July 14, 2024

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Foreign investment is still weak in the world

Foreign investment is still weak in the world

Geneva – Global foreign direct investment in 2023 reached $1.3 trillion, 2% lower than the previous year, due to global geopolitical and trade tensions, according to an analysis by the World Bank. UNCTAD (United Nations Trade and Development) issued on Thursday 20th of this month.

If the effect of certain exceptions is excluded, Organization report The United Nations Conference on Trade and Development (formerly known as UNCTAD) reveals a sharp decline of more than 10% in global foreign investment for the second year in a row.

With constrained financing conditions in 2023, the number of international project finance agreements – essential to finance infrastructure and public services such as electricity and renewable energy – fell by a quarter.

Inadequate funding is hampering efforts to achieve the 2030 Agenda, through which the United Nations has set 17 sustainable development goals to improve the lives of the world’s people and the health of the planet.

Investments in agri-food, water and sanitation systems are mainly affected. These sectors registered fewer internationally funded projects in 2023 than in 2015, when the Sustainable Development Goals were adopted.

The mobilization of funds to invest in the SDGs through sustainable financial products in global capital markets is slowing.

Last year, foreign investment declined moderately in most regions. The flow to developing countries decreased by seven percent, or $867 billion, and in Asia the decrease reached eight percent.

In Africa, it decreased by three percent, and by one percent in Latin America and the Caribbean.

On the other hand, flows to developed countries have been strongly affected by the financial transactions of multinational companies, partly due to efforts to implement a global minimum tax on the profits of these companies.

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Flows to most of Europe fell by 14 percent, and five percent to North America.

Although the outlook for foreign direct investment remains difficult in 2024, the report finds that “modest growth appears possible,” due to relaxed financial conditions and concerted efforts to facilitate investment, a feature of national policies and international agreements.

UNCTAD, based in this Swiss city, believes that facilitating business activity and digital government solutions can provide an environment to address declining investment.

In this regard, the report highlighted that in light of the global trend to attract and retain financial flows, online information portals and one-stop shops have spread to enhance a favorable business and investment climate.

Since UNCTAD launched the Investment Facilitation List in 2016, the number of online one-stop shops in developing countries has almost quadrupled, from 13 to 67. In advanced economies, the number has doubled, going from 12 to 28.

Likewise, the number of information portals for company and investor registration in developing countries increased from 82 in 2016 to 126 in 2024, while in developed countries their number increased from 43 to 48.

For developing countries, digitalization is not only a technical solution, but also a starting point for implementing broader digital government, addressing fundamental weaknesses in governance and institutions that often hinder investment, according to the UNCTAD standard.

Rebecca Greenspan, Secretary-General of UNCTAD, noted that “investment refers not only to capital flows, but also to human potential, environmental protection and the constant search for a more equitable and sustainable world.”