Geneva, Switzerland — Global foreign direct investment (FDI) fell by 2 percent to $1.3 trillion in 2023 amid an economic slowdown and rising geopolitical tensions, according to the latest World Investment Report released by UN Trade and Development (UNCTAD).
But the report highlights that the decline exceeds 10 percent when excluding the large swings in investment flows in a few European conduit economies.
The downturn in project finance affected sustainable development, with new funding for Sustainable Development Goals (SDGs) sectors dropping over 10 percent, particularly in agrifood and water. This hampers efforts to achieve the 2030 Agenda and calls for urgent policy action to revamp sustainable development finance.
The report emphasizes that business facilitation and digital government solutions can address low investment by creating a transparent and streamlined environment. It highlights significant growth in online services and information portals, saying such tools also support broader digital government development, benefiting developing nations in particular.
While the prospects for FDI remain challenging in 2024, the report says that “modest growth for the full year appears possible”, citing the easing of financial conditions and concerted efforts towards investment facilitation – a prominent feature of national policies and international agreements.
With the global push to attract and retain financial flows, online information portals and single windows have proliferated to foster a conducive business and investment climate.
For developing countries, digitalization not only provides a technical solution, but also a stepping stone for wider digital government implementation to address underlying weaknesses in governance and institutions which often hinder investment.
“Investment is not just about capital flows; it is about human potential, environmental stewardship and the enduring pursuit of a more equitable and sustainable world,” says UN Trade and Development Secretary-General Rebeca Grynspan.
FDI flows to developing countries fell by 7 percent to $867 billion last year, reflecting an 8 percent decrease in developing Asia. This figure dipped by 3 percent in Africa and by 1 percent in Latin America and the Caribbean.
On the other hand, flows to developed countries were strongly affected by financial transactions of multinational enterprises, partly due to efforts to implement a global minimum tax rate on the profits of these corporations. Inflows to most parts of Europe and North America were down by 14 percent and 5 percent, respectively.