Question

Identify the trendiest countries for Foreign Direct Investment in this 2020. Do you see any changes compared to 2018? Explain your answer.  

250 words

Answer 1

Trendiest countries for Foreign Direct Investment in this 2020

With global expansion dominating the world scenario swiftly, many people have started to look for options outside their motherland. The basic factors to start any business includes tax rates, infrastructure, the capacity of trade, investor protection, corruption, access to utilities, quality of life, red tape, freedom (personal, trade, and monetary), and workforce.

The Netherlands has been recognized as the best country in the world for foreign direct investment (FDI), according to the CEOWORLD magazine 2020 report, while Singapore and New Zealand placed second and third, respectively. The 2020 rankings placed France in fourth ahead of India into fifth; while the United Kingdom ranked sixth, and Australia seventh. Overall, among the top 10 best countries in the world, for its citizens to live, the eighth, ninth, and tenth positions are held by the British Virgin Islands, Switzerland, and Luxembourg.

Countries With the Best Foreign Direct Investment Opportunities ranking is an annual survey of global business executives, financial advisors, affluent families, financial institutions, corporations, private investors, and high-to-ultra high net worth individuals that ranks markets that are likely to attract the most investment in the next three years. The survey was conducted from January to April 2020, gathering over 132,500 replies. All participating companies have annual revenues of $100 million or more. The companies are headquartered in 84 countries and span all sectors. Ranking scores are based on responses only from companies headquartered in foreign markets. For example, the ranking score for the United Kingdom was calculated without responses from UK-headquartered investors.

List of top twenty Countries With Best Foreign Direct Investment Opportunities, 2020

Rank	Country	Investor Friendliness Index	Investor Sentiments Index
1	United States	99.81	97.04
2	Singapore	98.38	96.25
3	Netherlands	95.95	95.42
4	France	95.56	95.2
5	India	95.3	95.01
6	United Kingdom	95.19	94.95
7	Australia	94.98	94.88
8	British Virgin Islands	94.73	94.51
9	Switzerland	94.71	94.51
10	Luxembourg	94.54	94.49
11	Brazil	94.42	94.25
12	Taiwan	94.21	93.56
13	Germany	93.9	93.22
14	Mexico	93.57	93.02
15	Ireland	93.56	92.44
16	Hong Kong	93.52	92.17
17	Canada	93.18	91.98
18	Poland	92.96	91.84
19	United Arab Emirates	92.86	91.71
20	Portugal	92.37	91.55

Luxembourg (Ranked 10th): This landlocked country in the European continent finishes on the second spot after Finland. Touted as one of the wealthiest countries in the entire continent, the citizens here enjoy a high standard of living. The country has a top-notch finance sector that is the biggest contributor to its economy. With a high bureaucracy standard, low manufacturing costs, corruption-free society, and transparency in government policies, Luxembourg is another top favorite for setting a business.

Canada (Ranked 17th): The only North American country to make it to the list is Canada. Functioning highly on the major attributes such as bureaucratic policies, corruption-free environment, transparency in government policies, and low manufacturing costs, the nation is best for conducting business. All thanks to the immigration policies exercised by the government, Canada has become a forerunner in economic stability. These factors together have to lead the nation in achieving an excellent business environment for all startups leading to unhindered business operations.

Denmark (Ranked 21st): Another Scandinavian country to make it to the list is Denmark. The effective digitalization process is one of the major factors that contribute to the nation’s business policies. Another prime takeaway is the inculcated digital methods, which help in the registration of new business in a single day. The trade policies of the country are also easy due to the ‘free border’ scenario and the flexicurity model helps businesses to expand quickly.

Sweden (Ranked 26th): Sweden is another major player when it comes to business policies. The easy to operate government policies, the standard of living combined with an attractive infrastructure makes it easy for setting up a business. Another factor that helps the country to carry out commerce is skilled labor forces. These all are the prime factors that have together made the nation an epicenter for operating new business easily.

Finland (Ranked 32nd): Finland is a Nordic nation in Europe that is regarded as one of the best places to start a business. The Finnish government welcomes international companies warmly as they harness a lot of opportunities for innovation. Businesses who prefer to start their venture also enjoy a plethora of benefits in the nation. As Finland’s economy primarily relies on free-market capitalism, about one-third of GDP comes from international trade. Also due to the support of the government, setting up a business in the country is very easy and takes only a couple of weeks to start off.

Norway (Ranked 37th): The arctic oasis in the Scandinavian peninsula is also one of the favorable countries open to business. Norway has successfully leveraged the strong technological sector to the energetic workforce, making it a global business leader. The high-income nation with a bustling private structure has one of the most efficient systems in the world for conducting business. Also, the country’s startup procedure including all the formalities takes only 4 days and thus makes it easy for a business to operate smoothly.

Detailed findings & methodology:

In order to determine the rankings, researchers at the CEOWORLD magazine compiled analyzed and compared 84 countries across two key categories: 1) Investor Friendliness and 2) Investor Sentiments. To evaluate those dimensions, researchers looked at 16 indicators that fell into one of the three categories. Each attribute was graded on a 100-point scale.

1) Investor Friendliness Index

Startup Activity
Number Of Failed Businesses (Employers With Over 100-Plus Employees)
Productivity (Based On Per Capita GDP)
Productivity (Based On Purchasing Power Parity GDP)
Access To Capital
Stock Market Performance
Labor Market
Natural Resources

2) Investor Sentiments Index

Cost Of Living (Grocery, Housing, Utilities, Transportation, And Healthcare Costs)
Business Tax Climates (Corporate, Individual Income, Sales, Unemployment Insurance, And Property Tax Rates)
Quality Of Life (Access To Healthcare, Education, And Physical Safety)
Unemployment Rate
Availability Of Employees
Working-Age Population
Working-Age Population Growth
Education Level Of Potential Employees

Raw data for countries were normalized on a 1-100 scale according to the following: Each individual indicator was given equal weighting within each of the two categories with some indicators being comprised of 2-3 sub-indicators that were also weighted equally. Each category was weighted equally to arrive at the overall index.

Changes in FDI in 2020 as compared to 2018

The United Nations Conference on Trade and Development (UNCTAD) released the latest issue of its Global Investment Trends Monitor in January. With this release, the Investment Research team at SelectUSA was excited to analyze the latest global 2019 numbers and better understand a few of the key global foreign direct investment (FDI) trends during the last year!

In 2019, global FDI flows totaled $1.39 trillion, which was a one percent decrease from $1.41 trillion in 2018. These global flows reflect both mergers and acquisitions (M&As) and greenfield investment activity. This slight decline in FDI flow accompanied global patterns of slowed economic growth and policy uncertainty. While there is great country-specific variation in trend, FDI flows to developed countries decreased six percent to a historically low level of $643 billion. Simultaneously, flows to developing countries were constant at $695 billion. Announced greenfield projects, an indicator of future trends, overall performed better than cross-border M&As in 2019. Globally, announced greenfield projects decreased 22 percent, compared to a 40 percent decrease in announced cross-border M&As.

In contrast to larger declines in other developed economies, the United States received consistent inward FDI between 2018 and 2019, with $251 billion in inflows in 2019. These preliminary estimates indicate that the United States is still the largest destination for FDI in the world, with inflows at least $100 billion greater than those of any other destination market. Germany, Japan, and the Netherlands were the largest source markets of FDI flows to the United States, while U.S. inflows from Canada and the broader European Union (EU) significantly declined.

Overall, the EU saw a 15 percent decrease in FDI inflows to $305 billion. Despite being the top destination for FDI in Europe, the United Kingdom’s FDI inflows fell by six percent as it approached Brexit. France and Germany also were in the top 10 destination markets for FDI inflows at $52 billion and $40 billion, respectively.

FDI inflows to developing Asia made up one-third of global FDI flows in 2019, despite its FDI value declining six percent from 2018. Hong Kong drove much of this drop as its own inflows fell by 48 percent amid divestment and unrest. However, Hong Kong remained the sixth-highest destination market in the world for FDI. Inflows to China saw almost no change from 2018 to 2019, leaving China the second-highest destination market for FDI in the world at $140 billion, followed by Singapore at $110 billion.

Lastly, despite these trends in other parts of the world, the Latin America and Caribbean region saw inflows increase by 16 percent, reaching $170 billion in 2019. Within the region, Brazil’s inward FDI flows increased by 26 percent to $75 billion, cementing itself as the fourth-largest recipient of FDI in the world. UNCTAD gives some of the credit for this jump to Brazil’s new privatization program, which launched in July 2019 as an effort to revitalize the economy.

What does this mean for 2020? The global outlook is optimistic! UNCTAD projects that global FDI flows will increase slightly during the next year alongside continuing high corporate profits and growing international trade. UNCTAD also expects GDP growth and capital investment to increase globally. While UNCTAD noted a 22 percent decrease in global greenfield FDI announcements from 2018 to 2019, the opposite was true for the United States. Data from fDi Markets indicated that the value of greenfield FDI announcements into the United States totaled $91.7 billion in 2019, a 26.9 percent increase from 2018.

With consistently strong U.S. growth in greenfield FDI and a positive global forecast, SelectUSA is excited to welcome and facilitate even more greenfield investment in the United States throughout 2020.