GENEVA: In 2023, global foreign direct investment (FDI) decreased by 2 percent to US$1.3 trillion, according to the latest World Investment Report released by UN Trade and Development (UNCTAD) on 20 June.

When excluding the impact of a few exceptions, the report reveals a sharper decline of over 10 percent in global foreign investments for the second consecutive year. This decline is driven by increasing trade and geopolitical tensions in a slowing global economy.

While the prospects for FDI remain challenging in 2024, the report says that “modest growth for the full year appears possible”, citing the easing of financial conditions and concerted efforts towards investment facilitation – a prominent feature of national policies and international agreements.

With the global push to attract and retain financial flows, online information portals and single windows have proliferated to foster a conducive business and investment climate.

For developing countries, digitalization not only provides a technical solution, but also a stepping stone for wider digital government implementation to address underlying weaknesses in governance and institutions which often hinder investment.

“Investment is not just about capital flows; it is about human potential, environmental stewardship and the enduring pursuit of a more equitable and sustainable world,” said UN Trade and Development Secretary-General Rebeca Grynspan.

FDI flows to developing countries fell by 7 percent to US$867 billion last year, reflecting an 8 percent decrease in developing Asia.

This figure dipped by 3 percent in Africa and by 1 percent in Latin America and the Caribbean.

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

Inflows to most parts of Europe and North America were down by 14 percent and 5 percent, respectively.

With tight financing conditions in 2023, the number of international project finance deals - crucial for funding infrastructure and public services such as power and renewable energy - fell by a quarter. This triggered a 10 percent reduction in investment in sectors linked to the Sustainable Development Goals (SDGs), most notably impacting agri-food systems, and water and sanitation. These sectors registered fewer internationally financed projects in 2023 than in 2015, when the goals were adopted.

Tariq Al Fahaam