The Effect of Global Competitiveness and Trade Openness Through the Investment, Tax, and Inflation Towards Economic Growth

18 Pages Posted: 1 Mar 2016

See all articles by Eleonora Sofilda

Eleonora Sofilda

Trisakti University - Sustainable Development Management Program

Dini Hariyanti

Trisakti University - Faculty of Economics

Tri Ismawaty

Trisakti University - Magister Economic Program

Date Written: February 29, 2016

Abstract

Based on the great economic potential and in order to face the challenges of regional cooperation, the leaders of ASEAN countries to make long-term plans the establishment of an ASEAN Community comprising the ASEAN Economic Community (AEC), ASEAN Security Community (ASC) and the ASEAN Socio-cultural Community (ASCC). These three pillars are interrelated to each other and mutually reinforcing objectives for achieving sustainable peace, stability and prosperity in the region equalization.The main objective is to achieve sustainable economic growth and equitable, as well as supporting individual katahanan member countries and regions. Cooperation between ASEAN countries has been strengthened with the spirit of economic and social stability in the region, including through accelerating economic growth, social progress, and culture with regard to equality and partnership that became the foundation for the achievement of a prosperous and peaceful society. To create economic growth, each ASEAN country should conduct an open economy. With the open economy, capital can move from one country to another and investors can buy assets in various countries in an unlimited amount. So will cause a rise in the amount of foreign direct investment into the economy of the country.

In the development of the concept of the MEA with the ultimate goal of economic integration, ASEAN perform this feat with several steps, namely the free flow of goods services investment, skilled labor, and freer flow of capital. Conducted economic cooperation especially in the fields of trade and investment. This can be seen with the start prefential Trade Arrangement (PTA, 1977), the ASEAN Free Trade Area (AFTA, 1992), the ASEAN Framework Agreement on Services (AFAS, 1995) and the ASEAN Investment Area (AIA, 1998), and then fitted with the formulation of sector priority of integration and cooperation in the field of monetary another. All this is a manifestation of the pursuit of MEA.

Measures to strengthen the framework MEA rolling back in 2006, among others with formulations containing the blueprint for achieving the targets and time MEA clearly. Weigh the benefits and interests of ASEAN to face the challenges of global competitiveness, it was decided to accelerate the formation of MEA from 2020 to 2015 (12th ASEAN Summit, January 2007). This decision is also the political will of the leaders of ASEAN by at signing of the ASEAN Charter.

The background of the formation of the AEC in 2015, research was conducted to investigate the factors of economic growth in the ASEAN 6 countries. Indonesia, Singapore, Malaysia, Thailand, Philippines, and Vietnam became the object of research to-six countries. As for the purpose of this study is; (1) To analysisthe effect of the Global Competitiveness of Investment, (2) To analysis the effect of trade openness (TO) on investments, (3) To analysis the effect of investment on economic growth, (4) To analysis the effect of the State Tax Revenue (TaxR) on economic growth, (5) To analysis the effect of inflation on economic growth in the period 2004-2013 6 ASEAN countries.

This study uses a panel model and within a period of 10 years from 2004 to 2013. The variables tested in the form of a variable percentage of competitiveness, trade openness, state tax revenue, investment, and inflation. Regression testing using a panel with two-step method. The first step in which the investment is the dependent variable, while its independent variable is global competitiveness and trade openness. In the second step, the economic growth becomes the dependent variable, and independent variables it is tax revenue, investment, and inflation.

The results showed that 4 out of 5 of these variables significantly. The result is that in the first step, trade openness variable have negative impact and no significant on the investment but significant value of 0.7831 which express the degree of confidence in doubt. Meanwhile, global competitiveness have a significant effect with 95% confidence level. In the second step, where the variables in the test is revenue from taxes, inflation, and investment, all significant variables and according to the theory of economic growth in the ASEAN-6.

Accordingly, in promoting economic growth, it can be suggested as follows: (1) To promote cooperation among ASEAN countries and makes the MEA in December 2015 into an opportunity of economic growth, not the threat of economic growth. (2) Increasing productivity and innovation in order to invest in the country could increase. (3) Increasing investment opportunities in the ASEAN region by running the ASEAN Comprehensive Investment Agreement (ACIA) and improve the supporting facilities investment activities. (4) In terms of taxes, improve tax payment system so that taxpayers easily willing to pay the tax. (5) Strengthening the foundations of economic security to prevent malicious inflation due to global economic turmoil. (6) Making the rules between ASEAN anticipation of unfair competition. (7) The government provides support for their respective countries as a form of commitment in achieving the AEC 2015.

Keywords: Economic Growth, Investment, Trade Openness, the gross domestic product, Global competitiveness,Tax revenue

Suggested Citation

Sofilda, Eleonora and Hariyanti, Dini and Ismawaty, Tri, The Effect of Global Competitiveness and Trade Openness Through the Investment, Tax, and Inflation Towards Economic Growth (February 29, 2016). OIDA International Journal of Sustainable Development, Vol. 09, No. 02, pp. 71-88, 2016, Available at SSRN: https://ssrn.com/abstract=2739888

Eleonora Sofilda (Contact Author)

Trisakti University - Sustainable Development Management Program ( email )

Jl. Kyai Tapa No.1, Grogol, RT.6/RW.16
Tomang, Grogol petamburan, Kota Jakarta Barat
Jakarta, Daerah Khusus Ibukota
Indonesia

Dini Hariyanti

Trisakti University - Faculty of Economics ( email )

Jl. Kyai Tapa No.1, Grogol, RT.6/RW.16
Tomang, Grogol petamburan, Kota Jakarta Barat
Jakarta, Daerah Khusus Ibukota
Indonesia

Tri Ismawaty

Trisakti University - Magister Economic Program ( email )

Jl. Kyai Tapa No.1, Grogol, RT.6/RW.16
Tomang, Grogol petamburan, Kota Jakarta Barat
Jakarta, Daerah Khusus Ibukota
Indonesia

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