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Key Findings from the 2019 FDI Confidence Index

Paradoxes permeate the results of the 2019 Foreign Direct Investment (FDI) Confidence Index, the latest edition of the annual executive survey that ranks the countries likely to attract the most investment in the next three years.

Developed markets dominate the 2019 rankings, even as investors worry about rising political and economic risks within these markets. In frontier and emerging markets, average scores increased, yet not enough for more than a few to rank in the top 25. Cities play an increasingly important role in FDI decisions even in an era of rising nationalist sentiments. And despite investors consistently telling us in recent years that they plan to increase their levels of FDI, recorded levels of FDI fell once again in 2018. All told, these paradoxes at the global level also create some seemingly counterintuitive results in the Index rankings.

The FDI Confidence Index Top 25

 

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 Gain   Decline   Not ranked last year   No change
Rank Country Change from 2018 Score
2019/2018
(Scale of 3)
Remarks

1 United StatesUnited States 2.10/2.09 The United States maintains the Index’s top ranking for the seventh consecutive year. The country’s continued attractiveness is in large part the result of its sustained and robust economic expansion in recent years.

2 GermanyGermany ▲1 1.90/1.81 Germany’s improvement in position is likely due to strong competitiveness indicators and recently announced initiatives in technology and digital infrastructure. And while economic growth is expected to slow, it will remain in positive territory.

3 CanadaCanada ▼1 1.87/1.82 Despite falling one place in the Index, Canada’s score has been steadily improving in recent years. Efforts to boost investment appear to be paying off as FDI inflows increased nearly 60 percent from last year, reversing a years-long downward trend.

4 United KingdomUnited Kingdom 1.85/1.77 The United Kingdom holds steady in the fourth position for the third year in a row. Despite Brexit uncertainty, it remains a highly competitive, industrialized market and is the fifth largest economy in the world.

5 FranceFrance ▲2 1.79/1.70 France claims its highest-ever ranking on the Index this year. Likely contributing to this jump are an improving business environment and a recent decrease of corporate tax rates.

6 JapanJapan 1.78/1.72 Japan maintains its sixth-place ranking for the fourth year in a row. This may be partly due to economic performance expectations, as investors are the most optimistic about the country’s three-year outlook among the countries on the Index.

7 ChinaChina ▼2 1.72/1.76 China remains the only emerging market among the top 10, indicating investors continue to view the country as a top FDI destination. But domestic and external headwinds may be contributing to mixed investor views on its economic outlook.

8 ItalyItaly ▲2 1.67/1.57 Italy captures its highest ranking since 2002. This may be because of a less volatile political environment compared with a year ago as well as the enduring appeal of the country’s strong brands and robust manufacturing sector.

9 AustraliaAustralia ▼1 1.67/1.66 Australia has maintained its position among the top 10 FDI destinations for a decade. With more than a quarter century of uninterrupted economic growth, the country remains a large, stable investment destination.

10 SingaporeSingapore ▲2 1.65/1.53 Investors are very optimistic about Singapore’s economic outlook, which may have propelled the country regaining its place in the top 10 after a one-year hiatus. Its world-class business environment also remains a top driver of its attractiveness to investors.

11 SpainSpain ▲4 1.62/1.48 Spain’s national competitiveness has improved in recent years, and the financial system is showing growing signs of recovery. More broadly, an improving economic climate is likely contributing to greater investor confidence.

12 NetherlandsNetherlands ▲1 1.61/1.51 The Netherlands achieves its highest ranking to date. Strong business environment indicators and its growing appeal as a hub for companies moving out of the United Kingdom amid Brexit uncertainty likely drove this result.

13 SwitzerlandSwitzerland ▼4 1.59/1.58 Switzerland remains highly competitive across a variety of business indicators, and its recent economic growth has been robust. However, uncertainty over Bern’s access to the EU single market is rising.

14 DenmarkDenmark ▲6 1.58/1.45 Denmark achieves its highest ranking in the history of the Index. Its strength is in part the result of its strong performance on the factors investors prioritize when determining where to invest, such as lack of corruption and high levels of human capital.

15 SwedenSweden ▼1 1.55/1.48 Sweden remains a stable and business-friendly regulatory environment, and the government’s stated priorities include lowering personal and corporate tax rates. However, a weakening housing market may dent consumer spending growth.

16 IndiaIndia ▼5 1.54/1.56 Investor optimism about India’s economy remains strong, likely in part because of cross-border M&A recently hitting an all-time high and its economy forecast to continue growing robustly. There is uncertainty surrounding the long-term impact of some new foreign investment policies though.

17 South KoreaSouth Korea ▲1 1.54/1.46 Both the South Korean economy and its rankings on the Index are relatively stable. Investors may be attracted to the country partly because it has positioned itself as a leader in 5G wireless networks and other emerging technologies.

18 BelgiumBelgium ▲3 1.54/1.43 Belgium’s score increase is among the largest this year, likely driven in part by stable economic indicators. Investors appear unfazed by recent political turbulence, while the recent Belgian Pledge Act that simplifies borrowing and lending practices could be attracting investment.

19 New ZealandNew Zealand ▼3 1.52/1.48 New Zealand’s remarkably steady economic growth is a probable driving factor of investor confidence, as is its largely stable and business-friendly regulatory environment. The country’s food and beverage sector remains a key driver of FDI.

20 IrelandIreland ▼1 1.521.46 Ireland’s mixed Index performance could be because of Brexit uncertainty. It is the external economy most vulnerable to Brexit, but it also enjoys strong substitutability as an FDI destination with a post-Brexit United Kingdom.

21 AustriaAustria ▲3 1.50/1.42 Austria’s jump in the rankings is likely in part the result of its business-friendly tax environment, though a recent digital tax proposal pushes in the other direction. An area of growing strength is the country’s technology sector.

22 Taiwan (China)Taiwan (China) 1.50/NA Taiwan returns to the Index after a two-year hiatus, likely thanks in part to the business environment remaining open to foreign investment. Investors from the Asia Pacific region are particularly bullish about investing there.

23 FinlandFinland 1.50/NA Finland ranks among the top 25 for the second time in the Index’s history. The country’s highly skilled labor force is one of its strongest assets, particularly as the government pursues the digital transformation of the economy.

24 NorwayNorway ▼1 1.49/1.42 Norway’s economic growth outlook is strong, particularly vis-à-vis the rest of Europe. The economy is helped by the relatively stable global oil price outlook as well as by the country burnishing its image as a green energy champion.

25 MexicoMexico ▼8 1.49/1.47 Despite a significant fall in rank, Mexico’s score increase indicates it remains attractive to investors. These mixed results may be due to the expectation that the government will roll back privatization measures while opening the economy through new trade deals.
 
 Gain   Decline   Not ranked last year   No change
Rank Country Change from 2018 Score
2019/2018
(Scale of 3)

1 United StatesUnited States 2.10/2.09
The United States maintains the Index’s top ranking for the seventh consecutive year. The country’s continued attractiveness is in large part the result of its sustained and robust economic expansion in recent years.

2 GermanyGermany ▲1 1.90/1.81
Germany’s improvement in position is likely due to strong competitiveness indicators and recently announced initiatives in technology and digital infrastructure. And while economic growth is expected to slow, it will remain in positive territory.

3 CanadaCanada ▼1 1.87/1.82
Despite falling one place in the Index, Canada’s score has been steadily improving in recent years. Efforts to boost investment appear to be paying off as FDI inflows increased nearly 60 percent from last year, reversing a years-long downward trend.

4 United KingdomUnited Kingdom 1.85/1.77
The United Kingdom holds steady in the fourth position for the third year in a row. Despite Brexit uncertainty, it remains a highly competitive, industrialized market and is the fifth largest economy in the world.

5 FranceFrance ▲2 1.79/1.70
France claims its highest-ever ranking on the Index this year. Likely contributing to this jump are an improving business environment and a recent decrease of corporate tax rates.

6 JapanJapan 1.78/1.72
Japan maintains its sixth-place ranking for the fourth year in a row. This may be partly due to economic performance expectations, as investors are the most optimistic about the country’s three-year outlook among the countries on the Index.

7 ChinaChina ▼2 1.72/1.76
China remains the only emerging market among the top 10, indicating investors continue to view the country as a top FDI destination. But domestic and external headwinds may be contributing to mixed investor views on its economic outlook.

8 ItalyItaly ▲2 1.67/1.57
Italy captures its highest ranking since 2002. This may be because of a less volatile political environment compared with a year ago as well as the enduring appeal of the country’s strong brands and robust manufacturing sector.

9 AustraliaAustralia ▼1 1.67/1.66
Australia has maintained its position among the top 10 FDI destinations for a decade. With more than a quarter century of uninterrupted economic growth, the country remains a large, stable investment destination.

10 SingaporeSingapore ▲2 1.65/1.53
Investors are very optimistic about Singapore’s economic outlook, which may have propelled the country regaining its place in the top 10 after a one-year hiatus. Its world-class business environment also remains a top driver of its attractiveness to investors.

11 SpainSpain ▲4 1.62/1.48
Spain’s national competitiveness has improved in recent years, and the financial system is showing growing signs of recovery. More broadly, an improving economic climate is likely contributing to greater investor confidence.

12 NetherlandsNetherlands ▲1 1.61/1.51
The Netherlands achieves its highest ranking to date. Strong business environment indicators and its growing appeal as a hub for companies moving out of the United Kingdom amid Brexit uncertainty likely drove this result.

13 SwitzerlandSwitzerland ▼4 1.59/1.58
Switzerland remains highly competitive across a variety of business indicators, and its recent economic growth has been robust. However, uncertainty over Bern’s access to the EU single market is rising.

14 DenmarkDenmark ▲6 1.58/1.45
Denmark achieves its highest ranking in the history of the Index. Its strength is in part the result of its strong performance on the factors investors prioritize when determining where to invest, such as lack of corruption and high levels of human capital.

15 SwedenSweden ▼1 1.55/1.48
Sweden remains a stable and business-friendly regulatory environment, and the government’s stated priorities include lowering personal and corporate tax rates. However, a weakening housing market may dent consumer spending growth.

16 IndiaIndia ▼5 1.54/1.56
Investor optimism about India’s economy remains strong, likely in part because of cross-border M&A recently hitting an all-time high and its economy forecast to continue growing robustly. There is uncertainty surrounding the long-term impact of some new foreign investment policies though.

17 South KoreaSouth Korea ▲1 1.54/1.46
Both the South Korean economy and its rankings on the Index are relatively stable. Investors may be attracted to the country partly because it has positioned itself as a leader in 5G wireless networks and other emerging technologies.

18 BelgiumBelgium ▲3 1.54/1.43
Belgium’s score increase is among the largest this year, likely driven in part by stable economic indicators. Investors appear unfazed by recent political turbulence, while the recent Belgian Pledge Act that simplifies borrowing and lending practices could be attracting investment.

19 New ZealandNew Zealand ▼3 1.52/1.48
New Zealand’s remarkably steady economic growth is a probable driving factor of investor confidence, as is its largely stable and business-friendly regulatory environment. The country’s food and beverage sector remains a key driver of FDI.

20 IrelandIreland ▼1 1.521.46
Ireland’s mixed Index performance could be because of Brexit uncertainty. It is the external economy most vulnerable to Brexit, but it also enjoys strong substitutability as an FDI destination with a post-Brexit United Kingdom.

21 AustriaAustria ▲3 1.50/1.42
Austria’s jump in the rankings is likely in part the result of its business-friendly tax environment, though a recent digital tax proposal pushes in the other direction. An area of growing strength is the country’s technology sector.

22 Taiwan (China)Taiwan (China) 1.50/NA
Taiwan returns to the Index after a two-year hiatus, likely thanks in part to the business environment remaining open to foreign investment. Investors from the Asia Pacific region are particularly bullish about investing there.

23 FinlandFinland 1.50/NA
Finland ranks among the top 25 for the second time in the Index’s history. The country’s highly skilled labor force is one of its strongest assets, particularly as the government pursues the digital transformation of the economy.

24 NorwayNorway ▼1 1.49/1.42
Norway’s economic growth outlook is strong, particularly vis-à-vis the rest of Europe. The economy is helped by the relatively stable global oil price outlook as well as by the country burnishing its image as a green energy champion.

25 MexicoMexico ▼8 1.49/1.47
Despite a significant fall in rank, Mexico’s score increase indicates it remains attractive to investors. These mixed results may be due to the expectation that the government will roll back privatization measures while opening the economy through new trade deals.

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About the A.T. Kearney Foreign Direct Investment (FDI) Confidence Index®

The A.T. Kearney FDI Confidence Index is an annual survey of global business executives that ranks the markets likely to attract the most investment in the next three years. The first report was released in 1998. Click here for past editions.

The Index is constructed using primary data from a proprietary survey of 500 senior executives of the world’s leading corporations. The rankings are calculated based on questions about the respondents’ companies’ likelihood of making a direct investment in a market over the next three years.

In contrast to other backward-looking data on FDI flows, the FDI Confidence Index provides unique forward-looking analysis of the markets investors intend to target for FDI in the coming years. Click here for the full methodology.

What Is Foreign Direct Investment (FDI)?

For our survey, we define foreign direct investment an equity investment by a company in one country in a company in a different country.

It is based on UNCTAD’s definition that FDI is as “an investment involving a long-term relationship and reflecting a lasting interest and control by a resident entity in one economy (foreign direct investor or parent enterprise) of an enterprise resident in another economy (FDI enterprise or affiliate enterprise or foreign affiliate).”

Does the FDI Confidence Index Actually Predict Future FDI flows?

Since its inception in 1998, the countries ranked on the FDI Confidence Index have tracked closely with the top destinations for actual FDI flows in subsequent years. So at a macro level, the FDI Confidence Index is a relatively reasonable predictor of where FDI flows will go in the next three years.

However, investor intentions can change due to economic or political developments in potential host markets, the availability of quality targets and projects in the potential host market, or other reasons. In addition, the FDI Confidence Index is not an apples-to-apples comparison with FDI flows because the units of analysis are different. The FDI Confidence Index gauges companies’ planned investments in a market, but not the size of those investments. FDI flows are usually reported in US dollars, so a big investment by one company can outweigh smaller investments by many companies.

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