organization that comprises 10 member countries, with a combined population of over 650 million people. The region has experienced rapid economic growth in recent years, driven by foreign investment and trade. However, the region also faces challenges such as high levels of foreign debt and a lack of economic diversification. This study aims to contribute to the existing literature on the impact of foreign debt and direct foreign investment on economic growth in ASEAN countries.

Methodology

This study uses a quantitative approach, with a focus on foreign debt variables, direct foreign investment, and economic growth. The method used is a panel data regression that combines time and cross-section data. The time span starts from 2008 to 2018, with secondary data issued by the World Bank, International Monetary Funds, ASEAN Exchanges, and Our World in Data. The data processing process is carried out using EViews 10, as well as data panel analysis with the Random Effects Model (Rem) method.

Results

The results of this study show that simultaneously, foreign debt and foreign investment directly have a significant impact on economic growth in five ASEAN member countries. However, when seen individually, foreign debt has an existing influence but is not significant on economic growth, while foreign investment directly has a significant effect on economic growth.

The Role of Direct Foreign Investment

The effect of direct foreign investment (FDI) on economic growth in five ASEAN countries indicates that foreign capital flows play an important role in accelerating economic development. FDI not only brings capital, but also technology, managerial knowledge, and access to international markets that can increase the competitiveness of a country. Countries such as Vietnam and Thailand that have succeeded in attracting large amounts of FDI showed rapid economic growth in the last decade.

The Double-Edged Sword of Foreign Debt

On the other hand, foreign debt often becomes a double-edged sword for a country. When used to finance productive projects, debt can encourage economic growth. However, debt that is not managed properly can lead to an economic crisis, if the obligation to pay the debt exceeds the country's ability to pay. For example, Indonesia and the Philippines face challenges in managing their debts to keep it sustainable and not burden the long-term economy.

Conclusion

This study emphasizes the importance of managing foreign debt and strategies to attract direct foreign investment for ASEAN countries. To maximize economic growth, public policy needs to be focused on increasing the investment climate, transparency in debt management, and utilizing debt for productive investment. Through appropriate policies, these countries can achieve sustainable and beneficial economic growth for their people.

Recommendations

Based on the findings of this study, the following recommendations are made:

Increase investment climate: ASEAN countries need to create a favorable investment climate to attract more foreign investment.
Improve debt management: Countries need to improve their debt management practices to avoid debt crises.
Utilize debt for productive investment: Debt should be used to finance productive projects that can encourage economic growth.
Increase transparency: Governments need to increase transparency in their debt management practices to avoid corruption and ensure accountability.

Limitations

This study has several limitations. Firstly, the study only focuses on five ASEAN member countries, and the results may not be generalizable to other countries. Secondly, the study uses secondary data, which may not be accurate or up-to-date. Finally, the study only examines the impact of foreign debt and direct foreign investment on economic growth, and does not consider other factors that may influence economic growth.

Future Research Directions

Future research should focus on the following areas:

Examining the impact of other factors: Future research should examine the impact of other factors such as trade, education, and infrastructure on economic growth in ASEAN countries.
Using primary data: Future research should use primary data to improve the accuracy and reliability of the results.
Comparing ASEAN countries: Future research should compare the economic growth experiences of ASEAN countries to identify best practices and areas for improvement.

Conclusion

In conclusion, this study highlights the importance of managing foreign debt and strategies to attract direct foreign investment for ASEAN countries. The study shows that foreign debt and foreign investment directly have a significant impact on economic growth in five ASEAN member countries. However, foreign debt can become a double-edged sword if not managed properly. To maximize economic growth, public policy needs to be focused on increasing the investment climate, transparency in debt management, and utilizing debt for productive investment. Through appropriate policies, these countries can achieve sustainable and beneficial economic growth for their people.
Q&A: The Influence of Foreign Debt and Direct Foreign Investment on Economic Growth in Five ASEAN Member Countries

Introduction

In our previous article, we discussed the impact of foreign debt and direct foreign investment on economic growth in five ASEAN member countries. In this article, we will answer some of the most frequently asked questions related to this topic.

Q: What is the relationship between foreign debt and economic growth?

A: Foreign debt can have both positive and negative effects on economic growth. When used to finance productive projects, debt can encourage economic growth. However, debt that is not managed properly can lead to an economic crisis, if the obligation to pay the debt exceeds the country's ability to pay.

Q: How does direct foreign investment affect economic growth?

A: Direct foreign investment (FDI) can have a significant impact on economic growth by bringing in foreign capital, technology, managerial knowledge, and access to international markets. FDI can increase the competitiveness of a country and lead to rapid economic growth.

Q: Which ASEAN countries have been successful in attracting foreign investment?

A: Countries such as Vietnam and Thailand have been successful in attracting large amounts of foreign investment, which has led to rapid economic growth in the last decade.

Q: What are the challenges faced by ASEAN countries in managing their debts?

A: ASEAN countries face challenges in managing their debts to keep it sustainable and not burden the long-term economy. Indonesia and the Philippines are examples of countries that face challenges in managing their debts.

Q: How can ASEAN countries maximize economic growth?

A: ASEAN countries can maximize economic growth by increasing the investment climate, transparency in debt management, and utilizing debt for productive investment. Through appropriate policies, these countries can achieve sustainable and beneficial economic growth for their people.

Q: What are the limitations of this study?

A: This study has several limitations. Firstly, the study only focuses on five ASEAN member countries, and the results may not be generalizable to other countries. Secondly, the study uses secondary data, which may not be accurate or up-to-date. Finally, the study only examines the impact of foreign debt and direct foreign investment on economic growth, and does not consider other factors that may influence economic growth.

Q: What are the future research directions?

A: Future research should focus on the following areas:

Examining the impact of other factors: Future research should examine the impact of other factors such as trade, education, and infrastructure on economic growth in ASEAN countries.
Using primary data: Future research should use primary data to improve the accuracy and reliability of the results.
Comparing ASEAN countries: Future research should compare the economic growth experiences of ASEAN countries to identify best practices and areas for improvement.

Q: What are the policy implications of this study?

A: The policy implications of this study are that ASEAN countries need to create a favorable investment climate to attract more foreign investment. They also need to improve their debt management practices to avoid debt crises and utilize debt for productive investment. Through appropriate policies, these countries can achieve sustainable and beneficial economic growth for their people.

Conclusion

In conclusion, this Q&A article provides answers to some of the most frequently asked questions related to the impact of foreign debt and direct foreign investment on economic growth in five ASEAN member countries. The study highlights the importance of managing foreign debt and strategies to attract direct foreign investment for ASEAN countries. Through appropriate policies, these countries can achieve sustainable and beneficial economic growth for their people.