Globally, foreign direct investment inflows fell 2 percent this year to $1.3 trillion, while in developing countries they fell 7 percent to $867 billion.
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Foreign investment remains sluggish due to a slowing global economy and rising geopolitical tensions.
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Financing shortfalls are hindering efforts to achieve the 2030 Agenda, and policy measures are needed to maintain sustainable financing.
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Pro-business and digital government solutions can foster an environment that addresses low investment.
Global foreign direct investment (FDI) is expected to fall 2% to $1.3 trillion in 2023, according to the latest research. World Investment Report The United Nations Commission on Trade and Development (UNCTAD) announced this on June 20th.
Excluding a few exceptions, the report found that global foreign investment fell sharply by more than 10 percent for the second consecutive year, driven by rising trade and geopolitical tensions as the global economy slowed.
While the outlook for FDI in 2024 remains bleak, the report says that “moderate growth seems possible for the full year,” citing easing financial conditions and concerted efforts to promote investment that are prominent features of national policies and international agreements.
Global efforts to attract and retain capital flows have led to a proliferation of online information portals and single windows, fostering a business- and investment-friendly environment.
For developing countries, digitalization not only provides technological solutions but also a stepping stone to broader digital government adoption to address underlying weaknesses in governance and institutions that often hinder investment.
“Investment is not just about capital flows; it is also about human potential, environmental stewardship and the enduring pursuit of a more equitable and sustainable world,” said Rebecca Grynspan, UN Secretary-General for Trade and Development.
Foreign investment declined moderately in most regions
Destinations of FDI Developing countries fell 7% to $867 billion Last year, developing Asia saw an 8% decline (more details here).
The figure fell by 3% in Africa (more here) and 1% in Latin America and the Caribbean (more here).
on the other hand, Developed country There were also efforts to introduce a global minimum tax rate on multinational corporate profits, which was heavily influenced by the financial transactions of multinational corporations.
Flows into most of Europe and North America fell by 14% and 5%, respectively.
Foreign Investment A structurally weak and fragile economy bIt ruined the trend.There have been slight increases in least developed countries, landlocked developing countries and small island developing States.
Lack of investment slows sustainable development
Due to the tight fundraising situation in 2023, International Project Finance Transactions Investment in sectors that are essential for financing infrastructure and public services, such as electricity and renewable energy, fell by a quarter. This led to a 10% drop in investment in sectors related to electricity and renewable energy. Sustainable Development Goals The SDGs have had their most notable impact on agri-food systems and water and sanitation: these areas saw fewer projects funded internationally in 2023 than in 2015, when the goals were adopted.
on the other hand, Greenfield Project Publications from developing countries increased by over 1,000, with a large concentration in Asia.
Efforts needed to strengthen sustainable finance
On the other hand, mobilization of funds SDG Investment Investment through sustainable finance products in global capital markets is slowing.
Sustainable bonds showed slight growth in 2023, while new inflows into sustainable investment funds fell by 60%.
In this context, the United Nations Department of Trade and Development notes that greenwashing concerns related to misleading sustainability claims are increasingly affecting investor demand and has called for more systematic efforts to bring greater transparency and credibility to the sustainable funds market, including through clearly defined product standards, robust sustainability disclosures, external audits and third-party ratings.
Global efforts to promote investment
Promoting business and investment It is central to both developing the private sector and attracting foreign direct investment in developing countries.
According to the World Investment Report, by 2023, Investment policy measures The policies adopted in these economies were investor friendly.
Given the need for access to information, transparency in rules and regulations, and streamlined administrative procedures, digital tools are key to effective implementation.
The United Nations Trade and Development Organization (UNTDA) Global Action Menu for Promoting Investment In 2016, the number of online individual helplines in developing countries nearly quadrupled, from 17 to 67. In developed countries, the number more than doubled, from 12 to 25.
Similarly, the number of information portals for company and investor registration in developing countries will expand from 87 in 2016 to 135 by 2024, while in developed countries it will increase from 42 to 51.
A bottom-up, cost-effective approach to digital government
Furthermore, by encouraging business and investment, it complements the traditional top-down approach and supports the expansion of digital government services.
By starting with basic services for businesses and gradually expanding to more institutions, countries can achieve economies of scale and scope in digital government tools that benefit all businesses, domestic and foreign, large and small.
Developing countries in particular can benefit from this bottom-up approach, which creates immediate value for users, has revenue generation potential for governments, and does not require major legislative changes.
