The Impact of Foreign Direct Investment, Human Capital, Urbanization, and CO2 Emissions on Economic Growth in ASEAN

Abstract

Introduction: This study explores the impact of human resources, foreign direct investment (FDI), urbanization, and CO2 emissions on industrial growth within ASEAN member countries, with a specific focus on the relationship between these factors and GDP.

Objectives: The research aims to identify the influence of human capital, capital inflows, urban development, and CO2 emissions on industrial expansion across ASEAN nations and analyze the causal relationships among these variables.

Methods: Secondary data from the World Bank, spanning 1990 to 2020, was utilized. Industrial expansion served as the dependent variable, while human capital, FDI, urbanization, and CO2 emissions acted as exogenous factors. The analysis employed statistical methods to evaluate both direct impacts and causal relationships.

Results: Human resources and FDI significantly affect GDP in all ASEAN member states, though the intensity of their impact varies across countries. A bidirectional causal relationship exists between human capital and GDP, as well as between FDI and GDP. Urbanization is a crucial determinant of economic growth in Southeast Asia. However, CO2 emissions correlate strongly with industrial expansion, underlining environmental concerns.

Conclusions: The findings highlight the need for ASEAN governments to collaborate on foreign investment policies, prioritize human capital development, and promote sustainable economic practices. Policies focusing on skill enhancement and reducing environmental impact are essential for balanced growth. The study's limitations include data accessibility and the research time frame.