Does Foreign Direct Investment (FDI) Impact Livelihood Capitals? A Bottom-Up Research in Indonesia

Abstract

This study explores the impact of Foreign Direct Investment (FDI) on the livelihoods of local communities. While previous research has produced mixed results on FDI effects, this thesis employs the livelihood capitals from the Sustainable Livelihoods (SL) approach to analyze the impact of the two biggest FDI projects in Aceh Province, with both being recoursed-based FDI. Findings indicate differing impacts, PT MPG (steam power plants) negatively impacts most livelihood capitals except the financial capital, while PT Socfindo (palm oil plantation and CPO factories) exhibits positive impacts on livelihood capitals except the natural capital. These findings support the idea that FDI within the same category can exhibit different impacts that depend on company management, regional policies, and local institutions. The study also emphasizes that resource-based FDI leads to inevitable negative impacts on local environments, but the severity of it can be reduced. However, both projects positively influence local economic growth by increasing the income of locals.