Insights into the Uneven Impact of Foreign Direct Investment, Sector-Specific Official Development Assistance, and Remittances on Human Development in ASEAN-9: Evidence from Panel Data Models

Abstract

ASEAN's motto of "One Vision, One Identity, One Community" aims for peace, stability, market integration, and inclusivity. However, development disparities persist among member countries. This research analyzed the impact of foreign capital flows on the Human Development Index (HDI) in ASEAN-9 from 2002 to 2021, using panel data regression models and data from reputable international sources. It also highlights the data characteristics and variations in HDI across member countries. Results show that while Foreign Direct Investment (FDI) and remittances contribute significantly to capital inflows, only FDI affects HDI. Despite its smaller share, Official Development Assistance (ODA) significantly influences HDI. However, the effects of ODA vary across sectors, with grants for social infrastructure and manufacturing, as well as ODA loans for manufacturing and other sectors, positively impacting HDI, while grants for economic infrastructure and other sectors negatively affect HDI. This highlights the complex relationship between foreign capital flows and HDI in ASEAN-9. Targeted ODA allocation and policy considerations are crucial for regional human development, even if the direct impact of remittances on HDI is limited.