The amount of foreign direct investment (FDI) attracted by the US is outperforming the global average by over thirteen times, according to a new study by UHY, the international accounting and consultancy network.
According to UHY, inflows of FDI into the US were $379.4 billion last year, accounting for 2.1% of total GDP. This compares to the average world figure of $29.3 billion, or 2.2% of total GDP.
Countries are keen to win FDI because it helps power economic growth. As well as boosting job creation and tax revenues, it can act as a spur to competitiveness and productivity through knowledge transfer or investment in improved processes, technologies or infrastructure.
The USA, China and Brazil attracted the most FDI in absolute terms – at $379 billion, $250 billion and $75 billion respectively in 2015.
The UHY study looked at FDI inflows last year in 45 major economies around the world, measuring how successful they have been in attracting FDI as a percentage of their GDP.
UHY says that the US has several advantages which make it attractive to foreign investors, including:
- World’s largest economy
- Workforce with a comparatively high level of qualification
- Predictable and transparent judicial system
- Highly developed infrastructure network
Comments Dennis Petri, Managing Director at UHY Advisors, a member firm of the UHY network: “The US is attracting significant amounts of FDI – leaving much of the rest of the world behind.”
“Inbound investment by foreign businesses is a sign of confidence in an economy, providing a boost to business growth, job creation and developments in areas such as innovation and infrastructure.” “Continuing to focus on fostering an environment that encourages foreign investment is key if the US is to maintain its position on the global stage.”
However, the research shows that the BRIC economies in total are easily outperforming the G7 in attracting FDI, with total inflows of FDI accounting for 2.3% of the total BRIC nations’ GDP last year. This figure compares to 1.7% of GDP for the G7. BRICs economies received total FDI in 2015 of $375 billion – a 59% increase on five years ago in 2010 when the figure was $236 billion.
Of the G7, Japan and Italy saw the lowest performance with 0% and 0.7% respectively. Germany was also well below the average with just 1.4% ($46 billion in total). Overall, Europe saw FDI worth 2% of total GDP, slightly below the global average of 2.2% of total GDP.
UHY says that emerging economies are seen as providing better growth opportunities for multinational businesses than the more mature economies of the G7.
In addition, the shift towards locating manufacturing facilities in emerging economies rather than in western countries continues as multinational companies seek locations with low labor costs, availability of resources and favorable business climates.
ASEAN economies (Association of South East Asian Nations) outperformed even the BRIC nations in terms of FDI as a share of their economies, attracting FDI worth 5.3% of GDP.
Malta saw the highest FDI as a share of GDP in the study at 25.8% ($2.5 billion in total), as the island continues to take advantage of its location at the crossroads of Europe, Africa and the Middle East to become an international center for banking and attract substantial inflows of capital.
Inflows of Foreign Direct Investment (2015, USD$)
Inflows of Foreign Direct Investment as a percentage of Gross Domestic Product