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Global Foreign Direct Investment Declined in 2016, But Should Rise in 2017

Lou Bertin

Continuing sluggish global economic growth and resulting weakening world trade volumes led to a 13 percent yearly decline in global flows of foreign direct investment (FDI) in 2016, according to a recently released report from the United Nations Conference on Trade and Development’s (UNCTAD’s) Global Investment Trends Monitor.1

$1.52 Trillion in Foreign Direct Investment for 2016


The drop, which the UNCTAD report said resulted in $1.52 trillion being invested across borders in 2016, was not felt equally across all economies. As an example, FDI flows to Europe dropped 29 percent to an estimated $385 billion, while FDI flows to North America grew by 6 percent – to a matching $385 billion.2


Overall, “FDI recovery continues along a bumpy road,” said UNCTAD Secretary-General Mukhisa Kituyi in his comments on the UNCTAD report.3 “Particularly of concern is the sharp drop-off in manufacturing investment projects, which play such an important role in generating badly needed productivity improvements in developing economies.” The report shows that FDI flows to those developing economies dropped 20 percent to an estimated $600 billion, driven at least in part by falling commodities prices.


FDI historically has allowed investors to seek markets they believe will deliver the highest rates of return on their capital investments. Beyond reducing risk to investors, FDI has been viewed as a means for spreading best practices around the globe, primarily in the areas of corporate governance, adherence to accepted accounting practices and respect for global regulations.4


Looking ahead to 2017, continuing global economic turbulence will be the principal element driving FDI. As UNCTAD’s Kituyi observed, “Economic fundamentals point to a potential increase in FDI flows by around 10 percent in 2017. However, significant uncertainties about the shape of future economic policy developments could hamper FDI in the short-term.”5


Historically, FDI performance is driven by multiple factors, some quantifiable, some less so. UNCTAD says these include the freedom for cross-border investors to invest in every segment of the target economy; the ease (or lack thereof) in starting new businesses; access to industrial land and facilities, and – critically – the effectiveness of governing institutions when it comes to enforcing the target economy’s existing laws and business regulations.6


Collectively, those principal factors (along with the myriad other variables that define every nation’s economic norms), mean that FDI will likely remain heterogeneous, and therein lies the difficulty in drawing blanket conclusions regarding the overall strength or weakness of the FDI environment. As an example of the importance of taking a long view of the short-term shifts in FDI, the developing economies that experienced a 20 percent year-to-year drop (principally those of Latin America, the Caribbean and developing Asia) continue to comprise half of the top-10 recipient economies globally.


The outlook for 2017 FDI performance is guardedly optimistic, according to UNCTAD. Overall, growth in developed countries is expected, driven in part by fiscal stimulus programs in the United States. Driving potential rebounds in emerging and developing economies will be rises in growth for natural resources exporters, with that growth coming as a result of commodity price increases, particularly the price of crude oil. The UNCTAD report predicts that overall world trade volumes will grow by 3.8 percent in 2017 (as opposed to 2016’s 2.3 percent increase), leading to the 10 percent growth in global FDI the body is projecting.


According to the UNCTAD report, it is widely believed that the all-too-visible hands of political decisions stand to outweigh the invisible hands of markets. Geopolitical uncertainties around the world are likely to affect overall FDI flows. For developing economies, these factors are of paramount importance because any extended period of uncertainty could easily undermine the momentum provided by past FDI inflows.



The global FDI environment appropriately mirrors March weather anywhere on the planet – small changes for some and the potential for big swings for others. UNCTAD Secretary General Kituyi notes that things will continue to be “bumpy” for the foreseeable future.

Lou Bertin-The Author

The Author

Lou Bertin

Lou Bertin has been a technology journalist, public relations professional and corporate advisor for more than 25 years, providing writing, event moderation, webcasting and podcasting services for publications like CIO magazine and InformationWeek, and corporations such as IBM, Intel, Microsoft and many others.


1. Global Investments Trends Monitor, United Nations Conference on Trade and Development;
2. Ibid.
3. Ibid.
4. "How Beneficial Is Foreign Direct Investment for Developing Countries?", Finance & Development;
5. Global Investments Trends Monitor, United Nations Conference on Trade and Development; ;
6. Investing Across Borders, The World Bank;

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