To answer the question of which region of the world appeared to be most attractive to inward foreign direct investment (FDI), the remittance service provider MoneyTransfers.com has analysed the recently published data of the Organisation for Economic Co-operation and Development (OECD).
Essentially, an FDI is an overseas investment made from one person or company in one country to another person or company elsewhere. In order for an investment to be identified under this term, the investing party must hold at least 10% of the company into which they are investing; otherwise the contribution would be categorised as part of their stock portfolio.
For the focus of their research, MoneyTransfers.com analysed the rate of FDI inflows (also known as ‘inward FDI’), as this type of FDI measures investments made in a country from another country. Compiling and processing the data of the OECD – through their ‘Foreign Direct Investment Statistics: Data, Analysis and Forecasts‘ report, MoneyTransfers.com were aiming to identify which countries in the world benefitted the most and the least from inward FDI in 2020.
From the OECD data, MoneyTransfers.com identified the FDI inflows figures recorded for the four quarters in 2020 (Q1 – Jan to Mar 2020, Q2 – Apr to Jun 2020, Q3 – Jul to Sep 2020 and Q4 – Oct to Dec 2020) and then added them together to establish a collective and definitive FDI inflows figure for a whole 12-month period (which was January to December 2020).
When picking apart the data, MoneyTransfers.com discovered that China was the largest beneficiary of inward FDI in the world last year (2020), receiving the colossal sum of $212.5 billion. A 14% increase from the year before (2019), where FDI inflows into the country equated to $187.2 billion.
In second place is the United States who were the second-biggest recipient of inward FDI in 2020 at $177.1 billion. Despite such a hefty sum, it represented a 37% fall in FDI inflows in contrast to 2019, when accumulative inward FDI was $282.1 billion.
Over in Europe, and Luxembourg was the continent’s highest-ranking country; securing fourth place. In 2020, Luxembourg’s economy benefitted from an injection of $62 billion from inward FDI. From all the countries analysed in the research, Luxembourg experienced the greatest year-on-year increase (319%) in FDI inflows, $47.2 billion more was generated from inward FDI last year when contrasting 2019 figures against 2020 figures.
India ($64.4 billion), Germany ($35.6 billion), and Ireland ($33.3 billion) are among the other countries which gained more than $3 billion each from inward FDI in 2020, respectively ranking third, fifth and sixth.
The United Kingdom came in at 12th position, as inward FDI in the country was a sizeable $19.7 billion in 2020. This also meant that FDI inflows in the UK fell by 57% when compared to the collective $45.4 billion inward FDI that was made in 2019.
Interestingly, from the assessed countries, Finland in 29th position is the country which suffered from the biggest fall in year-on-year inward FDI at 81%. In 2020, FDI inflows in the country equated to $2.6 billion – significantly less when shadowed against the $13.5 billion that was generated from inward FDI in 2019.
At the other end in the 33rd spot is Lithuania, as the country only amassed $478 million from inward FDI in 2020. This signified $722 million less from inward FDI last year when comparing 2019 figures to 2020 figures.
Overall, 28 out of the 37 countries reviewed for the research adversely experienced a year-on-year decrease in inward FDI in 2020. Given the worldwide turbulence and economic uncertainty the Covid-19 pandemic caused last year, businesses and entrepreneurs alike were perhaps much more hesitant than ever before about investing outside of their domestic borders.