Abstract
Indonesia is a developing country with a high demand for capital from both domestic and international sources. However, international capital flows are needed the most. For non-Western countries, especially Indonesia, capital flight is an unfavourable financial problem. This research aims to summarise capital flight from Indonesia and analyse the impact of macroeconomic and non-macroeconomic determinants through capital flight. Macroeconomic determinants include budget deficits, economic growth, inflation rates, and exchange rates. Nonmacroeconomic determinants are the degree of trade openness, interest rate differences, and dummy ratings. The data comes from the Bank of Indonesia, OECD, Moody's, and BPS-Statistics Indonesia. The coverage of this research is the Indonesian quarter from 2010 to 2018. This period complies with the latest procedures of the sixth edition of the Balance of Payments Manual (BPM 6). In this research, the measurement of the capital flight is the World Bank's residual method, trade misinvoicing method, and combined method. This research finds that, compared with other economics, non-macroeconomics is the most influential determinant of capital flight from Indonesia.
Highlights
After winning the 2019 presidential election, President Jokowi made a breakthrough in the National Development Plan (RPJMN) for 2020-2024
Regarding the theory of macroeconomics and empirical data evaluation, this research is a novelty of controversial economic theory
This research shows that macroeconomic variables are not the main cause of capital flight in Indonesia, but non-macroeconomic variables such as country risk, corruption, tax evasion and tax avoidance have become the main important factors in how the dynamics of capital flight in Indonesia are driven
Summary
After winning the 2019 presidential election, President Jokowi made a breakthrough in the National Development Plan (RPJMN) for 2020-2024. He will move Jakarta, the capital of Indonesia, to the island of Borneo. This policy will require a large budget, and make investors interested in investing their assets in Indonesia. The BKPM Investment Coordination Committee has developed a "one-stop service" system aimed at coordinating the permits and approvals of various ministries and commissions. This service is composed of 22 ministries and lasts 3 hours. Indonesia’s Ease of Doing Business (EoDB) has risen from 114th (2014) to 72nd (2018) among 190 countries/regions
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