Published date:Feb 19 2025

Journal Title: KnE Social Sciences

Issue title: The International Conference on Economic and Sustainable Development (ICESIDE)

Pages:14 - 27

DOI: 10.18502/kss.v10i5.18091

Alifah Rokhmah Idialisalifah.ridialis@trunojoyo.ac.idDepartment of Economics, Economic and Business Faculty, Universitas Trunojoyo Madura

Riesta Firsty AnggrainiDepartment of Economics, Economic and Business Faculty, Universitas Trunojoyo Madura

Unstable economic and political conditions can increase uncertainty and potential foreign investment losses. According to Marsh (2019), ASEAN-7 countries (Indonesia, Myanmar, Vietnam, Thailand, Malaysia, Philippines, and Cambodia) have high and medium economic and political risks in ASEAN. An in-depth analysis of foreign investment that is assumed to be correlated with economic and political risk is required. The research methodology used is the Panel Corrected Standard Error (PCSE) as the analysis technique. The results show that economic risk with trade openness indicator positively and significantly affects foreign direct investment. This means that when ASEAN-7 countries have the ability to increase their international trade activities, the flow of FDI will increase. Political risk with political stability indicator has a positive and significant effect on Foreign Direct Investment. This means that good political stability conditions in ASEAN-7 will increase FDI flows to ASEAN-7 countries. The corruption perception index negatively and significantly affects the foreign direct investment. This means that the more corrupt the countries in ASEAN-7, the higher the FDI flow to ASEAN-7 countries.

Keywords: economic risk, political risk, foreign direct investment, panel corrected standard error (PCSE), ASEAN-7

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