| Lao PDR as a newly emerging country,lacking physical,financial and human capital are major problems for development,then reliance on external financial resources as foreign capital is always an answer.The source of financial resources from Foreign Direct Investment(FDI)which is also regarded as a vector of technologies,knowledge,developing country is mainly skills and innovations transfer of developed countries to developing countries.Thus,it come to the question how to attract more FDI as a vehicle for capital and technology.To answer this question,this study aimed to identify the significant determinants of FDI inflows to Lao PDR since last two decades(1990-2017)by relying on inferential statistical approach as well as econometric model.Say,multiple linear regression(OLS)in order to investigate the impact of independent variables on dependent variables(FDI Inward).According to the results of econometric model(OLS)aver the absence of heteroskedasticity and it also substantiates that there is no multicollinearity in the estimated model.Likewise,according to the result of Durbin's alternative test for autocorrelation and Breusch-Godfrey LM test for autocorrelation found that there exists serial correlation(the existence of correlation between residuals).However,such the issue has been solved by re-running Prias-Winsten estimation which the final multiple regression model transformed to be consistent,robust outcome as well as no serial correlation AR(1).The empirical results based on econometric model substantiate that six independent variables are statistical significance and have effects on FDI inward into Laos including labor force,export,gross domestic product,political stability index,ASEAN members and applications of amended investment laws,whilst the rest of explanatory variables such as exchange rate,total natural resource rent and WTO member are not statistical significance and have no impact on FDI inward in Lao PDR.The findings of empirical evidence by using multiple regression found that gross domestic product(GDP),the volume of export and after affiliating a member of ASEAN countries are statistically significant and has positive effect on foreign direct investment influx(FDI)in Lao PDR with 1%and 5%significance level respectively.For export,an increase by 1%of export leads to rise 2.85%of FDI inward with a 99%significant level because Laos is one of the least developed countries(LDCs)and has obtained preferential treatment in term of generalized system of preferences(GSP),which contribute to export products/goods with no tariff and leads to attract more and more foreign investment in each year.whereas,labor force,political stability index,applications of amended investment laws are also statistical significance but have negative influence on foreign direct investment(FDI)in Lao PDR.in other words,an increase by 1%of those independent variables will result to decrease 40.46%,8.54%and 1.15%with a 1%,5%and 1%significance level in succession.Nevertheless,exchange rate(EXCH),total natural resource rent(TNRR)and after the year of affiliating a member of world trade organization(WTO)are not statistical significances and have influence in attracting foreign direct investment(FDI)in Lao PDR.More significantly,the result of econometric model strongly avers that the most important factors determining foreign direct investment(FDI)in Laos are composed of gross domestic product(GDP),export and after being a member of ASEAN countries because affiliating a member of ASEAN is one of the attempt to get access to foreign market that can contribute to open golden opportunity for new foreign investments into the host/home countries,it helps to circulate the mobility of capital across countries.Furthermore,affiliating a member of ASEAN provides a variety of mutual long-term benefits through trade cooperation,investment promotion and economic integration among ASEAN members themselves,with other regions and many parts of the global economic integration. |
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