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that alludes the importance of international trade conducted by entrepreneurs in realizing economic
growth.
International trade has an important role considering the strategic location of the Riau
Islands which borders directly with foreign countries. The special zones in Riau Islands are
Batam, Bintan, and Karimun BBK. While the other districts i.e. Anambas Islands, Lingga,
Natuna, and Tanjung Pinang are supporting the implementation of special zones in BBK by
providing manpower, food, etc. Given the strategic location of Riau Islands and the government
support to the special zones of BBK, Riau Islands trade balance reached 20 percent of total GDRP in
2010-2014. However, in the last four years, both export and import are facing a decline. Under this
condition, the author hopes to find empirical evidence whether export and import really
influence economic growth as expected by the government.
Meanwhile, the author recognizes the importance of investment to economic growth. Keyness
theory that is expanded and developed by R.F. Harrold and E.D. Domar Gilarso, 2004:398,
emphasizes the balance between the amount of savings and investment required for a harmonious
economic growth. Investment can be interpreted as expenditure to buy capital goods and production
equipment to increase the capability of a company to produce goods and services available in the
market. One way to catch investment expenditure data is through financial institutions or banks.
Funds disbursed by financial institutions include investment credit. Investment credit is a type of
long-term
credit used
to finance
capital expenditure in the context of rehabilitation,
modernization, land
expansion or
the establishment of new projects. The author used
data of investment credit from Bank Indonesia, the central bank in Indonesia.
This article intends to explain the influence of export, import, and investment to the economic
growth of a region, especially Riau Islands province in Indonesia, both partially and
simultaneously. The author conducted the research using secondary data obtained from Bank
Indonesia in the form of panel data within the period 2009-2016 and processed the data using
panel data regression method. The author has not found previous research involves the three
independent variables simultaneously to the dependent variable. More unlikely, in the case of
Riau Islands province. Thus, the author hopes to contribute to enrich the literature in this field. The
author also hopes to motivate companies to conduct international trade and motivate the
government to attract investment as they will contribute heavily to the local economic growth.
2. LITERATURE REVIEW
Sari, et. al 2016 examined the effect of investment, labor, and government expenditure to
the economic growth of Indonesia. This study showed that investment, labor, and government
expenditure simultaneously affect the economic growth of Indonesia. Partially, investment has a
positive impact to the economic growth in Indonesia significantly.
Mohsen 2015 examined the effects of export and import on the economic growth of Syria. Using
Johansen Cointegration test, he showed that export and import have a positive and significant effect
on GDP. Using Granger Causality test, he found that there was a two-way causal relationship
between export, import, and GDP in the long and short term. The impulse response functions IRFs
indicated that when there is a shock to exports, GDP will respond positively in the following
years, but when there is a shock to imports, GDP will respond negatively in the following years. The
variance decomposition VD analysis showed that at a ten-year forecasting horizon, exports and
imports shocks explain 28 and 25 of the GDP forecast error variance, respectively.
Dewi and Sutrisna 2015 examined the effect of investment annd export on the absorption of labor
through economic growth. The results of this study showed that investment has a significant positive
effect on economic growth, while exports have an insignificant negative effect on economic growth.
Susi et. al 2015 examined the effect of investment, labor, and export to economic growth
in Buleleng regency period of 2008 to 2012. This study showed that investment, labor, and export
International Journal of Economics and Financial Issues | Vol X
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201X X
have a positive effect on economic growth. Partially, both investment and export have a
positive effect.
Hasan et. al 2013 examined the effect of investment, labor, and government expenditure on
economic growth in West Sumatera Province. This study showed that there is a significant influence
of investment on economic growth in West Sumatera Province.
Kholis 2012 examined the impact of foreign direct investment on the growth of Indonesian
economy. Using pooled least square method, he showed that export growth has a positive effect on
economic growth in Indonesia but import growth has a negative impact on economic growth. Export
was the main driver of economic growth.
Export
According to the Law of the Republic of Indonesia Number 17 Year 2006, export is the activity of
removing goods from customs areas. If the buyer comes from abroad and the seller comes from
within the country, then the activity can be regarded as export. Export of goods can be judged
according to the price of Free On Board FOB, the calculation of the export of goods is done by
multiplying the value of goods according to notification of export of goods or PEB with the
exchange rate.
FOB means that the seller exporter is delivering the goods to the port mentioned in a contract, this
means that the buyer importer shall bear all costs and risks of loss or damage of goods starting from
that point Amir, 2007.
Export is vital on a countrys economic growth, as has been explained in Hecksher-Ohlins theory in
Pridayanti 2014 that a country will export products that production cost is less expensive and
raw materials are abundant. This will benefit the exporting country as it will increase the national
income and economic growth.
Import
According to the Law of the Republic of Indonesia, import is the activity of entering goods
into the customs area. Literally, imports can be interpreted as the activities of entering goods from
foreign country into the customs territory of our country Susilo, 2008.
Investment
Investment is one of the decisive factors in economic growth Prasetyo, 2011:88. Credit
investment is a credit to finance investment activities of a company with a credit period of
more than 1 year Supriyono, 2011.
Economic Growth
Economic growth can be defined as the development of activities in the economy that
cause goods and services produced in the community to increase Sukirno, 2011. One of
indicators to see the economic conditions of a region is Gross Domestic Regional Product
GDRP. GDRP is basically the amount of value added generated by all business units within a
particular country, or is the sum of the value of final goods and services produced by all economic
units. Sjafrizal 2008:93 mentioned that GDRP is a sum of consumption, investment, government
expenditure, and exports, minus imports.
3. METHODOLOGY
