World Bank flags drop in foreign investment to developing countries
[WASHINGTON] The World Bank said in a report on Monday (Jun 16) that foreign direct investment (FDI) into developing economies has hit the lowest level since 2005, citing growing trade and investment barriers.
Developing countries received just US$435 billion of such investment in 2023, the Washington-based development lender added, noting this was the latest year for which data was available.
As a share of gross domestic product (GDP), FDI flows to developing economies were at 2.3 per cent in 2023 – about half the level of their peak in 2008.
'What we're seeing is a result of public policy,' said World Bank chief economist Indermit Gill, noting that investment is falling while public debt is reaching new highs.
'In recent years governments have been busy erecting barriers to investment and trade when they should be deliberately taking them down,' he added in a statement.
Reversing this slowdown is 'essential for job creation, sustained growth, and achieving broader development goals,' urged World Bank deputy chief economist Ayhan Kose.
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The bank stressed that FDI can be a strong boost to economic growth.
But investment treaties, a catalyst for investment flows, have also fallen in numbers.
Between 2010 and 2024, just 380 new investment treaties came into force – less than half the number between 2000 and 2009, when around 870 pacts took effect – the World Bank report found.
'Global economic policy uncertainty and geopolitical risk have soared to the highest level since the turn of the century,' the report noted.
Meanwhile, FDI tends to be concentrated in larger economies.
Two-thirds of FDI flows to developing economies between 2012 and 2023 went to just 10 countries, with China, India and Brazil jointly receiving almost half of total FDI inflows to emerging market and developing economies.
The 26 poorest countries received 'barely two per cent of the total,' the report added.
The World Bank urged for stronger global cooperation to help direct funding towards developing economies with the biggest investment gaps. AFP
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