The United Nations Conference on Trade and Development (UNCTAD) has recently released its annual World Investment Report 2024. The report highlights global foreign direct investment (FDI) trends while comparing them with last year.
Key highlights
- The report states that the global FDI flow declined by 2% in 2023, down to $1.3 trillion. It attributes this decrease to economic slowdown and escalating geopolitical tensions.
- The FDI for developed nations fell by 7% to $867 trillion. For Asian countries, it dropped by 8% to $621 billion.
- The US topped the list by drawing the highest FDI in 2023. It was followed by China, Brazil, Canada, Germany and Mexico.
- The FDI flow in India also decreased significantly from $49.3 billion in 2022 to $28.1 billion in 2023. The country fell seven spots to rank 15 in the investment ranking globally in 2023. The net FDI flow, the difference between inflows and outflows, also dropped by 62.14% to $10.6 billion.
Impact on project development and employment generation
- The decrease in FDI flow impacted projects across the globe. For instance, funding for Sustainable Development Goals (SDGs) reduced by over 10%.
- International project financing also decreased by 26%, which impacted infrastructure development badly. Necessary infrastructures such as power and renewable energy felt the impact.
- This also affected employment generation across sectors.
Reasons behind declining FDI
- The world economy faced myriad challenges. Wars between Russia and Ukraine and Israel and Philistine affected the global business environment and thus investor sentiment.
- Furthermore, protectionist policies, supply chain disruptions, and regulatory environment created hurdles in business and trade.
- It is expected that the business environment will improve this year and encourage investors to infuse capital into business expansion. Particularly, sectors like semiconductors, EVs, and electronic goods are expected to see a boom.
Recommendations suggest by UNCTAD
- The report recommends creating a transparent and efficient business environment by adopting digital solutions.
- It suggests simplifying processes to ensure comfort for investors. This can be achieved by improving access to information and streamlining procedures.
- Countries across the globe, particularly developing nations, will have to embrace suggestions in order to improve FDI flow which is an essential tool to achieve target growth figures.
About UNCTAD
- UNCTAD is a permanent UN body that was established in 1964 to deal with trade and development issues.
- It supports developing and the least developed countries to improve their trade and economy while associating with the global economy.
- It also works to promote global partnerships and support policy-making across the globe.
- It also provides trade analysis and insights through various reports. The major reports published by the organisation are the Trade and Development Report, World Investment Report, and The Least Developed Countries Report.
- Currently, it has 195 members and its headquarter is located in Geneva, Switzerland.
