United Nations – Global economic fracturing and shifting investment

This report discusses 10 trends in foreign direct investment (FDI) and highlights three key insights with significant implications for developing countries and their industrialization strategies. Firstly, FDI growth and that of Global Value Chains (GVCs) have disconnected from GDP and trade growth. Secondly, there is a growing gap in investment trends between manufacturing and services sectors. Thirdly, investment patterns in China have become detached from the rest of the world. Recent geopolitical differences and global crises have led to a transition from divergence to fracturing in investment patterns. This has resulted in high levels of uncertainty and limited opportunities for countries to benefit strategically from diversification. While there are new opportunities for investment in environmental technologies to drive industrial development, many smaller developing countries, especially Least Developed Countries (LDCs), are experiencing marginalization and vulnerability. The report notes a long-term stagnation in global FDI growth since around 2010 and a shift towards services-centric and asset-light investments. Manufacturing FDI has shown negative growth post-Covid-19, indicating a trend towards deglobalization. This shift towards services-oriented FDI is impacting all regions, blurring traditional differences between developed and developing regions. These trends call for a re-evaluation of strategies to attract inclusive and sustainable FDI for development.