proceeding of stie widya gama lumajang

i

Proceeding of STIE Widya Gama Lumajang

Auditorium Semeru, 31 Agustus 2019

Prosiding Seminar Nasional dan Call For Paper "Indonesian Conference On Social Science

and Humanities”

ii

KATA PENGANTAR

Assalamu’alaikum Wr. Wb.

Alhamdulillahirabbil’alamin. Segala puji dan syukur kami panjatkan ke hadirat Allah SWT yang

telah melimpahkan rahmat dan hidayah-Nya sehingga prosiding ini dapat terselesaikan dengan baik. Prosiding ini berisi kumpulan makalah dari berbagai daerah di Indonesia yang telah dipresentasikan dan didiskusikan dalam Progress Conference and Call For Paper yang diadakan oleh STIE Widya Gama Lumajang pada Sabtu, 31 Agustus 2019 dengan Seminar yang mengangkat tema " Indonesian Conference On Social Science and Humanities”.

Prosiding ini disusun untuk mendokumentasikan gagasan dan hasil penelitian terkait isu-isu keilmuan social science dan humanities. Selain itu, diharapkan prosiding ini dapat memberikan wawasan tentang perkembangan keilmuan di bidang ekonomi,akuntansi, bisnis dan social sebagai upaya-upaya yang terus dilakukan demi terwujudnya pendidikan berkemajuan. Dengan demikian, seluruh pihak yang terlibat dalam dunia pendidikan dapat terus termotivasi dan bersinergi untuk berperan aktif membangun pendidikan Indonesia.

Dalam penyelesaian prosiding ini, kami menyadari bahwa dalam proses penyelesaiaannya tidak terlepas dari bantuan berbagai pihak. Untuk itu pada kesempatan ini panitia menyampaikan ucapan terima kasih dan memberikan penghargaan setinggi-tingginya, kepada :

1. Ketua STIE Widya Gama Lumajang Ratna Wijayanti Daniar Paramita, S.E., M.M yang telah memberikan dukungan dan memfasilitasi dalam kegiatan ini.

2. Seluruh pembicara tamu, Dr Taufiqullah, M.Hum 3. Bapak/Ibu seluruh dosen, guru dan pejabat instansi penyumbang artikel hasil penelitian

dan pemikiran ilmiahnya dalam kegiatan seminar ini. 4. Bapak/Ibu/Mahasiswa seluruh panitia yang telah meluangkan waktu, tenaga, serta

pemikiran demi kesuksesan acara ini. Kami menyadari bahwa prosiding ini tentu saja tidak luput dari kekurangan, untuk itu segala

saran dan kritik kami harapkan demi perbaikan prosiding pada terbitan tahun yang akan datang. Akhirnya kami berharap prosiding ini dapat bermanfaat bagi seluruh pihak terkait.

Wassalamualaikum Wr. Wb.

Lumajang, 31 Agustus 2019 Ketua Panitia Progress Conference

Noviansyah Rizal, S.E., M.M., Ak., CA


and Humanities”

iii

Pembicara 1 Dr.Taufiqullah, M.Hum

Dosen FKIP UPS dan Reviewer Penelitian Bersertifikasi ISO 17024

Penyelenggara Ratna Wijayanti Daniar Paramita, S.E., M.M.

Ketua STIE Widya Gama Lumajang


and Humanities”

viii

Susunan Redaksi

Progress Conference and Call For Paper

Chief Editor Fetri Setyo Liyundira - STIE Widya Gama Lumajang

Editorial Team

Deni Juliasari – STIE Widya Gama Lumajang Widi Listiyas Rini – STIE Widya Gama Lumajang

Editorial Board

Noviansyah Rizal – STIE Widya Gama Lumajang Khoirul Ifa – STIE Mandala Lumajang

Andi Mursidi – STKIP Singkawang

Reviewer Meithiana Indrasari – Universitas Dr. Soetomo

Wahyuning Murniati – STIE Widya Gama Lumajang Moh. Hudi Setyobakti – STIE Widya Gama Lumajang

Jesi Irwanto – STIE Widya Gama Lumajang Anisatul Fauziyah – STIE Widya Gama Lumajang


and Humanities”

viii

Daftar Isi

Progress Conference And Call For Paper

Cover ……………………………………………………………………………………………..…………………… I

Kata Pengantar ………………………………………………………………………………………………………. II

Pembicara Seminar Nasional ……………………………………………………………………………………… III

Susunan Redaksi……………………………………………………………………………………………………. IV

Daftar Isi………………………………………………………………………………………………………………. V

TB-00002 Moh. Hudi Setyobakti, Wahyuning Murniati

Dimensions of Service Quality in Society Satisfaction: a Study of Village Government in Lumajang Regency

1-7

TB-00004 Naimah Naimah, Ratnaningsih Ratnaningsih, Ning Mukti Indrayani

Revitalization Efforts And Re-Creation Through The Arts Cultural Partners Lumajang Cio Indonesian Arts Culture

8-15

TB-00006 Naimah Naimah, Soesilo Soesilo

District Government Responsibility of Lumajang In Efforts To Achieve Securitysnacks Children In School

16-22

TB-00008 Shanti Akhiriani, Naimah Naimah

PKM Snack BAPER: Efforts To Increase The Economic Independence Of Yatim-Dhuafa Guardians In The Rpi Lumajang Foundation

23-32

TB-00009 Riza Bahtiar Sulistyan, Emmy Ermawati

Retention Management Approaches for Encouraging Satisfaction and Commitment to Retaining Employees

33-43

TB-00010 Neny Tri Indrianasari, Khoirul Ifa

o Risk Profile Analysis, Earnings and Capital Assessment Banking Soundness

44-54

TB-00011 Nawangsih Nawangsih, Kurniawan Yunus, Khoirul Ifa

Decision Making: Strategy In Choosing Coffee Shops

55-61

TB-00012 Muhamad Taufiq, Mimin Yatminiwati

Analysis Of Village Financial Management Based On Regulation Of The Minister Of Home Affairs No. 113, 2014

62-67

TB-00013 Fauziyah Fauziyah, Muhammad Rijalus Sholihin

E-Commerce Organization Account Analysis As An Effort To Boost The Sales Volume Of UMKM Products

68-78

TB-00014 Khoirul Ifa, Neny Tri Indrianasari, Nawangsih Nawangsih

Foreign Direct Investment and Economic Growth in ASEAN 5

79-90

TB-00015 Noviansyah Rizal, Mimin Yatminiwati

Green Accounting Disclosures In Efforts To Improve Environmental Performance And Financial Performance

91-95

TB-00016 Abdul Majid, M. Wimbo Wiyono, Agus Salim

Influence Profitability and Gain Flattening Against Ownership Structure(On Mining Companies Listed on BEI Year 2015-2017)

96-102

TB-00017 Ajeng Khuril Aini, Sochib Sochib, Mimin Yatminiwati

Effect of Dividend Policy, Investment Decisions, And Against Company Size Value Manufacturing Company in Indonesia Stock Exchange

103-109

TB-00018

Anita Khotiningrum, Noviansyah Rizal, M. Yahdi

Treatment, Presentation, and Disclosure Of Virtue Of Funds In The District Lumajang Baznas

110-114

http://proceedings.stiewidyagamalumajang.ac.id/index.php/progress/article/view/213































and Humanities”

viii

TB-00019

Wulan Ayu Ndari, Noviansyah Rizal

Optimization Of Waste Collection Levy To Improve District PAD Lumajang

115-120

TB-00020 Ayus Qomariyah

Effect Of Sanctions Against Taxes And Tax Amnesty Behavior Of The Individual Taxpayer(Study In KP2KP Lumajang)

121-127

TB-00021 Dimas Bagus Prasetyo

As the Budget Control Production Costs At Mustika Karya Jaya Sakti CV

128-141

TB-00022 Dewi Cahyani Syaputri

Operating Activities Cash Flow Effect on The Performance Of The Market(Study In Industrial Goods Manufacturing Sector Consumption Listed in BEI 2016-2017)

142-151

TB-00023 Choirotul Laili, Ratna Wijayanti Daniar Paramita

Effect of Its Size, Growth And Profitability of Company Capital Structure of Listed Companies In BEI Year 2015-2017

152-157

TB-00024 Dedik Prasetyo, Emmy Ermawati, Neny Tri Indrianasari

Calculation of Production Cost Analysis Using Full Costing to Set Price on Flower UD Jaya

158-164

TB-00025 Deny Arif Eka Putra

Effect of Third Party Funds, CAR, LDR and NPL on Performance The Banking Companies Listed in Indonesia Stock Exchange (IDX)

165-173

TB-00026 Dian Eka Puspita, Noviansyah Rizal, Moh. Hudi Setyobakti

Evaluation Of Use Of Application SISKEUDES (Financial System Desa) Quality Improvement Efforts In Village Year 2018 Financial Accountability(A Case Study Of Rural Nogosari Rowokangkung Subdistrict Lumajang)

174-177

TB-00027 Rini Dina Abna, Wimbo Wiyono, Ratna Wijayanti Daniar Paramita

Analysis Of Application Of Target Costing Assessment Of Efficiency As A Tool Of Production in UD Kembang Jaya

178-185

TB-00028 Fenny Eka Ellyta Sari, Wimbo Wiyono, Agus Salim

Influence Profitability, Liquidity Against Timeliness of Financial Reporting In Manufacturing Vendor Listed in Indonesia Stock Exchange

186-191

TB-00029 Ferric Yuanggi, Wimbo Wiyono, Emmy Ermawati

Room Rental Price Determination Method Using Activity Based Costing System In Lumajang Hotel Gajah Mada

192-196

TB-00030 Grima Eka Wahyuningtias

Payroll Accounting System Application Analysis And Wages In Sarana CV Food

197-202

TB-00031 Icha Dwi Erlita

Perception, Presentation and Disclosure of Non-Halal Fund Alms Houses Lumajang in East Java

203-205

TB-00032 Ilfi Roudotul Jannah

Accounting Information System Credit To Customers Barupada Jalin Matra District Village Sentul Sumbersuko Lumajang

206-209

TB-00033 Imro'atus Sholihah, M. Yahdi, Moh. Hudi Setyobakti

Analysis Of Financial Management Accountability Village(Case Study Bodang Village Of Padang District Lumajang)

210-215









































and Humanities”

viii

TB-00034 Nani Ramadhani Nurhidayati, Ratna Wijayanti Daniar Paramita, Muchamad Taufiq

Influence Policy Loans, Investment Policy And Dividend Policy On Value Of Companies Listed In Indonesia Stock Exchange In 206 - 2017

216-222

TB-00035 Ade Mahendra, Riza Bahtiar Sulistyan, Anisatul Fauziah

Influence of Personality and Learning Entrepreneurship Student Entrepreneur Of Interest STIE Widya Gama Lumajang

210-218

TB-00036 Dwi Agustin Asmara, Nawangsih Nawangsih, Ninik Lukiana

Marketing Mix Effect On Consumer Decision To Choose Pegadaian Shari'a(Case Study On Customer Pt Pawnshop Sharia Branch Jember)

219-230

TB-00037 Akhmad Dhimas Prayogo, Hartono Hartono, Riza Bahtiar Sulistyan

Role Analysis Work Motivation, Work Discipline and Performance Against Teacher Training at SMP Negeri 2 Klakah

231-240

TB-00038 Alfian Arif Rizaldy, Noer Aisha Balian

Effect Of Leadership Style, Rotation Work And Work Environment On The Performance Of Employees In District Bappeda Lumajang

241-250

TB-00039 Andiyanto Andiyanto, M. Ato'illah, Anisatul Fauziah

Price And Brand Image Analysis Of Interest In Buying Re Madjank Store Brand Products

251-254

TB-00040 Anisa Arifianda, Nawangsih Nawangsih, Jessi Irwanto

Effect of Discipline, Work Stress, And Compensation Against Employee Performance At Sumbersari Puskesmas Subdistrict Lumajang Rowokangkung

255-260

TB-00041 Arif Rakhman Hakim, Fauzan Muttaqien, Kusnanto Darmawan

Impact of Transformational Leadership, Motivation And Performance Against Employee Compensation Office of Population and Civil Registration Lumajang

261-270

TB-00042 Bidin Abdillah, Ainun Jariah, M. Taufik

Role of People, Process, Physical Evidance Rice Warehouse Customer Satisfaction UD. Two Men Lumajang

271-276

TB-00043 Diah Anggraeni Prahesti, Tri Palupi Robustin, Hartono Hartono

Effect of Product Attribute, Satisfaction and Trust in Customer Loyalty Oriflame products(Case Study at STIE student Widya Gama Lumajang)

277-283

TB-00044 Dibyo Erfanto, Hesti Budiwati, Kasno Kasno

Competence and Motivation Influence on Performance of State Vocational Teachers Senduro In Lumajang

284-289

TB-00045 Eko Romadhoni Arisona, M. Taufik, Jesi Irwanto

Relations Service Quality, price, and location on Customer Loyalty(Studies in Silk Screen Printing Mainstay Tekung, Lumajang)

290-295

TB-00046 Eva Yulianti, M. Taufik, Hesti Budiwati

The Effect Of Compensation And Competence On Employee Performance(Case Study Of PT. Serbuk Jaya Abadi In Kebon Arang District, Lumajang District)

296-302

TB-00047 Fionaris Tilasenda, Hesti Budiwati, Anisatul Fauziah

The Effect Of Celebrity Endorse And Brand Images On Purchase Decisions(Case Study On Private College Students In Oppo Handphone Buyers)

303-307

TB-00048 Heru Mahendra, M. Taufik, Noer Aisyah Barlian

Analysis Of The Effect Of Promotion, Price, And Satisfaction On Consumer Loyalty Cv. Andaku In Lumajang District

308-312











































and Humanities”

viii

TB-00049

Imam Ghozali, Ainun Jariah, Jesi Irwanto

Role of Product Innovation, Quality of Service and Promotion of influence on purchase decision on Omahmu Cafe Lumajang

313-320

TB-00050 Intan Cahyaning Diniya, Zainul Hidayat, Tri Palupi Robustin

Effect Of Price And Quality Products On The Decision To Purchase Products In Paris Sophie Lumajang(Case Study On The Students STIE Widya Lumajang Gama)

321-326

TB-00051 Jannat Firdaus, Riza Bahtiar Sulistyan, Kasno Kasno

Creating Employee Satisfaction Through Support Organizations(Case Study PT. Wana Lights Nugraha Senduro Lumajang)

327-332

TB-00052 Khoirul Anwar, Hartono Hartono, Fauzan Muttaqien

Implementation of Promotion and Quality Services To Attract Consumer Interests Buy Coffee Shops City Subdistrict Lumajang

333-339

TB-00053 Linda Ayu Utami Ningdita, Sukma Irdiana, Anisatul Fauziah

Performance Optimization Of Human Resources In The Department Of Population And Civil Registry District Lumajang

340-346

TB-00054 Mahirotul Lailiyah, Sukma Irdiana, Jesi Irwanto

Impact Car Free Day For Entrepreneurship Interests Street Vendors In Square Lumajang

347-354

TB-00055 Nurul Novika Hasanah, Sukma Irdiana, Ninik Lukiana

Formation Of Portfolio Analysis Optimal Model With A Single Index(Studies in IDX30 Index Period 2016-2018)

355-364

TB-00056 Zamrotul Hasanah, Riza Bahtiar Sulistyan, Ainun Jariah

Increasing Organizational Performance Through Leadership Transfromasional In Tempeh District Office Lumajang

366-371

TB-00057 Nuril Zuhriyah

Direct Selling and Promotion Strategies in Improving Sales Spare Parts and spare parts Motor UD Wodjo Motor Lumajang

372-379

TB-00058 Sochib Sochib, Moh. Hudi Setyobakti

Influence of Earnings Management on Stock Prices with Good Corporate Governance as an Intervening Variable

380-390



























E-ISSN : 2622-304X, P-ISSN : 2622-3031 Available online at:

http://proceedings.stiewidyagamalumajang.ac.id/index.php/progress

Progress Conference Volume 2 Number 2, August 2019 | 79

Foreign Direct Investment and Economic Growth in ASEAN 5 Khoirul Ifa

1, Neny Tri Indrianasari

2, Nawangsih

3

Departement of Accounting, STIE Widya Gama Lumajang12

Departement of Management, STIE Widya Gama Lumajang2

[email protected]

Abstract

In ASEAN 5 countries namely Indonesia, Vietnam, Thailand, the Philippines and Malaysia have

almost the same culture, in terms of social and economic aspects, the 5 countries have links between

one country and another, so it is possible that the flow of foreign investment has a close relationship

with economic growth. This study aims to determine the relationship between Foreign Direct

Investment (FDI) and Economic Growth in ASEAN 5 Periods 1986-2017. This research is a two-

way relationship research between the independent variable and the dependent variable that are

reciprocal. The type of data used is the 1981-2017 time series data. Sources of data obtained from

the World Bank. Data analysis technique uses Granger Causality analysis to see the 2-way

relationship, and VAR (Vector Auto Regression) analysis by looking at the implus response factor

for non-stationary data using VECM (Vector Error Correction Model) analysis. The results of the

study state that based on the Granger Causality test there is no relationship between FDI and GDP

and vice versa between GDP and FDI. Based on the VECM test there is a relationship between FDI

and GDP.

Keywords: FDI, Economic Growth, VAR and VECM

INTRODUCTION

Economic growth is believed to be a measure of the success of a country, because it is a process of

increasing output of goods and services that will increase national income. Economic growth is

supported by an increase in various other variables such as investment and international trade.

The factors driving economic growth according to Todaro, 2003 are manifested in three main

components, first, capital accumulation which includes all forms and types of new investments that

are invested in land, physical equipment, and human capital. Second, population growth will further

increase the number of the workforce. Thirdly technological advances which in the simplest sense

occur because of the discovery of new ways or improvements to old ways. In this case investment is

one of the drivers of economic growth, the statement is also supported by Lamsiraroj and

Ulubasoglu, 2015 which shows there is a positive influence between FDI and economic growth in

140 countries in the period 1970-2009, the most powerful influence is in developing countries,

whereas according to Almfraji and Almsafir, 2014 that in the long run there is a relationship

between FDI and Economic Growth in the State of Qatar, in addition there is a positive effect of

FDI on economic growth in the country of Qatar.

In essence, the average economic growth varies from country to country. In several Asian countries,

such as China, Hong Kong, Singapore, South Korea, and Taiwan, the average real income of the

population has increased by around 6% per year in the last fifty years, (Mankiw, 2014: 39). In

countries that are members of ASEAN the rate of economic growth differs between countries even

though they are almost culturally similar.




Figure 1.1. Economic Growth in 6 ASEAN Countries Quarter I-III 2017

Source: Tradingeconomics, 2017

A number of ASEAN countries experienced accelerated economic growth throughout 2017. In the

third quarter the economies of Vietnam and the Philippines accelerated to beat China, but the

Indonesian economy stagnated in the first, second and third quarters.

Vietnam's economic growth reached 7.46% in the third quarter, bigger in the first quarter and

second quarter of 5.15% and 6.28%, compared to other ASEAN countries the highest economic

growth in Vietnam, the condition is caused by the main export factors from industry foreign

property.

Economic growth supported by investment is considered to increase the productivity of a country or

region. Investment is the purchase of goods that will later be used to produce more goods and

services (Mankiw, 2006: 12). FDI is also a supporter of a country's economic growth. There is

granger causality between FDI and GDP (Tekin, 2012; Lamsiraroj and Ulubasoglu, 2015; Ibrahiem,

2015; Khatun and Ahamad, 2015; Khatun and Ahamad, 2015; Abdouli and Hammami, 2016).

Based on the introduction above, the formulation of the problem of this research is whether there is

a relationship between Foreign Direct Investment (FDI) and Economic Growth (GDP) and vice

versa whether there is a relationship between Economic Growth (GDP) and Foreign Direct

Investment (FDI) in ASEAN 5 period 1981 -2017?

Based on the background and the formulation of the problem, the purpose of this study is to

determine the relationship between variables FDI and Economic Growth and vice versa

The urgency of this research is to develop a new model related to the causality of the relationship

between FDI and economic growth in ASEAN countries 5.

METHOD

This research is a two-way relationship between the independent variable and the dependent

variable that are reciprocal, meaning that one variable can be the cause and also the effect on other

variables, and vice versa.

The purpose of this research is explanatory research (explanatory research) where explanatory

research is a type of research that explains the causal relationship between one variable with other

variables through hypothesis testing.




The object of this research is ASEAN 5 Countries, namely Indonesia, Malaysia, Thailand, Vietnam

and the Philippines by looking at the relationship between Foreign Direct Investment and Economic

Growth. The reason for choosing the object is because the characteristics and socio-cultural culture

are almost the same, besides this there is a linkage of the economic sector between one country and

another.

Data collection techniques use documentation studies by collecting secondary data, taking notes,

and processing data related to this research. According to Azwar (2001: 91) Secondary data is

usually in the form of documentation data or report data that has been available. The data used

include: Foreign Direct Investment (FDI), exports, government spending and Economic Growth

(GDP). While the type of data used is time series data in 1981-2017. Sources of data obtained from

the World Bank.

The data analysis technique of this study used the VAR and VECM models. According to Greene,

2002 The shape of the VAR equation has changed a lot but not only has the shape of the equation

changed, the variables in the equation have changed too, VAR has not only shaped a number of

structural models but also aims to analyze and forecast macroeconomic activity and explore the

effects of changes in policy and external stimulus on the economy. In addition to forecasting, VAR

has been used for two main functions, testing Granger causality and studying the effects of policy

through implus response factors and variance decomposition.

According to Gujarati (1995) there are several advantages of the VAR method including: (1) Simple

method; no need to worry about determining which variables are endogenous and which are

exogenous. All variables in VAR are endogenous. (2) Simple estimation; that is, the OLS method

can be applied to each equation separately. (3) Forcasting with this method is in many cases better

than several models of simultaneous equations.

Vector Error Correction Model (VECM) is the development of a VAR model for deeper analysis if

we want to consider the existence of non-stationary data behavior (Ekananda, 2016).

The main differences in cointegration equations in VECM include: The resulting cointegration

equation is a form of restriction from the VAR model, where the VAR model assumes that there are

dynamic relationships of several interrelated variables (vectors). 2. The resulting cointegration

equation is obtained from the johansen method, where cointegration results from the measurement

of the eigenvalues of several variable combinations. 3. The composition of the cointegration

equation is determined by the order of the variables in the VECM model. 4. Cointegration equation

arrangement shows the relationship between equations and between variables simultaneously

dynamically. 5. The composition of the cointegration equation shows the relationship between

equations and between variables simultaneously dynamically. 6. The compilation of the

cointegration equation must begin with the preparation of the VECM in accordance with economic

theory at the beginning of the study. The cointegration equation that is formed is a consequence of

the compilation of theories and VECM models that were prepared earlier (Ekananda, 2016).

RESULTS AND DISCUSSION

Economic growth in the five ASEAN countries has fluctuated. Since 1981-1996 the rate of

economic growth in ASEAN 5 countries experienced positive growth, but since 1997-1998 in

several ASEAN countries especially Indonesia, Malaysia, the Philippines, Thailand and Vietnam

experienced negative economic growth, this is due to the financial crisis that occurred in some

Asian countries, the financial crisis began in Thailand because of the fall in the value of the Bath




currency which eventually impacted on several other Asian countries. The impact of the 1997-1998

economic crisis was most felt by the Indonesian state, this was seen in conditions of growth that

dropped dramatically with a negative growth value compared to other ASEAN countries namely

Malaysia, the Philippines, Thailand and Vietnam.

Figure 5.1 Economic Growth in ASEAN Countries 5

Source: World Bank, 2017

In 1999 economic growth showed a stable development compared to previous years, the movement

of economic growth had grown positively in ASEAN 5 countries. However, economic growth

weakened again after the global crisis in 2008. The global economic crisis that occurred in 2008

actually started in a crisis the United States economy which then spread to other countries around

the world, including ASEAN countries such as Malaysia, Thailand, the Philippines, Vietnam and

Indonesia. The global economic crisis in 2009 began in the United States due to the impetus for

consumption (propincity to consume) . The American people live in consumerism outside the limits

of the ability of the income it receives. They live in debt, shopping with a credit card, and housing

loans. As a result, financial institutions that provide credit are bankrupt because of loss of liquidity,

because the company's loans to housing creditors have been mortgaged to lending institutions. In

the end, the companies must go bankrupt because they cannot pay all their debts which are due at

the same time. The collapse of the financial companies resulted in the Wall Street stock market

becoming powerless, large companies unable to survive. The 5 ASEAN countries that were most

affected by the 2009 global economic crisis were Malaysia and Thailand. Until 2017 economic

growth in ASEAN 5 countries experienced a positive growth rate despite fluctuating developments.

The development of foreign capital inflows in several ASEAN 5 countries is different, since 1981-

1996 FDI conditions experienced rapid growth, especially in Vietnam and Malaysia, as we know

Vietnam is a communist country that is most targeted by several foreign investors, besides because

of the success stories of giant shoe companies such as adidas and nike, Vietnam is also famous for

its high technology proven that Intel has been investing in the country since 2010, followed by LG

Group and Samsung, which are reaping successful investing in Vietnam.

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Figure 5.2 Foreign Direct Investment in ASEAN Countries 5


The growth of FDI that is most concerned about the Indonesian state in 1997-1998, the impact of

the monetary crisis is strongly felt in Indonesia, this is characterized by the weakening of the rupiah

against the US dollar which led to Indonesia's rich people, both native and ethnic Chinese officials,

since then get ready to save his assets abroad to anticipate domestic political instability. Since the

beginning of December 1997 until the beginning of May 1998 there has been a massive capital

flight out of the country due to political instability such as the issue of the President's illness and

elections (World Bank, 1998: 1.4, 1.10).

Trade openness is one measure of a country's readiness to establish product specialization in the

field of trade, according to the trading theory of Adam Smith and David Ricardo, each country has

comparative advantages and advantages so that each country will certainly specialize.

Figure 5.3 below shows that Vietnam and Malaysia have a high value of trade openness compared

to other ASEAN 5 countries. Aside from the two countries being the destination of foreign

investors, the country is a country with faster economic growth.

Figure 5.3 Trade Openness in ASEAN Countries 5


Based on the estimated results of the chow test from Table 5.4 shows that the Chi-Square

probability value (0.4457) is greater than the critical probability (α = 5% or 0.05). This means that

the null hypothesis (H0) is accepted and H1 is rejected. Thus it is known that the model is not good

and not appropriate to use the Fixed Effect model panel regression analysis. Testing the

determination of the best model is continued by using the Hausman Test.




Table 5.1. PLS, FEM and REM Model Testing Results

Variabel Panel Least Square Fixed Effect Model Random Effect Model

Trade -0.018870

(0.0070)*

-0.027422

(0.0417) *

-0.018870

(0.0072)*

FDI 1.059017

(0.0005)*

0.998433

(0.0000)*

1.059017

(0.0000)*

Adjusted R-square 0.227080 0.223281 0.227080

F-statistic 0.000002 0.000018 0.000002

Uji Chow 1.616356

Prob. 0.4457

Uji Hausman 1.545142

Prob 0.4618

LM 29.14296

Prob. 0.0000*

Source: Results of Eviews 7

Based on the thirsty test in table 5.1 it is known that the Chi-Square probability value (0.4618) is

greater than the critical probability (α = 5% or 0.05). This means that the null hypothesis (H0) is

accepted and H1 is rejected. Thus it is known that the model is not good and not right to use panel

analysis of random effects regression models. Testing the determination of the best model is

continued by using the LM Test.

Based on the LM test in table 5.1 it is known that the Chi-Square probability (0,000) is smaller than

the critical probability (α = 5% or 0.05). This means that the null hypothesis (H0) is rejected and H1

is accepted. Thus it is known that the model has been good and appropriate using random effects

model panel regression analysis.

Stationarity test is used to see whether the research variable has a unit root or does not have a unit

root. Stationary data is not found unit roots while non stationary data has unit roots. Unit root

testing uses Augmented dickey fuller test, stationary data must have a t-statistic value at the ADF

greater than critical values.

Based on the unit root test results in table 5.2 below shows that the GDP, FDI and TRADE

variables in the study are not stationary on the data level, the probability value is still greater than

the critical value α = 0.05. The output results indicate that the data is not stationary at the data level

level.

Table 5.2. Unit Root Test Results

Levin, Lin, Chu (LLC) Tingkat GDP TRADE FDI

Level 0.0002* 0.1002 0.2628

1st Difference 0.0007* 0.0071* 0.0000*

2nd Difference 0.0000* 0.0000* 0.0000*

Im Pesaran, Shin (IPS) Tingkat GDP TRADE FDI

Level 0.0002* 0.7722 0.743

1st Difference 0.0000* 0.0000* 0.0000*

2nd Difference 0.0000* 0.0000* 0.0000*

Fisher- Augment Dickey Fuller (F-ADF) Tingkat GDP TRADE FDI

Level 0.0008* 0.8715 0.1033

1st Difference 0.0000* 0.0000* 0.0000*




2nd Difference 0.0000* 0.0000* 0.0000*

Fisher- Phillip Perron (Fisher-PP) Tingkat GDP TRADE FDI

Level 0.0001* 0.5094 0.0417

1st Difference 0.0000* 0.0000* 0.0000*

2nd Difference 0.0000* 0.0000* 0.0000*


While based on unit root test results using the first difference data, it can be seen that the GDP, FDI

and TRADE variables in the study have been stationary because the probability value is smaller

than the critical value α = 0.05 each 0.0000> 0.05. The output results indicate that the data is

stationary.

To see the research data, there is cointegration or not by using the Johansen Cointegration Test. The

following is the Johansen Cointegration Test Results using lag length 1 with fist difference data. If

the Trance Statistics value is greater than the Critical Value then the equation is cointegrated and

vice versa if the Trance Statistics value is smaller than the Critical Value then the equation is not

cointegrated, or the ADF probability value> 5% critical value, in the VAR model the equation used

is the equation used not cointegrated.

Table 5.3. Cointegration Test Results

Prob. ADF Keterangan

0.0001 Terkointegrasi

Source: Processed Eviews 7

The Johansen Cointegration Test results in Table 5.3 above show the cointegration equation with

the ADF Probability value is smaller than the Critical Value (0,0001 <0.05), so in this study using

the Vector Error Correction Model (VECM).

To determine the optimal lag length using the Akaike Information Criterion (AIC) criterion value.

The smallest AIC value used in determining the optimal lag. Based on Table 5.4 below it appears

that the smallest Akaike Information Criterion (AIC) value is located at lag 2, then the optimal lag

length is 2 with an AIC value of 15,62982.

Table 5.4. Optimal Lag Length Determination Results

Lag AIC

0 19.38927

1 15.63257

2 15.6298*

3 15.71951

4 15.89785

5 16.02985

6 16.13867

7 16.17018

8 16.29902

Source: Result Of Eviews 7

Based on the Granger Causality test results in table 5.5 below shows the probability value is greater

than sig 0.005 both GDP, FDI and TRADE variables, meaning that there is no two-way relationship




between GDP against FDI and vice versa, there is no two-way relationship between TRADE to FDI

and vice versa, and there is no two-way TRADE relationship to GDP and vice versa.

Table 5.5. Granger Causality Test Results

Null Hypothesis: Obs

F-

Statistic Prob.

GDP does not Granger Cause FDI 90 1.54031 0.2202

FDI does not Granger Cause GDP 0.51103 0.6017

TRADE does not Granger Cause FDI 90 1.92462 0.1522

FDI does not Granger Cause TRADE 3.07619 0.0513

TRADE does not Granger Cause GDP 90 0.30541 0.7376

GDP does not Granger Cause TRADE 2.86166 0.0627


Because with the Granger Causality test there is no relationship between FDI and GDP and vice

versa, the estimation is continued using the VECM method to see the long-term relationship

between FDI and GDP, TRADE and GDP.

VECM estimates are used to look at past FDI, GDP and TRADE movements, in addition, the VAR

and VECM models are not only structural but aim to analyze and forecast macroeconomic activity

and explore the effects of changes in policy and external stimulus on the economy. Cointegration

test results above that each variable is cointegrated, the model used is the VECM model.

Implied Response Factor (IRF)

Furthermore, to find out the shock (shaking) of each variable against other variables using the

Response Response Factor (IRF). The figure below shows the period in which one period represents

one month. This study uses a period of 24 months, so that the period used in the IRF test is 24

periods. The following is the result of IRF estimation based on the relationship of each variable

(See Figure 5.6)

-1

0

1

2

3

4

2 4 6 8 10 12 14 16 18 20 22 24

Response of GDP to FDI

-1

0

1

2

3

4

2 4 6 8 10 12 14 16 18 20 22 24

Response of GDP to TRADE

Figure 5.6. Implied Response Factor (IRF) Results

In the estimation of the impulse response above, the GDP response to the shock variable FDI shows

that the GDP response to FDI is fluctuating. In the first period to the second period, it was seen that

the GDP variable gave a positive response to FDI of 0.2%. In the next period, the GDP response to

FDI shock began to decline but did not reach the negative direction to the range of 0.02%. The

response will reach a balance point in the 8th period until the 22nd period with a response of

0.001%. This indicates that in the long run there is a positive relationship between GDP and FDI.




Whereas based on the results of impulse response the GDP response to TRADE shock shows that

the GDP response to TRADE shock was positive and increased in the second period which was

0.1%, but in the next period the GDP response to TRADE began to decrease to around 0.001% in

the 3rd period until it reached balance in the 4th to the 24th periods. This indicates that in the long

run there is a positive relationship between GDP and TRADE.

Variance Decomposition (VD)

Analysis of Variance Decomposition (VD) is an analysis to predict the contribution of variable

variance due to changes in certain variables in the VAR model. With this analysis it will be known

how much the contribution of the FDI variable is due to changes in the GDP variable in each period

and how much the contribution of the GDP variable due to changes in the variable FDI in each -

each period and how many contributions the GDP variable is due to changes in the TRADE

variable. VD test is needed to test the estimated error variance of a variable that is how big the

variance before and after shock, both shock originating from oneself and from other variables.

Table 5.6. Output Variance Decomposition (DC) Results Of FDI, GDP and Trade

Period S.E. GDP FDI TRADE

1 3.379452 100 0 0

2 3.545851 99.54319 0.418096 0.038712

3 3.579488 97.68603 0.59725 1.716723

4 3.613679 97.28397 0.602202 2.113825

5 3.621565 96.98103 0.825978 2.192987

6 3.624868 96.85161 0.82853 2.319863

7 3.626995 96.84762 0.832439 2.319943

8 3.627606 96.82782 0.849818 2.322359

9 3.628028 96.80789 0.849762 2.342345

10 3.628233 96.80244 0.852318 2.34524

11 3.62848 96.79078 0.857015 2.3522

12 3.62872 96.77853 0.859404 2.362071

13 3.628946 96.76863 0.862947 2.368421

14 3.629187 96.75778 0.866858 2.375358

15 3.629428 96.7468 0.87026 2.382937

Source: Result Of Eviews 7

Based on the results of Variance Decomposition above, the biggest contribution lies in the GDP

variable. The contribution of the GDP variable continued to decline until the 15th period but

remained positive and was the most dominant among the other variables. In the third period the

contribution of GDP has decreased from 99.54% to 97.68%, although the downward trend in the

contribution of GDP until the 15th period remains positive and the most dominant among the other

variables, up to the 15th period the contribution of GDP amounted to 96.74%

The second biggest contribution in influencing economic growth is the TRADE variable, the

variance on the TRADE variable continues to increase until the end of the period, the highest

increase lies at the end of the 15th period of 2.38%.

The contribution of variance to the FDI variable in influencing economic growth also experienced a

positive trend, starting from the beginning of the period until the end of the period, this is indicated




by the value of the initial variance of the second period of 0.41%, increasing until the end of the

period of 0.87%.

Based on the Granger Causality test results, there is no 2-way relationship between FDI and GDP,

according to the research of Dritsaki and Stiakakis (2014), Temiz and Gokmen (2014). There is no

relationship between FDI and economic growth in 5 ASEAN countries (Indonesia, Malaysia, the

Philippines, Thailand and Vietnam) due to the Granger Causality test to see a 2-way relationship

between FDI and GDP and vice versa then the estimation is continued using the VECM method to

see the long-term relationship between FDI and GDP, TRADE and GDP.

Based on the results of the VECM estimation shows the response of GDP to shock FDI gives a

positive response and increases in the second period and the subsequent period has decreased and

tends to be stable until the end of the 24th period. This indicates in the long run there is a positive

relationship between GDP and FDI, in accordance with Tekin research, 2012; Lamsiraroj and

Ulubasoglu, 2015; Ibrahiem, 2015; Khatun and Ahamad, 2015; Abdouli and Hammami, 2016, De

Mello (1999); Sunde, 2017; Abbes, et al, 2015; Diby, 2014 and Nistor, 2014

Abdouli and Hammami, 2016 explained that international capital flows that entered the country,

especially developing countries as host countries, were able to bring many positive effects both

financial and non-financial. Aside from being a complement to domestic investment, for host

country FDI will bring other positive influences such as accelerating the transmission of modern

technology and developing human capital so that the level of domestic productivity increases and

people's needs can be met, it will clearly increase economic growth in terms of GDP.

When viewed from the characteristics of the 5 ASEAN countries namely Indonesia, Malaysia,

Thailand, Vietnam and the Philippines, the 5 ASEAN countries have almost the same

characteristics, namely both developing countries with the main base of the agricultural sector,

ASEAN 5 countries also have an open economy . In accordance with IRF results when there is a

shock from direct FDI responds to changes in economic growth. this is certainly in accordance with

the opinions of Dornbusch, Fisher and Strartz: 2004 which states economic growth is related to

growth in inputs such as labor and capital, and improvements in technology, Dornbusch, Fisher and

Strartz (2004) also argue that if FDI rises then it will respond quickly by economic growth, this has

happened in the 5 ASEAN countries, the ups and downs of FDI always bring changes to economic

growth.

Whereas based on the results of impulse response the GDP response to TRADE shock shows that

the GDP response to TRADE shock was positive and increased in the second period but in the next

period the GDP response to TRADE began to decline until the 3rd period until it reached a balance

in the 4th period to the 24th period , this indicates that every increase / decrease in GDP will be

responded to with an increase / decrease in TRADE and vice versa every increase / decrease in

TRADE will be responded to by an increase / decrease in GDP, this is in accordance with the

research of Belloumi (2014).

Hoang (2012) argues that with a high trade openness, which causes the trade barrier to decline this

is an opportunity for foreign investors to be able to take advantage of the comparative advantage of

the host country to be able to reexport so that it will increase economic growth in terms of GDP.

In developing countries, especially ASEAN 5 (Indonesia, Vietnam, Malaysia, Thailand and the

Philippines) is unique in product diversification. The basis of the agricultural sector has always

been an advantage, especially in Indonesia, Vietnam and Thailand, by implementing high trade




openness that will cause openness with several other countries so that product specialization can

occur.

The high trade openness policy in ASEAN 5 countries is very conducive to increasing international

trade transactions both through the imposition of tariffs and quotas. Thus the government policy to

implement various international trade policies aimed at increasing the value of trade openness by

opening the widest possible space for trade traffic between countries is the right step for ASEAN

countries to do. This is important because trade openness has an impact which is very large towards

efforts to increase economic growth better and faster. The existence of export and import policies

with a new and productive system is very possible by the governments of ASEAN countries to spur

economic growth and catch up with the developed countries. And the socialization of government

regulations in the field of trade between countries needs to be done, in which the community/

international trade actors to fully understand the regulations issued by the government. This

condition enables business actors to determine the appropriate business sectors to be carried out so

that long-term trade openness can continue to drive economic growth.

CONCLUSION

Based on the Granger Causality test there is no relationship between FDI and GDP and vice versa

between GDP and FDI, there is no relationship between trade openness to GDP and vice versa

between GDP and trade openness. Based on the VECM test there is a relationship between FDI to

GDP and trade options to GDP

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