The World Bank report highlights the decline of Foreign Direct Investment (#FDI) in emerging markets and developing economies (EMDEs) since the 2008 global financial crisis, with FDI-to-GDP ratios dropping from a peak of 5% in 2008 to about 2% recently. This slowdown, observed in most EMDEs across four of six regions, exacerbates challenges like infrastructure gaps, poverty, job creation, and climate change. Key drivers of the decline include rising #trade tensions, #policy uncertainty, geopolitical #risks, fewer #investment treaties, and increasingly restrictive FDI policies. The report proposes a three-pronged #strategy: improving institutional quality, macroeconomic stability, and trade/investment openness; sustaining conducive conditions for FDI benefits; and fostering global cooperation for a rules-based investment system and structural reforms, particularly in low-income countries. My thoughts: To revive FDI, we must prioritize revising our #digital #strategy to align with global investment trends, leveraging #technology to enhance transparency and attract investors. Additionally, an FDI-centric diplomacy, focusing on bilateral and multilateral agreements, can rebuild #trust and counter geopolitical risks. Strengthening the #entrepreneurial #ecosystem through incentives, streamlined regulations, and #innovation hubs is equally critical to create a vibrant investment climate. By integrating digital advancements, diplomatic efforts, and robust support for entrepreneurs, EMDEs can address the FDI decline effectively. These measures, combined with the report’s recommendations, can restore investor confidence and drive sustainable economic growth in a challenging global landscape. #strategy #economy #investing #ecosystem #future #innovation #trsnsformation #business #management #diplomacy
Trends in Global Fdi Evolution
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What’s behind the collapse in FDI flows to developing economies—and how can we turn the tide? And how can the world support fragile and conflict-affected economies facing mounting risks? In a recent Expert Answers interview with Andrea Tapia, I discussed two major challenges highlighted in the latest edition of the Global Economic Prospects report: 🔹 The sharp and sustained decline in Foreign Direct Investment 🔹 The worsening outlook for fragile and conflict-affected states (FCS) 🎥 You can watch the interview below: https://lnkd.in/e8qJzkMm 🔑 Key insights from our conversation: 📉 FDI flows to developing economies are at their lowest since 2005, down from 5% of GDP in the mid-2000s to around 2% today. 🌍 The decline reflects rising policy uncertainty, geopolitical tensions, and a broader retreat from globalization and structural reforms. 🛠️ To reverse this trend, countries must improve business environments, invest in human capital, and pursue deeper trade and investment integration. 🤝 Global cooperation—including risk mitigation and stronger development finance—is essential to reinvigorate cross-border investment. ⚠️ In fragile states, conflict has reduced GDP by up to 20% over five years—nearly half of the world’s extreme poor live in these settings. 🌱 Yet there is hope: FCS economies have young populations and valuable natural resources. With the right policies and global support, they can recover and thrive. #FDI #FragileStates #DevelopmentFinance #GlobalEconomy #WorldBank #ConflictRecovery #InvestingInPeople #EconomicProspects #economy The World Bank The World Bank Group United Nations World Bank for Reconstruction and Development | WBRD World Bank Development Economics #economy #econdev #globaleconomy #developingeconomies #growth #economics #development #fragility #conflict #econdev #emergingmarkets #development Jeetendra Khadan Peter Selcuk Samuel Hill Dana Vorisek Joseph Mawejje Carlos Arteta Joe Rebello Kristen Milhollin Leslie Yun David Young Hayley P. Amat Adarov International Monetary Fund The Brookings Institution UN Trade and Development (UNCTAD) UNDP IFC - International Finance Corporation Sustainable Development Solutions Network World Trade Organization
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Foreign direct investment (FDI) has declined since the global financial crisis, making it harder for developing countries to fund infrastructure, reduce poverty, create jobs, and tackle climate change. A The World Bank World Bank Development Economics report released last week by Amat Adarov and Hayley P. digs into the decline in FDI and policies that could be used to turn things around. This is also one of the current issues chapters of the June 2025 Global Economic Prospects. Key points: 📉 FDI inflows to EMDEs have declined, falling to about 2% of GDP—less than half the 2008 peak of 5%. 🌍 Most regions are affected, with nearly 60% of EMDEs seeing lower FDI-to-GDP ratios in 2012–23 compared to 2000–11. ⚠️ Key FDI drivers have weakened, including rising trade tensions, policy uncertainty, and a sharp drop in new investment treaties. 🚫 FDI policy is tightening, with more restrictive measures in the 2020s putting future inflows at risk. The authors argue that to attract FDI, maximize its benefits, and strengthen global cooperation countries should 🏛️ Improve institutional quality to build investor confidence and ensure policy stability. 📊 Promote macroeconomic stability to reduce risk and attract long-term investment. 🔓 Ease trade and investment restrictions to create a more open and competitive environment. 🤝 Foster global cooperation to uphold a rules-based system and support structural reforms, especially in LICs. 🛠️ Sustain enabling conditions to ensure FDI delivers long-term development benefits. 📒 Read the report: https://lnkd.in/guqueVbr 📕 Read the June 2025 GEP: https://lnkd.in/guMk4HGy
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