World Bank flags alarming drop in FDI to developing nations; says investment remains concentrated in 10 countries, leaving poorest behind

Foreign direct investment (FDI) in developing countries has fallen to its lowest level since 2005, according to a new report by the World Bank. The report, released on Monday, blamed rising barriers to trade and investment as a major cause.

In 2023, developing countries received just $435 billion in FDI, the lowest in nearly two decades. This is also the most recent year for which data is available. As a percentage of GDP, FDI in these countries was only 2.3% last year, nearly half of what it was in 2008, during the global financial boom.

“This is the result of public policy,” said Indermit Gill, chief economist at the World Bank. “Governments have been building walls around trade and investment, when they should be tearing them down.”

Gill also pointed out that while investment is falling, public debt is rising to record levels. His colleague, Ayhan Kose, deputy chief economist, added that reversing this drop in FDI is crucial for creating jobs, boosting long-term growth, and meeting development goals.

The report stressed that FDI plays a big role in supporting economic growth in poorer nations. However, it also pointed out that one key driver of investment, international treaties, has slowed down sharply.

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Between 2010 and 2024, only 380 new investment treaties were signed. That’s less than half of the 870 treaties signed between 2000 and 2009.The World Bank also said that global policy uncertainty and geopolitical tensions are now higher than at any time since the early 2000s. Meanwhile, FDI remains concentrated in just a few countries. From 2012 to 2023, two-thirds of all FDI into developing countries went to only 10 nations, with China, India, and Brazil together receiving nearly half of all such investment.

In contrast, the world’s 26 poorest countries received just 2% of total FDI over the same period.

The World Bank has called for stronger international cooperation to help channel investment into the developing economies that need it most.

Inputs from AFP

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