Australia stays in world top ten for foriegn investment

| June 22, 2018

According to the United Nations Conference on Trade and Development’s (UNCTAD) World Investment Report 2018, Australia remained in the top ten global destinations for FDI.  Foreign direct investment (FDI) inflows to Australia, which more than doubled in 2016, maintained their high level at US$46 billion in 2017.

From 2011 to 2017, Australia attracted an annual average of US$47 billion in FDI inflows, compared with an average of US$28 billion over the previous seven years (2004 to 2010). This represents a growth rate of 70% over the two periods, well above the world average of 24% and developed economies of 12%.

This solid growth has raised Australia’s share of global FDI inflows to 3% in the period of 2011–17 from 2.2% in the previous period. Australia’s economic resilience, strategic business location, increased global trade and investment ties, sound governance and political stability continue to position Australia as an attractive investment destination.

Australia was the eighth largest recipient of FDI inflows in the world in 2017, up from ninth position in 2016. The total value of Australia’s FDI inflows stood at US$46.4 billion in 2017, marginally down 2.9% from the inflows in 2016. Global FDI inflows fell by 23% in 2017 to US$1.43 trillion from US$1.87 trillion in 2016.

UNCTAD says in its report, ‘But even discounting the large one-off deals and corporate restructurings that inflated FDI numbers in 2016, the 2017 decline remained significant.’

This drop was largely driven by a sharp fall in inward FDI flows to developed economies (down 37% to US$712 billion in 2017 from US$1,133 billion in 2016). The drop can be explained by a decline from high inflows in the preceding year caused by cross-border mergers and acquisitions and corporate reconfigurations.

A significant reduction in the value of such transactions resulted in a decrease of 40% in inflows in the US to US$275 billion, and 92% in the UK to US$15 billion. However, FDI inflows to developing Asian nations remained stable at US$476 billion. This region, which encompasses East, Southeast, South and West Asia, regained its position as the largest FDI recipient in the world.

Half of the top-ten host economies are developing economies (see table below). The US remained the largest FDI recipient, attracting US$275 billion in inflows, followed by China (US$136 billion) and Hong Kong (US$104 billion).

Brazil overtook Singapore (US$62 billion) and the Netherlands (US$58 billion) to be the world’s four largest recipient of FDI in 2017, attracting US$63 billion in in 2017. France made a significant upwards jump (42%) to seventh place in the list, with total value of FDI inflows of almost US$50 billion. Switzerland and India were ranked ninth and tenth respectively, with total flows of US$41 billion and US$40 billion in 2017.

In terms of total stock value (that is, total accumulated value of foreign-owned assets at a given point in time), FDI in Australia was an estimated US$662 billion in 2017, up 15% from 2016. The latest stock value represents an annual compound growth rate since 2008 of 9%, which is above the average growth rate of the world’s total (8%), developed economies (7%) and European economies (4%).