THE ROLE OF DOMESTIC INVESTMENT, FOREIGN INVESTMENT, AND MICRO, SMALL AND MEDIUM-SIZED ENTERPRISES FOR POVERTY REDUCTION IN INDONESIA

Abstract

The Indonesian government is trying to reduce the poverty rate, among others, by encouraging investment sourced from within the country and abroad and increasing the number of micro, small and medium-sized businesses. However, until the end of 2020, the category of poor people in Indonesia is still relatively high, about ten per cent of the total population of Indonesia. This research problem encouraged the authors to examine the role Domestic Investment (DI), Foreign Investment (FI) and Micro, Small, and Medium Enterprises (MSMEs) to reduce poverty in Indonesia. This is also because there has been no previous Indonesian research involving the four variables with data from 2010 to 2020. This study used quantitative methods to determine the impact of DI, FI and MSMEs on the magnitude of poverty. Data combining time series and cross-section data is analyzed using the least square panel method. The results of the study showed that poverty would decrease when there is an increase in domestic investment, an increase in foreign investment, and an increase in the number of micro, small and medium-sized enterprises in Indonesia.