TDS Desk:

Global foreign direct investment (FDI) dropped by 11 per cent in the last year, marking the second consecutive year of decline and also confirming a sharp slowdown in productive capital flows.

The World Investment Report 2025, released on Thursday by the UN Trade and Development (UNCTAD) in Geneva, unveiled the picture.

The report added that although global FDI rose by 4 per cent in 2024 to US$1.5 trillion in regular count, volatile financial conduit flows through several European economies push the rise.

But the financial conduit flows often serve as transfer points for investments, making it a ‘double-counting’ of foreign investment and also push an artificial increase. That’s why UNCTAD excluded the high levels of conduit flows to get a more realistic picture of global FDI.

Investment dropped sharply across developed economies, particularly in Europe, said the UNCTAD flagship publication.

“In developing countries, inflows appeared broadly stable – but this concealed a deeper crisis: in too many economies, capital is stagnating or bypassing entirely the sectors that matter most – infrastructure, energy, technology, and the industries that drive job creation,” it added.

According to UNCTAD publication, “The investment landscape in 2024 was shaped by geopolitical tensions, trade fragmentation, and intensifying industrial policy competition.”

The report pointed out that these dynamics, combined with elevated financial risk and uncertainty, are now redrawing global investment maps and also eroding long-term investor confidence.

UNCTD also projected that the outlook for international investment in 2025 is negative.

“While modest growth seemed possible at the start of the year, trade tensions have led to downward revisions of most indicators of FDI prospects, including gross domestic product (GDP) growth, capital formation, exports of goods and services, foreign exchange and financial market volatility, and investor sentiment,” it explained.

The theme of this year’s report is: ‘International investment in the digital economy.’ Focusing on the theme, it said that the value of the global digital economy in its narrow scope is estimated to reach $16.5 trillion by 2028, mainly due to investment in technology.

“To bridge the global digital divide and the associated infrastructure investment gap, estimated at $1.6 trillion, it is necessary to establish an effective investment and financing mechanism, of which FDI is a critical component,” argued the UNCTAD report.

It also showed that greenfield investment in the digital economy nearly tripled to $360 billion in the last year since 2020. Most or around 78 per cent greenfield investment in the digital economy flows to 10 developing countries.

The report also mentioned that data centres have become a target for international greenfield investment in the digital economy, adding that only 3 per cent of global investment in data centres went to the Least Developed Countries (LDCs).

“Most LDCs have not yet benefited from the upward trends in FDI in the digital economy,” said the report. “This is largely because of various barriers, such as the high investment risks and costs of capital.”

Bangladesh: UNCTAD report showed that net inflow of FDI in Bangladesh declined by 13.20 per cent to $1.27 billion in 2024 from $1.47 billion in 2023. This for the fourth consecutive year, inflow of FDI declined in the country since 2021.

“Bangladesh saw a slight decline of 13 per cent to $1.3 billion, but this followed a strong performance in 2023 and maintained the country’s position as a top LDC recipient,” added the report.

FDI as a ratio of gross fixed capital formation in the country also came down to below 1 per cent in the last year.

Stock of FDI in the country stood at $18.30 billion at the end of 2024 which was $17.83 billion at the end of 2023, according to the report that uses the statistics available with Bangladesh Bank.

The value of announced greenfield investment in Bangladesh also declined sharply to $1.75 billion in the last year which was $2.70 billion in 2023.

In South Asia, greenfield FDI registered a modest growth of 5.80 per cent in the last year, according to the UNCTAD report.

Greenfield foreign investment in India crossed $100 billion level for the first time, reaching $109.52 billion in the last year, registering 28 per cent growth.

Net inflow of FDI in India, however, declined slightly by around 2 per cent to $ 27.55 billion in the last year, and around 80 per cent of the total inflow of FDI in South Asia went to the country, added the report.