Kearney's 2023 FDI Confidence Index® reveals cautious optimism among executives about the outlook for foreign direct investment.

News provided by

Mar 30, 2023, 10:03 ET

The United States retains the top position for investment attractiveness for the 11th consecutive year.
For the first time in its 25-year history, the 2023 FDI Confidence Index® features an exclusive ranking for emerging markets, led by China, India, and the United Arab Emirates.
Investors believe globalization will remain the central force in foreign direct investment but acknowledge it is changing amid increased regionalization and government self-sufficiency policies.

WASHINGTON, March 30, 2023 /PRNewswire/ -- Kearney's Global Business Policy Council today released its 2023 Foreign Direct Investment Confidence Index (FDICI), a survey of investor sentiment regarding future FDI flows that is celebrating its 25^th anniversary this year. The results reflect cautious investor optimism about the global economy. Indeed, more than three-quarters (82 percent) said they are planning to increase their FDI in the next three years and 87 percent cited FDI as more important for their corporate profitability and competitiveness in the next three years. Yet this positive sentiment is tempered by concern about downside risk.

"While investors are generally optimistic about the outlook for FDI, our results this year also reflect a degree of caution," says report co-author Erik R. Peterson, Partner and Managing Director of Kearney's Global Business Policy Council. "Investors cited a rise in commodity prices, an increase in geopolitical tensions, and rising political instability in emerging markets as among the top risk factors over the next three years."

The United States takes the top ranking for the 11th consecutive year. Canada reclaims the second position after falling to third in 2022, and Japan jumps to third place from a rank of fourth last year. Germany drops two spots to fourth, the United Kingdom maintains the fifth position, and France follows closely behind. China jumps from 10th position to 7th, perhaps attributable to Beijing's reversal of zero-COVID policies in the fourth quarter of 2022. Overall, this year's survey once again demonstrated investor preference for developed markets, which accounted for 19 out of 25 of the countries on the Index.

For the first time in the 25-year history of the FDI Confidence Index®, this year's report features an exclusive ranking for emerging markets. This list is intended to give business leaders insight into which emerging markets are most appealing to investors. China, India, the United Arab Emirates, Qatar, Thailand, and Saudi Arabia hold the top six positions; they are also the only emerging markets included in the world rankings. Beyond these top six, Latin America makes a strong showing, with Brazil, Mexico, and Argentina taking the 7th, 8th, and 9th positions, respectively. Southeast Asia also performs strongly, with Malaysia, Indonesia, the Philippines, and Vietnam taking the 10th through 13th positions, respectively.

"We believe that the inclusion of the emerging market rankings in our FDI Confidence Index will provide business leaders with additional insights into which emerging markets are most appealing to investors," Peterson notes, "The strength of key regions, including Southeast Asia and leading economies in Latin America is evident in these results."

The 2023 Index also finds that business leaders believe globalization is and will remain the central force in foreign direct investment. A distinct majority of respondents (66 percent) anticipate an increase in globalization in the next three years, while only 23 percent expect a decrease. Those anticipating an expansion of globalization cite a combination of connected digital infrastructure alongside growing trade opportunities and limited trade barriers as the primary driving forces. But investors also acknowledge that globalization is changing.

"While our findings show investors believe in the benefits of globalization and expect it to strengthen, they also anticipate more regionalization over the next three years and that national governments will pursue strategies to increase self-sufficiency," says report co-author Terry Toland, manager at the Global Business Policy Council. "These results suggest an awareness that while globalization will continue, its nature may be shifting—and business leaders will need to prepare accordingly."

About The 2023 Kearney FDI Confidence Index^®

The Kearney Foreign Direct Investment Confidence Index (FDICI) is an annual survey of global business executives that ranks markets that are likely to attract the most investment in the next three years. In contrast to backward-looking data sources on FDI flows, the FDICI provides unique forward-looking analysis of the markets that investors intend to target for FDI in the coming years. Since the FDICI's inception in 1998, the countries ranked on the Index have tracked closely with the top destinations for actual FDI flows in subsequent years.

The 2023 FDICI is constructed using primary data from a proprietary survey of senior executives of the world's leading corporations. The survey was conducted in January 2023. Respondents include C-level executives and regional and business leaders. All participating companies have annual revenues of $500 million or more. The companies are headquartered in 30 countries and span all sectors. The selection of these countries was based on UNCTAD data, with the 25 countries represented in the Index originating more than 95 percent of the global flow of FDI in recent years. Service-sector firms account for about 50 percent of respondents, industrial firms for 37 percent, and IT firms for 12 percent.

The Index is calculated as a weighted average of the number of high, medium, and low responses to questions on the likelihood of making a direct investment in a market over the next three years. Index values are based on responses only from companies headquartered in foreign markets. For example, the Index value for the United States was calculated without responses from US-headquartered investors. Higher Index values indicate more attractive investment targets.

All economic growth figures presented in the report are the latest estimates and forecasts available from Oxford Economics unless otherwise noted. Other secondary sources include investment promotion agencies, central banks, ministries of finance and trade, relevant news media, and other major data sources.

About Kearney

As a global consulting partnership in more than 40 countries, our people make us who we are. We're individuals who take as much joy from those we work with as the work itself. Driven to be the difference between a big idea and making it happen, we help our clients break through.

To learn more about Kearney, please visit http://www.kearney.com.

For past editions of the FDI Confidence Index, please go to:
https://www.kearney.com/foreign-direct-investment-confidence-index.

For more information, contact the Global Business Policy Council ([email protected]).

Media contact:

Meir Kahtan
Meir Kahtan Public Relations, LLC
+1 917-864-0800
[email protected]

SOURCE Kearney