🐽From countries focused on modernizing to the richest members of the Organization for Economic Cooperation and Development ꦇ(OECD), the world is awash with opportunities for development.

While central bankers have control over an economy’s monetary levels and politi𝐆cians control fiscal affairs, these two groups often cannot jumpstart growth without outside help. Enter foreign direct investment (FDI).

In simple terms, FDI is the movement of capital from one ♌country to another. A common example of FDI involves companies that build factories abroad or that invest in the development of an🎉 oil field.

The latest trend in FDI flows, as of the first half of 2024, shows a total of $802 billion, with $488 billion of that occurring in the first quarter. Modest growth from 2023 through 2024 is seen as possible.

The three countries that received the most FDI capital in the the first half of 2024 were the United States, Brazil, and Mexico.

The three countries that made the greatest amounts of FDI in the same period were the U.S., China, and Japan.

Global FDI Trends

Global FDI dropped to $1.3 trillion in 2023 due to weakening economic conditions and rising geopolitical crises. In particular, FDI in developing countries was $867 billion, a drop of 7%.

According to the annual report by the United Nations Conference on Trade & Development (UNCTAD), there was a 26% fall in international project finance deals in 2023. Such FDI is vital to infrastructure development and its absence has the greatest impact on the poorer countries.

There is some possibility for growth in 2024 overall because of the easing of financial conditions and beneficial national policies and international agreements that are attempting to drive investment transactions.

The report noted the growth in investments in some global manufacturing sectors like automotive and electronics in those parts of the world with access to major financial markets. Unfortunately, however, "many developing countries remain marginalized, struggling to attract foreign investment and participate in global production networks."

Regulatory Restrictions Across the Globe

The rise of more isolationist industrial policies, worldꦏwide economic problems, and national security issues can all impact FDI.  

According to UNCTAD, despite these protectionist tendencies, most countries are open to foreign investment. However, mainly because of national security fears, many governments have enhanced foreign investment screening policies as a safeguard.

Broadly, statutory restrictions in 2023 posed a consistent challenge to FDI.

FDI Recipients by Percentage of GDP

​Each year, more than $1 trillion in FDI fl꧋ows into countries around the world, but the distribution is far from equal.

According to the World Bank, the 10 countries with the greatest share of FDI as a percentage of GDP in 2023 were: 

1. Malta
2. Guyana
3. Singapore
4. Hong Kong SAR (China)
5. Namibia
6. Palau
7. Liberia
8. Bahrain
9. Antiqua & Barbuda
   
10. Mozambique

FDI Recipients by Total Dollars

​Viewing FDI as a percentage of GDP does not reflect the size of the economy being invested in. Ranking economies by total FDI dollars received presents a different picture of recipients compared to FDI as a percentage of GDP. 

1. United States: $348.7 billion
2. Singapore: $175.2 billion
3. Hong Kong (China): $111.1 billion
4. Brazil: $64.2 billion
5. Canada: $47.7 billion
6. China: $42.7 billion
7. British Virgin Islands: $39.8 billion
8. Spain: $33.7 billion
9. Italy: $33.1 billion
10. Australia: $32.7 billion
    

These 10 countries together receꦰived the bulk of global FDI. While several of these countries have natural resou𓂃rces that could entice foreign investment, the real draw may be the size of their populations.

A large population means a lot of consumers, and a multinational company generally wants to be near its consumers. Proximity allows a company to reduce the cost of shipping goods and allows it to keep a close eye on sh𝕴ifting consumer tastes. Sitting in an office halfway across the world could cause a company to lose out.

FDI As Trouble-Maker

​Foreign investment is often used as a political scapegoat for the world’s ills, and there are certainly times when it deserves the rap:

• Big companies can run roughshod over developing countries. They can breed corruption and remove a country’s wealth rather than inject it back into the domestic economy. This has spawned the concept of a resource curse.
• 澳洲幸运5官方开奖结果体彩网:Globalization, which tends to go hand in hand with FDI, is not the most well-liked economic concept, even if it does benefit consumers.
• Officials under pressure to fix the economy can earn brownie points by pointing a finger at foreign companies that they claim are bent on owning the country.
• They may back 澳洲幸运5官方开奖结果体彩网:legis✱lation and non-tariff barriers t🥃o trade intended to promote domestic buying and to reduce the ability of outsiders to gain market access.

The Upside of FDI

​Foreign direct investment can play a vital role in how a country achieves important goals for its population:

• Capital can provide the means for individuals to better feed, educate, and care for themselves by increasing the opportunities to work and earn consistently.
• FDI can help a country prosper and attain meaningful social and environmental goals.
• Inflows are a sign that the outside world considers an economy a worthwhile place to move capital.
• FDI allows countries without the know-how to develop resources that it otherwise would be without.  
• Profits from the investment of capital can be used to build infrastructure, improve healthcare and education, improve productivity and modernize industries.
• FDI can help countries benefit from innovative technologies that promote their economic growth and resiliency.

The Bottom Line

​How can a country 𝐆entice other countries in the world to supply it wi꧅th capital? One way to attract it is to create a business climate that makes foreign investors feel as if their capital is safe.

Global FDI fell 2% to $1.3 trillion in 2023. In developing countries, it fell 7% to $867 bil🔜lion. However, in the first half of 2024, global FDI grew to $802 billion. Modest growth for 2024 is considered challenging but possible.