The UN Trade and Development Organisation (UNCTAD) announced a 2% decline in Foreign Direct Investment (FDI) to $1.3 trillion in 2023, attributing the drop to a global economic slowdown and rising geopolitical tensions. This information was shared in a statement released on Thursday.
UNCTAD’s 2024 World Investment Report emphasized that insufficient funding is impeding progress towards its 2030 Sustainable Development agenda, highlighting the urgent need for policies to enhance financial support.
“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,” stated Rebeca Grynspan, Secretary-General of UNCTAD.
The report revealed that when excluding significant fluctuations in investment flows in some European conduit economies, the FDI decline exceeds 10%, with developing countries being the most affected. The reduction was largely due to increasing geopolitical tensions and concerns over “greenwashing,” a practice that misrepresents environmental friendliness.
“Foreign direct investment is crucial for funding infrastructure and public services such as power and renewable energy. However, tight financing conditions in 2023 led to a 26% drop in the number of FDI deals,” the report stated.
This decrease resulted in a 10% reduction in investment in sectors related to the Sustainable Development Goals (SDGs), particularly in agrifood systems, water, and sanitation. These sectors saw fewer internationally financed projects in 2023 than in 2015, when the SDGs were adopted.
Developing countries were the hardest hit, registering only marginal growth in sustainable bonds last year and experiencing a 60% drop in financing for supportive funds. FDI flows to developing countries fell by 7% to $867 billion, with regional variations in the decline.
In contrast, developing economies in Asia, home to 60% of the world’s megaprojects, saw a notable rise in greenfield FDI – investments in new operations or expansions of existing facilities. These investments increased by 44% in value and 22% in the number of announcements.
However, overall foreign investment in Asia declined from $678 billion in 2022 to $621 billion in 2023. Despite this, Asia, led by East and Southeast Asia, remained the largest recipient of FDI, accounting for nearly half of global inflows. China and its Hong Kong Special Administrative Region (SAR) continued to be the largest investors in the region by total FDI stock, followed by the United States, Japan, and Singapore.
