World Investment Report 2024

Global FDI flows fell 2% to $1.3 trillion in 2023, as trade and geopolitical tensions weighed on a slowing global economy. The report underscores that the headline figure exceeds -10% when excluding a few European conduit economies that registered large swings in investment flows.

FDI flows to developing countries dropped 7% to $867 billion.

Tight financing conditions led to a 26% fall in international project finance deals, critical for infrastructure investment. International project finance is crucial for the poorest countries, making them more vulnerable to the global downturn in this type of investment.

Crises, protectionist policies and regional realignments are disrupting the world economy, fragmenting trade networks, regulatory environments and global supply chains. This undermines the stability and predictability of global investment flows, creating both obstacles and isolated opportunities.

While prospects for 2024 remain challenging, the report says modest growth for the year remains possible, citing easing financial conditions and investment facilitation efforts in both national policies and international agreements.

Investments are growing in several global value chain-intensive manufacturing sectors like automotive and electronics in regions and countries with easy access to major markets. But many developing countries remain marginalized, struggling to attract foreign investment and participate in global production networks.

Overall, FDI to developing countries fell by 7% in 2023 to $867 billion, but the decrease varied significantly across regions.

While greenfield project announcements in developing countries increased by over 1,000, the distribution was uneven, with nearly half in South-East Asia and a quarter in West Asia.

FDI inflows to Africa declined by 3% to $53 billion. Greenfield announcements included megaprojects like a green hydrogen project in Mauritania. International project finance fell by a quarter in deal numbers and by half in value.

Flows to developing countries in Asia fell by 8% to $621 billion, with China, the world’s second-largest FDI recipient experiencing a rare decline. India and West and Central Asia also saw significant drops, while South-East Asia held steady.

FDI flows to Latin America and the Caribbean decreased by 1% to $193 billion. The number of greenfield investment announcements fell, but the value of greenfield projects rose due to large investments in commodity sectors, critical minerals and renewable energy.

Meanwhile, FDI flows to structurally weak and vulnerable economies increased. Inflows to the least developed countries rose to $31 billion, or 2.4% of global flows. Landlocked developing countries and small island developing states also saw increases. But in all three groups, FDI remains concentrated among a few countries.

Tight financing conditions in 2023 led to a 26% downturn in international project finance, which is crucial for infrastructure investment in areas such as power and renewable energy.

As a result, investment in sectors linked to the Sustainable Development Goals (SDGs) fell by more than 10%. The report highlights that agrifood systems and water and sanitation registered fewer internationally financed projects in 2023 than in 2015, when the goals were adopted.

While funds for SDG investment through sustainable finance products in global capital markets is still growing, the pace is slowing. Sustainable bonds showed marginal growth in 2023, while inflows in sustainable investment funds dropped by 60%.

Greenwashing concerns related to misleading sustainability claims are increasingly affecting investor demand. Policy actions are urgently needed to mitigate the risk of widening backlash against sustainable investment strategies.

Policymakers should also consider the negative spillover effects of sustainability reporting standards on firms outside main markets. In particular, small and medium-sized enterprises in developing countries may struggle to meet increasing disclosure requirements, which could affect their market access and participation in global supply chains.

Lacklustre financial flows to developing countries were not due to a lack of investment facilitation efforts.

In 2023, 86% of the investment policy measures taken by developing countries were more favourable to investors. In contrast, 57% of measures in developed countries were less favourable, with restrictions, such as FDI screening mechanisms increasingly used to address national security concerns.

Globally, the number of investment policy measures in 2023 matched the five-year average, with about three quarters favorable to investors. Investment facilitation reached a record 30% of all measures. Incentives targeted the services sector and renewable energy in particular.

In 2023, 29 new international investment agreements (IIAs) were concluded, less than half being traditional bilateral treaties. Reforming older IIAs remains slow, with about half of global FDI still governed by non-reformed treaties, increasing the risk of investor-State dispute settlement (ISDS) cases. This is higher for developing countries (two-thirds) and LDCs (three-quarters).

Only 16% of global FDI stock is covered by new-generation IIAs.

The total ISDS case count reached 1,332, with 60 new arbitrations in 2023. About 70% of new cases were against developing countries, including three LDCs, with claims mostly in the construction, manufacturing and extractive sectors.

Investment facilitation aims to simplify procedures for investors by increasing access to information, enhancing transparency and streamlining administrative processes. Digital government tools are key to effective implementation.

Since UN Trade and Development launched its global action menu for investment facilitation in 2016, online single windows in developing countries have increased from 13 to 67, and in developed economies from 12 to 28. Information portals for business and investor registration also expanded from 82 to 124 in developing countries and from 43 to 48 in developed economies.

Explore the Global Enterprise Registration portal.

The report underscores that digital investment facilitation should extend beyond initial procedures. The benefits of smooth business registration processes are limited if subsequent procedures remain opaque, inefficient, and unpredictable.

It also highlights that digital business and investment facilitation can lead to broader digital government implementation, addressing governance and institutional weaknesses that hinder investment.

The report advocates for a bottom-up approach as a complementary route to top-down digital government development. Starting with basic business services and gradually expanding coverage across more institutions allows countries to capture economies of scale and scope of digital government tools, benefiting all businesses – foreign and domestic, large and small. Developing nations, in particular, can gain immediate value without major legislative interventions.