What is the Role of Tourism, Foreign Direct Investment, and Institutions
in Economic Growth in ASEAN?
NELI AIDA
Economic Development, Faculty of Economics and Business,
University of Lampung,
Jalan Dipangga Satya No. 42, Rajabasa, Bandar Lampung,
INDONESIA
WIDIA ANGGI PALUPI
Economic Development, Faculty of Economics and Business,
University of Lampung,
Wisma Cantik Manis, Rajabasa, Rajabasa, Bandar Lampung,
INDONESIA
FAKHRI RIZAL HUSAIN
Economic Development, Faculty of Economics and Business,
University of Lampung,
Puri Sejahtera Blok F No. 3, Hajimena, Natar, Lampung Selatan,
INDONESIA
Abstract: This type of research is quantitative descriptive. This study looks at the impact of tourism, foreign direct
investment, and institutions on economic growth in ASEAN. The scope of this research is 10 ASEAN member
countries from 2003-2021. This study uses five independent variables: international tourism receipts, Feign Direct
Investment (FDI), the rule of law, government effectiveness, and regulatory quality. The dependent variable is
GDP as a proxy for economic growth. The data used is secondary data sourced from the World Bank. The
analytical method used is the panel data regression analysis method. Based on the results of this study, it was found
that international tourism receipts, foreign direct investment, the rule of law, government effectiveness, and
regulatory quality together affected GDP as a proxy for economic growth in ASEAN countries in 2003-2021.
Partially, international tourism receipts, the rule of law, and government effectiveness positively and significantly
affect economic gr. In contrast, FDI and regulatory quality have yet to influence economic growth in ASEAN
countries from 2003-2021.
Key-Words: Economic growth, Tourism, FDI, Institutions
Received: December 29, 2022. Revised: April 19, 2023. Accepted: May 22, 2023. Published: June 7, 2023.
1 Introduction
Economic growth is one of the essential indicators
that each country must consider. Where economic
growth is becoming increasingly important to study,
considering that every country will always try to
increase the financial target as a measure of a
country's success in the long term, the high economic
growth of a nation can indicate an excellent level of
economic performance. However, the level of
financial performance has not yet been seen further to
the level of welfare evenly distributed among its
citizens. However, with the data on economic
growth, we can see how the country's economic
development from time to and can make more
accurate policies for its economic development. The
economic activity uses production factors to produce
output, measured by the domestic Product indicator.
Economic growth will increase if a country's
trade continues to grow. This increase in economic
openness will eventually lead to an area of economic
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integration. ASEAN is one of the areas of economic
integration. ASEAN was formed to strengthen the
economy and society and guarantee security for
efforts to increase economic growth and social and
cultural progress among ASEAN member countries,
[1]. To encourage increased economic growth in the
ASEAN region, ASEAN has formed various
partnerships in the financial field. ASEAN member
countries realize that the best way to cooperate is by
opening up their economies to each other to create
regional economic integration. The ASEAN
Economic Community (AEC) is one of the
collaborations in the economic field that frees trade
flows among ASEAN members. In general, this can
accelerate the pace of trade and investment in
ASEAN countries, which is predicted to boost
economic growth, [2].
The economic growth that has occurred in
ASEAN countries could be more stable. This
situation is different from the initial goal of
establishing ASEAN, which is to increase the
economic growth of each member country.
Especially from 2003-2021, the economic
development of ASEAN member countries is highly
volatile. The following are the economic growth
conditions of ASEAN countries using the Gross
Domestic Product proxy:
Fig. 1: Gross Domestic Product of ASEAN Countries
2003-2021
Source: World Bank (2022)
Based on Figure 1, it can be seen that the condition of
the gross domestic product in ASEAN countries has
fluctuated. However, the gross domestic product of
ASEAN countries has almost always experienced an
increase every year. Indonesia is still the country in
the ASEAN region that has the highest awful
domestic pr. At the same time, Brunei Darussalam,
Lao PDR, and Cambodia have the lowest gross
domestic product in the ASEAN region.
According to Todaro and Smith [3], three factors
affect a country's economic growth: capital
accumulation, population growth, and technological
progress. In addition, according to John Maynard
Keynes in his theory, government intervention is
needed in the economy to reduce the occurrence of
market failures.
The tourism sector plays a vital role in increasing
the economic growth of a country, especially in
reducing the number of unemployed and increasing
the productivity of a counted. The tourism sector
strategies must be utilized for tourism development
as part of national development. Tourism
development has the claim to increase people’s
incomes. An urn can improve people's welfare and
economic growth. The influence of tourism on the
Gross Regional Domestic Product (GRDP) can be
seen from the contribution of tourism services,
revenues, and supporting sectors. The tourism
industry is a service-based sector that is one of the
country's leading strategic industries in terms of
national growth because it can bring in foreign
exchange.
As one of the development sectors that can drive
a country's economic growth, tourism is seen as a
strategic asset to support development in selected
areas with potential tourism. This is because tourism
has three typefaces: financial (source of foreign
money, taxes), social (employment), and cultural.
Furthermore, Samimi et al. concluded that the
tourism sector increases foreign exchange earnings,
creates jobs, and increases the growth of the tourism
industry, so that it can encourage economic growth,
especially by facilitating to development of the
tourism sector.
A country's economic growth can also be seen
from the level of development carried out in a
country. Sources of development financing can come
from within the country and abroad. One of the
sources of funding originating from abroad is in the
form of Foreign Direct Investment. Foreign direct
investment is needed to build an accelerating
economy. This is because foreign investment can
help industrialization by creating wider opportunities.
Foreign investment or foreign capital is provided d
not only through financial and technical assistance,
[4]. The economic growth produced by a country is
part of the successful performance of the government
and its institutions and agencies, [5]. One of the main
requirements for sustainable economic growth is
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controlling good governance, which takes work in
developed and developing countries, [6].
Good governance aims to promote the country's
economic and social growth, positively influencing
people's living standards and reducing poverty,
especially in developing countries. Individuals are
happy if they are governed by impartial, unbiased,
accountable, transparent, prudent institutions and
have a genuine bureaucracy, which makes some
developing countries much better off. This shows that
the economic growth rate will be influenced by the
quality of government, [7].
Good governance of a government can be seen
from the indicators of the rule of law, government
effectiveness, and regulatory quality, [8]. The
practice of law is an essential indicator of creating
good governance. Because the rule of law can limit
the government's authority so that it does not become
corrupt, a government that complies with the law can
carry out its primary duties, powers, and
responsibilities. The rule of law shows that the
government is doing well and well so that, in the end,
it is expected to have a broad impact on economic
progress and increase the pace of economic growth.
Government effectiveness is an indicator that
reflects the quality of government in formulating or
implementing policies. When the formulation and
implementation of government policies are effective,
this will undoubtedly move the wheels of the
economy, which can have an impact on national
income, which will be high and can further increase
economic growth.
Regulatory Quality reflects the government's
capacity to make effective policy decisions to
encourage private sector growth, [8]. This can be
interpreted that when the quality of regulation is
good, it can increase investors' interest in investing
their capital. Then it will have an impact on
increasing employment, as well as rising income.
High income will ultimately increase economic
growth.
The novelty of this research combines the
influence of the tourism sector, foreign investment
sector, and the government sector on economic
growth. ASEAN's economic growth has recently
increased quite drastically. Good natural conditions
and a tropical climate have made the ASEAN region
a destination for foreign and domestic tourists. This
is one of the contributors to state revenue. Apart from
the tourism side, ASEAN countries are also one of
the destinations that are quite promising in investing.
Many factors, such as cheap labor wages and a large
population, support foreign investment. In addition, a
country's institutions have an essential role in the
country's economic growth. The quality of good
governance will create an efficient market
mechanism that will encourage sustainable economic
growth. Government effectiveness in policy-making
and implementation can support improvements in the
financial sector. Besides that, the rule of law factor is
one of the supporters of increasing economic growth.
So this study aims to see the impact of tourism,
foreign direct investment, and institutions on
economic growth in ASEAN.
2 Literature Review
Robert Solow's theory reveals that economic growth
is influenced by four main factors: labor, technology,
capital accumulation, and output, [9]. Capital
accumulation, in this case, can be sourced from
foreign exchange receipts. International tourism
receipts can add to foreign exchange reserves and
will then have an impact on increasing economic
growth. Bojanic and Lo’s, [10], research concerning
a comparison of tourism's moderating effects on
economic development in countries with many
islands concludes that tourism greatly influences
economic growth in most countries, especially those
of islands. Archipelagic countries have more tourism
objects, so the revenue from taxes and fees obtained
through these tourism objects can boost regional
economic growth. Besides that, another study
conducted by Mallick et al., [11], regarding the
investigation of the relationship between tourism and
India's economic growth, concluded that tourism has
a positive influence on economic growth in the long
run. However, the opposite happened in Sulastri [12]
regarding the effect of tourism income on economic
growth in East Lampung. He concluded that tourism
sector income hurt economic growth.
According to Harrod Domar's theory,
investment can positively influence economic
growth. Investment can increase the economy’s
production capacity by increasing capital stock. This
capital increase is considered an expenditure that can
stimulate additional demand for community needs.
Increased public demand will have an impact on
improving economic growth. Research conducted by
Alaa et al., [13], regarding the effect of foreign
direct investment on economic growth in Egypt
found that foreign direct investment is a cross-border
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flow of capital that can affect a country's economic
growth. Another study by Hamoudi and Aimer, [14],
regarding the effect of foreign direct investment on
Libya's economic growth concluded that an increase
in foreign direct investment would lead to high
economic growth. However, on the contrary, the
research conducted by Ridha and Parwanto, [15],
regarding the impact of foreign direct investment on
Indonesia's economic growth concluded that foreign
direct investment has a negative and significant
impact on economic growth in the long term.
Keynes's Classical Theory states that the role of
government influences economic growth. This theory
assumes that government intervention determines
that economic development can run optimally. The
implication of Keynes's view is that to ensure stable
growth, the government's role in managing the
economy is needed, both through monetary policy
(interest rates and money supply) and fiscal policy
(taxes and government spending), [16]. Research
conducted by Bah and Kpognon, [17], on the role of
governance in the relationship between public
investment and growth in ECOWAS countries
concludes that indicators of good governance in
terms of the rule of law, government effectiveness,
and regulatory quality partially have a positive and
significant effect on economic growth. A similar
study conducted by Al-Naser and Hamdan, [18],
regarding the impact of public governance on
economic growth in GCC countries concluded that
indicators of the rule of law, government
effectiveness, and regulatory quality positively affect
economic growth. The opposite occurs in
Widjanarko, [19], research on the impact of
governance on economic growth: the OIC developing
country case study concludes that good government
in terms of the rule of law and regulatory quality
indicators hurts economic growth. In contrast,
government effectiveness has no significant impact to
economic growth.
3 Research Methods
This type of research is quantitative descriptive. The
data used in this study is secondary data published by
the World Bank (World Development Indicators and
Worldwide Governance Indicators). This study uses
five independent variables, international tourism
receipts, foreign direct investment, the rule of law,
government effectiveness, and regulatory quality, and
the dependent variable, GDP, as a proxy for
economic growth. This study uses 10 ASEAN
member countries from 2003-2021. The economic
model used in this study is as follows:
Y = f(X 1 , X 2 , X 3 , X 4, X 5 ) (1)
Then the model is transformed into a panel data
regression equation model:
LNGDit = β0 + β1LNITRit + β2FDIit + β3RL it + β4GE it
+ β5RQ it + µit (2)
Information:
LNGDP :Logarithm of Natural Gross Domestic
Product (US$)
LNITR :Logarithm of Natural International
Tourism Receipts (US$)
FDI :Foreign Direct Investment (Percent)
RL : Rule of Law (Index)
GE :Government Effectiveness (Index)
RQ : Regulatory Quality (Index)
β0 : Constant (Intercept)
β1, 2, 3, 4 : Regression coefficient
i : 1, 2, …., 5, indicates the country
(Cross Section)
t :1, 2, …., 11, shows the dimension of
the time series (Time Series)
µ : Error term
4 Results and Discussion
4.1 Descriptive Statistical Analysis
The descriptive statistical analysis used in this study
includes each variable's lowest, highest, and average
values. The following are the results of the
descriptive statistical analysis of this study.
Table 1. Descriptive Statistical Analysis
GDP
ITR
RL
GE
RQ
Means
215,000,000,000
8,660,000,000
-0.21
0.13
-0.03
median
150,000,000,000
4,460,000,000
-0.40
0.06
-0.11
Maximum
1,190,000,000,000
64,400,000,000
1.87
2.43
2.25
Minimum
2,020,000,000
59,000,000
-1.74
-1.63
-2.35
Std. Dev.
247,000,000,000
11,300,000,000
0.89
1.01
0.99
Observation
190
190
190
190
190
Source: Eviews 10
Based on Table 1, the average GDP is
215,000,000,000 billion USD. The country with the
highest GDP value in the ASEAN countries during
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2003-2021 is Indonesia 2021 at 90,000,000 billion
USD. Meanwhile, the country with the lowest GDP
in ASEAN is Lao PDR, with 2.020 million billion
USD in 2003. The average value of international
tourism receipts (ITR) has an average value of
8,660,000,000 USD. The country with the highest
international tourism in ASEAN during the 2003 to
2021 range was Thailand in 2019, reaching
8,660,000,000 USD. Meanwhile, the lowest
international tourism country was Myanmar in 2006,
with only 59,000,000 USD.
Furthermore, the v foreign direct investment
(FDI) variable has an average value of 5.628129. The
ASEAN country with the highest FDI during the
2003-2021 range was Singapore in 2019 at 29,69044
percent. Meanwhile, the country with the lowest FDI
was Brunei Darussalam in 2016, which only reached
-1.32052 percent. The rule of law variable has an
average value of -0.20915 index. The country with
the highest power of law index was Singapore in
2020, reaching 1.870237, while the country with the
lowest rule of law was Myanmar in 2004, which was
-1.73629.
The following variable is government
effectiveness which has an average value of
0.127812. The country with the highest government
effectiveness in ASEAN is Singapore reaching
2,426029 in 2008, while the country with the lowest
government effectiveness is Myanmar in 2010, only
going -1,62287. The regulatory quality variable has
an average value of -0.02883. The country with the
best regulatory quality was Singapore in 2015,
reaching 2,255347, while the country with the lowest
regulatory rate was Myanmar in 2004, which was -
2,34857.
Based on the statistical explanation of the
variables used in this study, it can be known that
Singapore has the highest government effectiveness,
quality of regulation, and FDI. This is in line with
Singapore's economic condition, where Singapore is
a country with ASEAN classified as advanced by the
World Bank. Based on statistical analysis carried out,
it is also known that the country with the worst
quality of government in ASEAN based on the
government effectiveness index and the quality of
regulation is Myanmar. Based on the hypothesis that
when the quality of government is poor, it hurts
economic growth. To prove the idea is correct, here
is the process of estimating data related to this study.
4.2 Selection of Regression Model
The best panel data regression model was selected
through the Chow Test, Lagrange Multiplier (LM)
Test, and Hausman Test. To choose between the
Common Effect Model (CEM) or Fixed Effect Model
(FEM), a Chow test is performed, ACEM or Random
Effect Model (REM) comparison test is performed,
and finally, for model selection is a comparison
between FEM or REM with the Hausman Test.
Table 2. Panel Data Regression Model Selection
Test
Prob
Decision
Chow
0.0000
FEM
LM
0.0000
REM
Hausman
0.0 755
REM
Source: Eviews 10
Based on Table 2 that has been carried out,
the best model chosen is the Random Effect. A study
conducted by Kosmaryati, [20], based on Gujarati,
[21], revealed that if the regression uses the Random
Effect Model (REM), then there is no need to test the
classical assumption. The following is the output of
the REM regression results
Table 3. Random Effect Model Regression Results
Source: Eviews 10
4.3.1 t-test
The t-test was used to determine the significance of
the independent variables individually on the
dependent variable by assuming the other variables
constant.
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Table 4. t-test results
Variable
t- Statistics
t-table
Infromation
LNITRD
10.84285
1.65318
Significant
FDI
0.892694
1.65318
Not significant
RL
1.980082
1.65318
Significant
GE
3.301305
1.65318
Significant
RQ
0.039561
1.65318
Not significant
Source: Eviews 10
Based on Table 4, the effect of each independent
variable on the dependent variable is obtained as
follows:
a. International tourism receipts positively and
significantly affect GDP in ASEAN countries
2003-2021. The t-statistic value (10.84285) is
greater than the t-table (1.65318).
b. Foreign direct investment has a positive and
insignificant effect on GDP in ASEAN countries
2003-2021. The t-statistic value (0.892694) is
smaller than the t-table (1.65318).
c. The rule of law has positively and significantly
affected GDP in ASEAN countries from 2003 to
2021. The t-statistic value (1.980082) is greater
than the t-table (1.65318).
d. Government effectiveness positively affects GDP
in ASEAN countries 2003-2021. The value of the
t-statistic (3.301305) is more significant than the
t-table (1.65318).
e. Regulatory quality has a positive and
insignificant effect on GDP in ASEAN countries
2003-2021. The t-statistic value (0.039561) is
smaller than the t-table (1.65318).
4.3.2 F Uji test
The F test determines whether all the
independent variables are statistically significant in
influencing the dependent variable
Table 5. F-Test Results
DF
F-table
Prob(F-statistic)
Information
(5;184)
2.65
71.48119
Significant
Source: Eviews 10
Based on Table 5, the F-statistic value
(71.48119) is greater than the F-table (2.65). Thus,
the independent variables jointly affect the dependent
variable, namely GDP.
4.4 Coefficient of Determination (R2)
Based on the regression estimation of the Random
Effect model, the coefficient of determination (R2) is
0.660144. This means that the variables of
international tourism receipts, foreign direct
investment, the rule of law government effectiveness,
and regulatory quality affect GDP in ASEAN
countries by 66,014 percent, and the remaining
33.9856 (100 - 66,014) is explained by other
variables not included in the research model.
4.5 Regression Model Interpretation
Based on Table 3, the regression equation of this
study is as follows.
LNGDP it = 14.73096 + 0.478103LNITRit * +
0.009114FDIit + 0.414734RLit * +
0.521349GE it * + 0.005161RQit (3)
Note: * Significant at = 0.05
The constant value of 14,73096 means that if
international tourism receipts, foreign direct
investment, the rule of law government effectiveness,
and regulatory quality are zero, then GDP in ASEAN
countries is 2497897.66 USD (anti-LN of 14,73096).
The coefficient value of international tourism receipts
is 0.478103. This means that if global tourism
receipts increase by 1 percent, then GDP in ASEAN
countries in 2003-2021 will increase by 0.478103
percent, cateris paribus.
The coefficient value of foreign direct investment
is 0.009114. This means that if FDI increases by 1
percent, GDP in ASEAN countries in 2003-2021 will
increase by 0.9114 percent, ceteris paribus. The
coefficient value of the rule of law is 0. 414734. This
means that if the rule of law increases by one index,
then the GDP in ASEAN countries in 2003-2021 will
increase by 41.4734 percent, ceteris paribus. The
coefficient value of government effectiveness is 0.
521349. This means that if government effectiveness
increases by one index, the GDP in ASEAN
countries in 2003-2021 will increase by 52.1349
percent, ceteris paribus. The coefficient value of
regulatory quality is 0.005161. This means that if
regulatory quality increases by one index, GDP in
ASEAN countries in 2003-2021 will increase by
0.5161 percent, ceteris paribus.
4.6 Discussion
The results of this study indicate that the variable
international tourism receipts significantly positively
affect GDP in ASEAN countries from 2003-2021.
The results of this study are by Robert Solow's
Theory. Solow reveals that economic growth is a
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series of activities from 4 main factors: labor, capital
accumulation, modern technology, and output, [9].
The capital in question can be in the form of physical
and non-physical capital that can increase
productivity in the economy. Foreign exchange
receipts are one of the sources of money that can be
used in the economic process. International tourism
receipts can increase foreign exchange reserves,
where foreign exchange reserves are used for the
financial activities of a country. The arrival of
foreign tourists requires dollar transactions against
the domestic currency. Thus the value of the
domestic currency appreciates. When the domestic
currency appreciates, it can increase export prices
and lower import prices. This condition certainly
causes a balance of payments surplus, which impacts
rising GDP, which boosts a country’s economic
growth.
The results of this study are also in line with the
research conducted by Scarlett [22], in his tourism
recovery and the economic impact: A panel
assessment,” which found that tourism receipts had a
statistically significant positive effect on economic
growth. These results are supported by [23] in his
research entitled “The Effect of Tourism Revenues
on Economic Growth in The Context of Neo-
Classical Growth Model: In The Case of Turkey.”
Research conducted by Study, [24], suggests that
tourism suggests or indirectly contributes to GDP
growth by increasing foreign exchange reserves,
creating jobs, and being able to alleviate poverty.
Thus, it can be said that an increase in tourism
income can cause a multiplier effect. The growth of
the tourism sector can create opportunities for
residents, culinary business opportunities, souvenir
businesses, and even transportation.
The existence of foreign exchange receipts can
create currency stability. The stability of the interest
currency can influence the decision of investors to
invest. So the study included the variable of foreign
direct investment to see its effect on GDP. The
foreign direct investment variable had a positive and
insignificant impact on GDP in ASEAN countries
from 2003-2021. This study’s results align with the
Harrod-Domar theory, which reveals that capita can
stimulate public demand from the expenditure side.
In contrast, from the supply side, capital can increase
goods and services, increasing output, [25]. However,
foreign direct investment in ASEAN countries has to
have a significant influence. This is because the FDI
value of foreign investment in ASEAN countries
tends to fluctuate. The following is FDI data in 10
ASEAN countries from 2003-2010.
Fig. 2: FDI in 10 ASEAN Countries in 2003-2021
Source: World Bank (2022)
Figure 2 shows that FDI in ASEAN countries tends
to fluctuate, so it has yet to affect GDP significantly.
This is because ASEAN countries have yet to
become a priority for foreign investors to invest their
capital, and there are still many entry barriers for
foreign investors. Efforts to increase FDI in ASEAN
countries are expected to boost economic growth.
Thus, efforts are needed from the government, the
private sector, and the public, so foreign investors are
interested in investing in ASEAN countries.
The insignificant FDI is in line with Magdalena
and Suhatman’s, [8], research entitled “The Effect of
Government Expenditures, Domestic Investment,
Foreign Investment on the Economic Growth of
Primary Sector in Central Kalimantan.” Foreign
direct investment is used as a proxy for foreign
investment in research conducted by [26]. This result
is also supported by research conducted by Istikomah
dan Kustituanto, [27], in a study entitled “Peranan
Penanaman Modal Asing (PMA) terhadap
Pertumbuhan Ekonomi di Indonesia” found that
foreign direct investment does not affect economic
growth either in the long term or in the short time.
A study conducted by Istikomah dan Kustituanto,
[27], revealed that foreign direct investment has no
significant effect due to: (a) country risk where the
domestic market in ASEAN countries causes a low
rate of return on capital and less available supporting
facilities (e.g., skilled labor, technology, and
transportation), (b) the development of foreign
investment is hampered by the complexity of the
permit process and convoluted bureaucracy, (c)
information on sources of funds from the banking
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sector is not optimal, and (d) the low quality and
productivity of human resources so that technological
transformation has not been carried out optimally.
One of the causes of the insignificant FDI
variable is the convoluted bureaucracy. Thus, this
study discusses good governance in government. The
proxies used include the rule of law, government
effectiveness, and regulatory quality in seeing their
effect on GDP in ASEAN countries. According to
Keynes's theory, to ensure stable growth, the
government's role in managing the economy is
needed, both through monetary policy (interest rates
and money supply) and fiscal policy (taxes and
government spending), [16].
Research in the field of government governance
is interesting because it turns out that good
governance facilitates the running of an efficient
market mechanism, [28]. This is because governance
is a tool used by the government to formulate,
supervise, implement, and evaluate public policies in
every development activity closely related to Andri
Pamungkas legislation [29]. This study used the rule
of law, government effectiveness, and regulatory
quality to see its effect on Gross Domestic Product.
This study found that the rule of law had a
positive and significant effect on GDP in ASEAN
countries from 2003-2021. These results are in line
with Keynes's theory and line with research
conducted by Demarani [30] in his study entitled
“The Effect Of Government Governance And Tax
Ratio To Economic Growth (Case Study In Asean
Countries)” found that the rule of law has a
significant positive effect. On economic growth in
the 6 ASEAN countries. The practice of law is one of
the critical indicators in creating good governance in
influencing economic growth because it can limit the
government's authority so that it does not become a
corrupt government, [31]. When viewed from the
perspective of society, the rule of law measures the
extent to which people obey the rule of law. The
existence of restrictions on authority and public
obedience to the law can ensure that the government
runs cleanly and well so that, in the end, it is
expected to have a broad impact on economic
progress and increase the rate of economic growth.
Research from Eka, [28], found that people's
compliance with obeying regulations and enforcing
laws will increase the rate of economic growth. In
addition, Ramadhan, [32], reveals that a government
that follows the rule of law can carry out its duties
and functions properly and is responsible for its
authority; Law enforcement agencies ensure that the
government runs cleanly and functions appropriately
so it is expected to have a broad impact on economic
progress and encourage the pace of economic growth.
Variable government effectiveness positively and
significantly affected GDP in 10 ASEAN countries
from 2003-2019. These results align with Keynes’
theory and the research conducted by Duho et al.,
[33], entitled Determinants and convergence of
government effectiveness in Africa and Asia”.
According to the Millennium Challenge Corporation,
indicators of government effectiveness are effective
coordination mechanisms ensuring policy
consistency across departmental boundaries and
administrative structures arranged along functional
lines with little duplication, [30]. A country
allocating the expenditure and revenue budgets has
undoubtedly been planned in the previous year. An
implementation budget by the budget plan and actual
spending can create high economic growth so that
there is a positive correlation between government
effectiveness and GDP. Research from Eka, [28],
suggests that when the quality of public services, the
quality of civil services, and the level of
independence from political pressures, the quality of
policy formulation and implementation are better.
The credibility of the government's commitment to
these policies is also strong, and it can increase
economic growth in a country. Thus there is a
positive and significant influence on the effectiveness
of the government on GDP.
The Regulatory Quality variable had no effect on
GDP in ASEAN countries from 2003-2019. This
study’s results align with research conducted by
Wibowo [34] entitled Analisis Pengaruh Kualitas
Pemerintahan Terhadap Pertumbuhan Ekonomi di
ASEAN”. The insignificant regulatory quality
indicates that the government's ability to formulate
public policies has not been able to increase
economic growth. In carrying out the government's
role, one of which is through tax increases instead of
for education and health, the benefits are still not felt
by the community. However, it is difficult for public
policy to satisfy various parties. Thus the quality
regulator has not been able to increase economic
growth. The insignificance of this variable is because
law enforcement generally has an indirect effect on
the year in question, which means that the impact and
benefits caused by the variable can be felt at the time
after the variable is run or in the coming year, [29].
However, in general, case studies in ASEAN
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DOI: 10.37394/232015.2023.19.55
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Fakhri Rizal Husain
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countries can be concluded that poor governance,
such as political violence, terrorism, and corruption,
can harm citizens mentally and physically by
lowering their productivity, [35].
5 Conclusions and Recommendations
Based on the results of this study, it was found that
international tourism receipts, foreign direct
investment, the rule of law, the government rule of
law, and regulatory quality together affect GDP,
which is a proxy for economic growth) in ASEAN
countries from 2003-2021. Partially, international
tourism receipts, the rule of law, and government
effectiveness positively and significantly affect
economic growth. In contrast, FDI and regulatory
quality have yet to influence economic growth.
The positive influence of international tourism
receipts shows how vital the tourism sector’s role is
in the economies of ASEAN countries. The Covid-19
pandemic shock challenges the tourism industry and
the creative economy to maintain their existence. The
government and the private sector can work together
to improve the quality of human resources and
workforce in the tourism sector and increase
promotions through social media related to tourism
potential in each country. Apart from that, ASEAN
countries can make virtual international tourism
exhibitions to attract foreign tourists.
Based on the results of the estimation carried out
by the rule of law is the variable with the most
decisive influence on economic growth in ASEAN.
This shows that institutional quality is essential in
realizing economic growth and development. Each
ASEAN country's government can cooperate with
other countries with good rules of law. Then these
policies are adopted and adapted to life in each
country. Apart from that, increasing public trust in
the government through procedures and channeling
community aspirations is well received. Thus
creating a condition where the government, private
sector, and society have one vision. If the
institutional quality improvement in ASEAN
countries is realized, it will undoubtedly attract
foreign investors to invest their capital. This is
because investors will feel safer investing in
countries that support countries with continuity in the
tourism sector, FDI, and institutions that are expected
to create equitable and sustainable development.
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Contribution of Individual Authors to the
Creation of a Scientific Article (Ghostwriting
Policy)
Neli Aida created a research framework and team
leader. Widia Anggi Palupi wrote the research,
compiled articles, and compiled a bibliography.
Fakhri Rizal Husain adapted to the format and
collected and managed the research data.
Sources of Funding for Research Presented in a
Scientific Article or Scientific Article Itself
The research in this manuscript is supported by
Lembaga Penelitian dan Pengabdian kepada
Masyarakat (LPPM) Universitas Lampung.
Creative Commons Attribution License 4.0
(Attribution 4.0 International, CC BY 4.0)
This article is published under the terms of the
Creative Commons Attribution License 4.0
https://creativecommons.org/licenses/by/4.0/deed.en_
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WSEAS TRANSACTIONS on ENVIRONMENT and DEVELOPMENT
DOI: 10.37394/232015.2023.19.55
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Fakhri Rizal Husain
E-ISSN: 2224-3496
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Conflicts of Interest
The authors have no conflicts of interest to declare
that are relevant to the content of this article.