The Impact Of Foreign Direct Investment On Environmental Quality In Some Southeast Asian Countries

Research purpose: The purpose of this research is to investigate the relationship between foreign direct investment (FDI) and environmental quality in Southeast Asian countries from 2000 to 2020, exploring how FDI contributes to environmental changes and CO₂ emissions, while also assessing the roles of economic growth and renewable energy. Research motivation: This study is motivated by the increasing concerns about global climate change and the need for Southeast Asian countries to balance economic development with environmental sustainability. As these countries experience significant FDI inflows, understanding the impact of FDI on environmental quality is crucial for policymakers aiming to promote sustainable development and meet climate change mitigation goals. Research design, approach and method: The research employs a quantitative approach using secondary data from the World Development Indicators for eight ASEAN countries over the period from 2000 to 2020. A panel data regression model is used, with methods such as pooled ordinary least squares (POLS), fixed effects model (FEM) and random effects model (REM) applied. The REM is selected based on model tests and generalized least squares (GLS) is employed to address heteroscedasticity and autocorrelation issues. Main findings: The study finds a positive relationship between FDI and environmental quality in ASEAN countries, indicating that increased FDI contributes to higher emissions. Economic growth is also associated with increased CO₂ emissions, while renewable energy consumption helps reduce emissions. Practical/managerial implications: Policymakers in Southeast Asia are encouraged to focus on attracting green FDI, which emphasizes environmentally friendly technologies and industries. This shift will support sustainable development while minimizing CO₂ emissions. Additionally, promoting renewable energy adoption through government incentives and international cooperation will help mitigate the environmental impact of economic growth and contribute to regional climate change targets.