Question

What are 7 commonalities between top countries ranked in the FDI Confidence Index?

Answer 1

These are the countries that win the most total FDI in dollar terms, based on the latest figures from the World Bank. While this is certainly one way to measure FDI performance, it clearly seems to advantage size. All the big countries by GDP, population and land mass are featured in the top 20, including Australia, Brazil, Canada, China, India, the US and the Russian Federation.

FDI is just as important to these developed behemoths as it is for smaller, developing nations. President Trump openly claimed that his tax repatriation scheme would induce US and foreign companies to build more factories and facilities in the US—that was certainly part of the stated intent.

But size isn’t everything when it comes to drawing investment. Industrious Hong Kong and Singapore, discreet Luxembourg and the Cayman Islands, low-tax Ireland and the Netherlands also make the list of FDI Giants. These are countries large in wealth, not land or markets. Some are—often because of their colonial past—historical gateways for trade, and thus offer traditional processes, relationships, know-how and institutions that give them privileged platforms for international business. Others, precisely to overcome their small size, have equipped themselves with investor-supportive regulations and institutions, stilts that allow them to walk among giants.

Most of the countries on the 10-year list of cumulative FDI inflows are also on the latest single-year list, meaning these big-draw countries tend to hold their advantage over time. Still, looking over the past decade offers a window on how the impact of the financial crisis and subsequent recession varied from country to country.

Two countries in particular seem to have outperformed in 2016, however: Italy and Sweden. After a big dip during the recession, Italy and Sweden are now showing an upward trend in FDI. Germany’s FDI, on the other hand, recovered almost immediately after the crisis first hit, with investors looking for a refuge in Europe. More recently, as other eurozone members regain strength, Germany is on a downward trend. Spain, where recovery has been slower than elsewhere, has also lost its position in the ranking. Distrust in Spain’s finances may have hindered FDI flows until very recently. The increase of more than 50% in FDI inflows in 2016 might indicate an uptick in investors’ trust.