Role of the foreign bank representative office to encourage foreign direct investment inflow increasement in Indonesia
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Published:
May 31, 2024
Keywords:
Foreign bank, Foreign direct investment, Representative office
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Economy
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Abstract
Offshore loans to Indonesian borrowers are essential for financing large-scale investment projects in Indonesia. This research uses a mixed method between case studies and Spearman Rank correlation tests. The qualitative approach was through interviews to collect research data and continued with a quantitative approach using the Spearman Rank correlation test. The study found that during 2017 and 2022, there are offshore loans were used for project financing with sector similarities with greenfield FDI inflows and international project finance. Also, there were representative offices actively involved in the M&A process of a national bank in 2022 and a Multi finance company in 2020. This research fills a knowledge gap regarding the role of foreign bank representative offices concerning FDI inflows in Indonesia.
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How to Cite
Aryati, Y. and Hendranastiti, N. D. . (2024) “Role of the foreign bank representative office to encourage foreign direct investment inflow increasement in Indonesia”, Jurnal Mantik, 8(1), pp. 303-310. doi: 10.35335/mantik.v8i1.4951.
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Sercu, P. (2009). International Finance: Theory into Practice. Princeton University Press.
Sijabat, R. (2022). The Association of Economic Growth, Foreign Aid, Foreign Direct Investment and Gross Capital Formation in Indonesia: Evidence from the Toda–Yamamoto Approach. 2022, 10(4), 93;, 10(4), 93. https://doi.org/https://doi.org/10.3390/economies10040093
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Tsaurai, K. (2014). Banking sector development and foreign direct investment. A case of Botswana. Risk Governance and Control Financial Markets & Institutions, 4(3), 44–50. https://doi.org/https://doi.org/10.22495/rgcv4i3art5
UNCTAD. (2023). Global foreign direct investment flows over the last 30 years. https://unctad.org/data-visualization/global-foreign-direct-investment-flows-over-last-30-years
Vasa, L., & Angeloska, A. (2020). Foreign direct investment in the Republic of Serbia: Correlation between foreign direct investments and the selected economic variables. Journal of International Studies, 13(1), 170–183. https://doi.org/doi:10.14254/2071-8330.2020/13-1/11
WTO. (2022). Evolution of trade under the WTO: handy statistics. https://www.wto.org/english/res_e/statis_e/trade_evolution_e/evolution_trade_wto_e.htm
Beck, T., Ioannidou, V., & Schäfer, L. (2017). Foreigners vs. Natives: Bank Lending Technologies and Loan Pricing. Management Science 64(8):3792-3820., 64(8), 3792–3820. https://doi.org/https://doi.org/10.1287/mnsc.2016.2706
Cahyadin, M., & Sarmidi, T. (2019). The Impact of Foreign Direct Investment, Labour Force, and External Debt on Economic Growth in Indonesia and Malaysia. Jurnal Ekonomi Malaysia, 53(1), 171–185. https://doi.org/http://dx.doi.org/10.17576/JEM-2019-5301-14
Calzolari, G., Colliard, J.-E., & Lóránth, G. (2018). Multinational Banks and Supranational Supervision. The Review of Financial Studies, 32(8), 2997–3035. https://doi.org/https://doi.org/10.1093/rfs/hhy116
Casella, B., Borga, M., & Wacker, K. M. (2023). Measuring Multinational Production with Foreign Direct Investment Statistics: Recent Trends, Challenges, and Developments. IMF Working Paper No. 2023/113. https://doi.org/http://dx.doi.org/10.5089/9798400245084.001
Demirbag, M., Tatoglu, E., & Glaister, K. W. (2008). Factors affecting perceptions of the choice between acquisition and greenfield entry: The case of Western FDI in an emerging market. Management International Review, Springer, 48(1), 5–38. https://doi.org/10.1007/s11575-008-0002-3
Ge, W., Kim, J.-B., Li, T., & Li, Y. (2016). Offshore operations and bank loan contracting: Evidence from firms that set up subsidiaries in offshore financial centers. Journal of Corporate Finance, Elsevier, 37, 335–355. https://doi.org/10.1016/j.jcorpfin.2016.01.006
Gizaw, G., Kefelegn, H., Minwuye, B., Mengesha, G., & Berihun, D. (2023). Impact of business regulations on foreign direct investment inflows and economic growth in East African countries. Cogent Economics & Finance, 11(1). https://doi.org/https://doi.org/10.1080/23322039.2022.2163874
Hagemejer, J., & Tyrowicz, J. (2012). Is the effect really so large? Firm-level evidence on the role of FDI in a transition economy. Economics of Transition, 20(2), 195–233. https://doi.org/https://doi.org/10.1111/j.1468-0351.2012.00433.x
He, W., Boateng, A., & Ring, P. (2024). Motives, choice of entry mode, and challenges of bank internationalization: Evidence from China. Thunderbird, 66(1), 897–909. https://doi.org/https://doi.org/10.1002/tie.22062
Jiang, M., & Wamuziri, S. (2008). Role of export credit agencies in PFI/PPP projects. Management Procurement and Law, 161(4), 163–169. https://doi.org/DOI:10.1680/mpal.2008.161.4.163
Kurniasih, E. P. (2021). The Effect of Foreign Debt on the Economic Growth. Jurnal Ekonomi Malaysia, 55(3), 125–136. https://doi.org/http://dx.doi.org/10.17576/JEM-2021-5503-09
Lestari, D., Lesmana, D., Yudaruddin, Y. A., & Yudaruddin, R. (2022). The impact of financial development and corruption on foreign direct investment in developing countries. Investment Management and Financial Innovations, 19(2), 211–220. https://doi.org/http://dx.doi.org/10.21511/imfi.19(2).2022.18
Levi, M. D. (2009). International Finance (5th editio). Routledge.
McCauley, R. N., McGuire, P., & Sushko, V. (2015). Global dollar credit: links to US monetary policy and leverage. Economic Policy, 30(82), 187–229.
Meivitawanli, B. (2021). Research on the relationship between provincial foreign direct investment and economic growth: An empirical study in Indonesia. Journal of International Studies, 14(1), 241–257. https://doi.org/doi:10.14254/2071-8330.2021/14-1/17
Mutinelli, M., & Piscitello, L. (2001). Foreign direct investment in the banking sector: the case of Italian banks in the ’90s. International Business Review, Elsevier, 10(6), 661–685. https://doi.org/10.1016/S0969-5931(01)00037-3
Okuyan, H. A. (2014). The Effect of Asymmetric Information on Turkish Banking Sector and Credit Markets. Revue Économique, 65(5), 699–708.
Pegan, G., Vianelli, D., & Luca, P. de. (2020). From Country of Origin Effect to Brand Origin: Challenges in International Direct Marketing Channels. In International Marketing Strategy (pp. 97–117). https://doi.org/10.1007/978-3-030-33588-5_5
Pelinescu, E., & Radulescu, M. (2009). The Impact of Foreign Direct Investment on the Economic Growth and Countries’ Export Potential. Journal for Economic Forecasting, Institute for Economic Forecasting, 4, 153–160.
Qian, L., & Delios, A. (2008). Internalization and experience: Japanese banks’ international expansion, 1980–1998. Journal of International Business Studies, 39(2), 231–248. https://doi.org/doi:10.1057/palgrave.jibs.8400317
Sercu, P. (2009). International Finance: Theory into Practice. Princeton University Press.
Sijabat, R. (2022). The Association of Economic Growth, Foreign Aid, Foreign Direct Investment and Gross Capital Formation in Indonesia: Evidence from the Toda–Yamamoto Approach. 2022, 10(4), 93;, 10(4), 93. https://doi.org/https://doi.org/10.3390/economies10040093
Sinintya, W., & Sebayang, R. (2019). Program OBOR China Diklaim Bisa Tarik Investasi Rp 70 Ribu T. CNBC Indonesia. https://www.cnbcindonesia.com/news/20190708141829-4-83370/program-obor-china-diklaim-bisa-tarik-investasi-rp-70-ribu-t
Tanaya, O., & Suyanto, S. (2022). The Causal Nexus Between Foreign Direct Investment and Economic Growth in Indonesia: An Autoregressive Distributed Lag Bounds Testing Approach. Periodica Polytechnica Social and Management Sciences, 30(1), 57–69. https://doi.org/10.3311/PPso.16799
Tsaurai, K. (2014). Banking sector development and foreign direct investment. A case of Botswana. Risk Governance and Control Financial Markets & Institutions, 4(3), 44–50. https://doi.org/https://doi.org/10.22495/rgcv4i3art5
UNCTAD. (2023). Global foreign direct investment flows over the last 30 years. https://unctad.org/data-visualization/global-foreign-direct-investment-flows-over-last-30-years
Vasa, L., & Angeloska, A. (2020). Foreign direct investment in the Republic of Serbia: Correlation between foreign direct investments and the selected economic variables. Journal of International Studies, 13(1), 170–183. https://doi.org/doi:10.14254/2071-8330.2020/13-1/11
WTO. (2022). Evolution of trade under the WTO: handy statistics. https://www.wto.org/english/res_e/statis_e/trade_evolution_e/evolution_trade_wto_e.htm
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