By Bryna Meivitawanli

Indonesia is actively promoting foreign direct investment in the past few years. This has been done with the hope that FDI is going to help the country‘s economy grow. However the benefits of FDI might not be realized without the support of sufficient internal factors. This research uses OLS to analyze whether FDI alone is enough to bring positive impact on Indonesia‘s economy. The paper introduces human capital and trade openness into the equation to find out whether these commonly known absorptive capacities of FDI are also applicable in the case of Indonesia. Using data from 2002 to 2014, this research concludes that FDI alone does not positively affect economic growth. Interaction of FDI and human capital as well as interaction of FDI and trade openness show significant effect on economic growth. The effect is positive for FDI and trade but negative for FDI and human capital. These results should urge the government to encourage trade openness and pay closer attention to the country‘s level of human capital. Promoting FDI without improving internal conditions of the country is not adequate to induce economic growth.