Mapping the World FDI

Episode 1 – The Big Picture

In 2015 FDI inflows have increased worldwide, although not proportionately. It’s again M&As that account the most for the rise and the number of announced greenfield projects remain high as well. Looking for a little bit less aggregated picture of the world FDI, we decided to start a series of blog posts with the intention to focus each time on different regions and modes of investments. The main purpose of “Mapping the World FDI” series would be to unravel some of the key regional characteristics of foreign investments and to try to catch both FDI and SDGs (Sustainable Development Goals) in one picture. The latter we would do by using some alternative measures of growth and well-being of people.

Now let’s start with the big picture. As usual, the absolute measure of FDI is not suitable for comparison. That’s why we take the relative measure (FDI as share in GDP) for as many countries as possible.

Fig. 1 – FDI inflows as share in GDP.

Blog picture mapping the world 1 Sources: World Investment Report 2016, World Bank and WAIPA’s calculations.

The blue circles are those countries with negative FDI inflows (as share in GDP) in 2015, namely – Japan, Algeria, Norway, Iceland, Bahrain, Palau, New Zealand, South Sudan and Swaziland. On the other side of the river are the biggest net attractors of FDI inflows relative to their economies – Hong Kong (56%), Ireland (42%), Cyprus (23%), Liberia (25%), Luxemburg (43%), Mozambique (25%), Montenegro (18%), Singapore (22%), and Congo-Brazzaville (17%).

 

Fig 2. – FDI Inflows and Social Progress Index by region.

blog picture mapping the world 2

Sources: World Investment Report 2016, Social Progress Imperative and WAIPA’s calculations.

Next, we plot the same relative measure of FDI inflows against an alternative measure of growth called Social Progress Index (SPI). SPI is developed by a network of scientists and practitioners (see the link). But this time we want to see the geographical cut of the data and set up a framework for later posts in which a more-in-depth regional outlook and analysis will be undertaken.

Europe is having the lead both in terms of SPI and foreign investments. Although some African countries mentioned above follow with high relative levels of FDI inflows, Central and Western Africa remain the regions lagging the most in terms of growth and development. However, East Africa (with the exception of Mauritius) is right next in the ladder, followed by South Asia. Clearly, as resource extraction dependencies become heavier especially in Africa, a new policy agenda should take place in order to help those countries alleviate poverty and eventually achieve the developed countries standards of living. Indeed, a first and necessary step is the empowerment of local IPAs by their governments. Investment promotion can play a crucial role not only for attracting foreign investors, but also for the impact of foreign capital on the host economy and well-being of people.