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FDI Review of the Year 2016

So we come to the end of a year where at least in a FDI sense, there is profound global uncertainty. Accompanying this blog, you can read about six events / topics of the year HERE that will shape FDI trends for 2017 and beyond. Every reader is likely to guess at least some of these choices, but for completeness they are:

  • Trump & FDI

  • Brexit & FDI

  • Cuba & FDI

  • South America & FDI

  • The Middle East & FDI

  • Changing FDI Trends

Of course this is not an exhaustive list, and other events that are important could have been selected. Some world regions are not explicitly discussed, while other events such as the US-Iran deal are not covered – even though lengthy discussion of the FDI implications on this one issue alone would be possible.

The six topics attempt to give some balance to the arguments around whether FDI can continue in an upward direction into 2017, on the global scale. Overall, it’s a difficult case to make, but as economic development professionals we should not go overboard in how the status quo might change: the US will still be one of, if not the world’s leading foreign investor; FDI activity between the UK and EU will still be of key importance to both parties.

Developing Countries

Nevertheless, investment trends will surely change to some extent, as businesses do not like risk, particularly when that risk endures for a long period of time. One development that we might expect to see concerns FDI into developing economies. Flows from the developed world might not remain as robust, but FDI between developing economies could plug the gap.

The obvious candidate countries for this are the BRICS (or CIVETS, EAGLES or plenty of other acronyms), but in particular China. Although the country has seen weaker growth recently, it is the one developing country where outward FDI is really substantial.

But again, it’s not as high as many would think: as the US Organization for International Investment points out in its 2016 report, based on 2014 data, the country is not even a top 20 investor in the US. Moreover, much of this investment continues to be through M&A. While this doesn’t necessarily reduce its worth, it is harder for economic developers to firstly influence the investor, and then sell the benefits to a taxpaying public. Nevertheless, Chinese FDI to the US and across the world is now on a significantly upward curve.

Politics and People

Trying to predict what international investment will look like in 12 months’ time is probably more difficult now than it ever has been – only time will tell. Much depends on how the politics in numerous countries plays out, but more than that, it depends on how the public mood across these countries evolves. Of course, people having made choices where a topic like FDI is probably only a consideration for a tiny minority. Nevertheless, effective investment attraction can have a fundamental effect on people’s lives, which is why economic development must continue to be championed.

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