Foreign Direct Investment and Growth in East Asia: Lessons for Indonesia

Reprint No. 2011:11

Author(s): Robert E. Lipsey and Fredrik SjöholmYear: 2011 Title: Bulletin of Indonesian Economic Studies Volume (No.): 47 (1) Pages: 35–63
Online article (restrictions may apply)

Foreign direct investment (FDI) has been important in the growth and global integration of developing economies. Both Northeast and Southeast Asia, especially the latter, have been part of this development, with increasing inflows of FDI and greater foreign participation in local economies. However, Indonesia has been an outlier within the region. Inflows of FDI have been lower to Indonesia than to other countries, especially in manufacturing, and they have been lower than could be expected from Indonesia’s size, population and other country characteristics. We show that the inflows that have occurred have benefited Indonesia, and use the East Asian experience to identify measures that are likely to increase these flows. A relatively poor business environment, inefficient government institutions, low levels of education and poor infrastructure all seem to be important explanations for the low inflows of FDI to Indonesia.

Lipsey, Robert E. and Fredrik Sjöholm (2011), "Foreign Direct Investment and Growth in East Asia: Lessons for Indonesia". Bulletin of Indonesian Economic Studies 47(1), 35–63.

Fredrik Sjöholm


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In this book Andreas Bergh, Therese Nilsson, IFN and Lund University, and Daniel Waldenström, IFN and Paris School of Economics, France, review the latest research on the relationship between inequality and health. What does inequality mean for our health? Does increasing income inequality affect outcomes such as obesity, life expectancy and subjective well-being?


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