The evolution of foreign direct investment

Foreign direct investment (FDI) in developing countries and from developing countries to developing countries are one of the important elements of the XXIst century paradigm shift, in addition to demographics, technological revolution and the magnitude of the population getting access to a new wealth. This post analyses FDI inflows and outflows by income groups, geographic regions and countries.

Thierry Warin https://www.nuance-r.com/principalInvestigator.html (HEC Montréal & Cirano (Montréal))
06-10-2020

Table of Contents


FDI Inflows and Outflows by Income Groups

When it comes to income, the World Bank divides the world’s economies into four income groups: high, upper-middle, lower-middle, and low. (Agarwala et al. 1983) The income classification is based on a measure of national income per person, or GNI per capita, calculated using the Atlas method.

Based on the World Bank Atlas method as of 1 July 2019, the income economies are defined as follow:

FDI, net inflows

In 1970, the net inflows of foreign direct investment for high income economies amounted to 9.3 billion current US$, those for the upper middle income economies were at 2.2 billion current US$, those for the lower middle income economies were at 0.75 billion current US$ while those for the low income economies reached 0.11 billion current US$.

In 2000, the net inflows of foreign direct investment for high income economies amounted to 1424 billion current US$, those for the upper middle income economies were at 127 billion current US$, those for the lower middle income economies were at 16 billion current US$ while those for the low income economies reached 1.8 billion current US$.

Today, the net inflows of foreign direct investment for the four different income economies respectively have grown by -40%, 200%, 411% and -16% compared to the year 2000.

FDI, net outflows

In 1970, the net outflows of foreign direct investment for high income economies amounted to 12 billion current US$, those for the upper middle income economies were at 0.038 billion current US$, those for the lower middle income economies were at 0.002 billion current US$ while those for the low income economies reached billion current US$.

In 2000, the net outflows of foreign direct investment for high income economies amounted to 1388 billion current US$, those for the upper middle income economies were at 15 billion current US$, those for the lower middle income economies were at 0.12 billion current US$ while those for the low income economies reached 0.73 billion current US$.

Today, the net outflows of foreign direct investment for the four different income economies respectively have grown by -34%, 1091%, 13569% and -93% compared to the year 2000.

FDI Inflows and Outflows by Geographic Regions

Groupings are primarily based on the regions used for administrative purposes by the World Bank. There are two main variants: one which includes all economies, and one which excludes high-income economies. In this case, all economies are included.

FDI, net inflows

In 2019, the net inflows of foreign direct investment for Europe & Central Asia were at 282 billions current US$, East Asia & Pacific at 450 billions current US$ whereas South Asia reached 54 billions current US$.The same year, the North America and Latin America & Caribbean respectively amounted to 356 billions current US$ and 144 billions current US$. Finally, the 2019 Middle East & North Africa net inflows of FDI accounted for 32 billions current US$ and those for Sub-Saharan Africa were at 2.8 billions current US$.

In the last 10 years each region has evolved as follow:

FDI, net outflows

In 2019, the net outflows of foreign direct investment for Europe & Central Asia were at 286 billions current US$, East Asia & Pacific at 487 billions current US$ whereas South Asia reached 12 billions current US$.The same year, the North America and Latin America & Caribbean respectively amounted to 269 billions current US$ and 37 billions current US$. Finally, the 2019 Middle East & North Africa net outflows of FDI accounted for 22 billions current US$ and those for Sub-Saharan Africa were at 1.5 billions current US$.

In the last 10 years each region has evolved as follow:

FDI Inflows and Outflows by Countries

FDI, net inflows

In 2019, the net inflows of foreign direct investment for Brazil were at 79 billions current US$, India at 51 billions current US$ whereas China reached 156 billions current US$. The same year, France and Canada respectively amounted to 67 billions current US$ and 45 billions current US$. Finally, the 2019 Mexico net inflows of FDI accounted for 29 billions current US$ and those for United States were at 311 billions current US$.

In the last 10 years each region has evolved as follow:

FDI, net outflows

In 2019, the net outflows of foreign direct investment for Brazil were at 22 billions current US$, India at 12 billions current US$ whereas China reached 98 billions current US$. The same year, France and Canada respectively amounted to 53 billions current US$ and 71 billions current US$. Finally, the 2019 Mexico net outflows of FDI accounted for 6.2 billions current US$ and those for United States were at 198 billions current US$.

In the last 10 years each region has evolved as follow:

Tools

This section provides access to the resources that were used to create this article.

Agarwala, Ramgopal, Richard Heaver, Dominique Lallement, Geoffrey Lamb, Pierre Landell Mills, Selcuk Ozgediz, and Mary Shirley. 1983. “World Development Report 1983.” 11119. The World Bank. http://documents.worldbank.org/curated/en/997591468322730301/World-development-report-1983.

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Citation

For attribution, please cite this work as

Warin, "Data Science for International Business: The evolution of foreign direct investment", ds4ib.org, 2020

BibTeX citation

@article{warin2020fdi,
  author = {Warin, Thierry},
  title = {Data Science for International Business: The evolution of foreign direct investment},
  journal = {ds4ib.org},
  year = {2020},
  note = {https://ds4ib.org/posts/2020-06-10-fdi/},
  doi = {10.6084/m9.figshare.12485789.v1}
}