Foreign Direct Investment Has Impact on Global Supply Chains

Foreign direct investment has never been more important in catalyzing growth, whether in the developed or developing world. Although equity markets around the world have largely recovered since the financial crisis, global capital flows have contracted sharply.

As reported in SCMR, expansion of global supply chains has at the same time, “lost its momentum.”

The Milken Institute's Global Opportunity Index, released this week, provides policy makers and investors vital information on policies that can best attract foreign direct investment, expand economies and accelerate job creation. The index is also a guide for countries seeking to improve their business environments and attract investors who commit long-term capital, rather than move it around as a fleeting portfolio tactic.

The index ranks 136 countries across four broad categories: economic fundamentals, ease of doing business, quality of regulation, and rule of law. Among the findings:

• Singapore, Hong Kong, and Finland achieved the top three spots.
• Malaysia is the only developing country in the top ten; it scored particularly well in rule of law.
• From 2009- 2015, there was a slight decline among many advanced economies and mainly positive changes among developing countries, highlighting the hit that developed markets took during the financial crisis, as well as continuing reforms in developing countries.
• In Latin America, countries with improving scores – including Chile, Uruguay, Panama, Colombia, and Ecuador – outnumbered decliners by a margin of 2 to 1.
• Six sub-Saharan countries in Africa are in the top half of the index: Mauritius, South Africa, Botswana, Rwanda, Namibia, and Zambia.
• Germany and the United States are tied at 18 – behind the Netherlands, Estonia, and Iceland.

“The Milken Institute's Global Opportunity Index is both descriptive and prescriptive,” says Institute Economist Heather Wickramarachi, co-author of the report. “The higher the country scores in the index, the greater the inflow of foreign direct investment. With the pending normalization of monetary policy by developed countries, it will be more important than ever that developing countries are attractive places for investment. We hope our Global Opportunity Index helps both countries and companies understand the most productive policies and investment opportunities.”

The Global Opportunity Index top 10:
1. Singapore
2. Hong Kong SAR, China
3. Finland
4. New Zealand
5. Sweden
6. Canada
7. Norway
8. United Kingdom
9. Ireland
10. Malaysia

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