CHANGING FACE OF FDI

FDI - whether from the West, China, or the Gulf - is profit-driven, and sometimes motivated by rent-seeking. It can deliver significant benefits, but it also carries risks

- Jayati Ghosh

Although US President Donald Trump’s protectionist trade policies dominate news headlines, they are far from the only forces shaping global production. New investment patterns have been reshaping the global economic landscape since well before Trump's tariffs.

Nowhere is this more evident than in flows of foreign direct investment (FDI). According to the latest World Investment Report from United Nations Trade and Development (UNCTAD), FDI inflows to Europe, South America, and much of Asia declined in 2024. By contrast, FDI flows to Africa surged by 75 per cent, to $97 billion, while those to Southeast Asia increased by 10 per cent, to $225 billion.

Behind these trends lies a broader restructuring of multinational supply chains, which are steadily shifting toward Southeast Asia, Eastern Europe, and Central America. Consequently, FDI patterns are also changing: while the United States, Japan, and China remain the largest outward investors, the Middle East has emerged as a major source of FDI.

Flush with oil revenue, the Gulf Cooperation Council (GCC) countries — Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates — invested roughly $113 billion in Africa in 2022 and 2023, dramatically expanding their economic footprint on the continent. Most of this capital has gone into logistics and infrastructure projects such as ports, airports, and transportation networks, as well as oil and gas.

The centre of gravity, however, is rapidly shifting toward China, especially when it comes to green investment. A new report from the Net Zero Industrial Policy Lab highlights the scope of Chinese outward FDI, showing how China’s push in to clean energy is boosting its economic influence.