ARE FOREIGN DIRECT INVESTMENT IN INDONESIA INFLUENCED BY POLITICAL RISK? A PANEL REGRESSION APPROACH

Foreign direct investment was needed to encourage a country's economic growth. Foreign direct investment did not only function as an engine of development, but also became a picture of economic openness. Theoretical developments showed that foreign direct investment was not only influenced by macroeconomic variables, but also institutional and political. By using six political risk indicators from the World Bank, this study aimed to look at the influence of political risk and macroeconomic variables on investment in Indonesia. The data used were secondary data from 2004 to 2017 and used the panel data regression model. Political risk indicator data showed that Indonesia's political indicators were getting better from year to year. While the panel data regression results showed that overall political risk did not have a significant effect, the effectiveness of bureaucracy had a significant influence on foreign direct investment in Indonesia. \nKeywords: Foreign Direct Investment, Political Risk, Panel Regression, Indonesia