Kearney's 2022 FDI Confidence Index® reveals initial business leader optimism about the investment outlook. Subsequent geopolitical shocks are now remaking the world--and their hopes for a robust recovery.

Published: Apr. 7, 2022 at 8:17 AM CDT
  • The United States retains the top position for investment attractiveness for the 10th consecutive year.
  • Our results reflect the continued strength of developed markets in periods of crisis, be it a pandemic or geopolitical crisis.
  • Investors cited a rise in commodity prices, increasing geopolitical tensions, and persistent inflation as developments that were likely to occur in the year ahead—and each of these areas has been exacerbated by Russia's military actions in Ukraine.

WASHINGTON, April 7, 2022 /PRNewswire/ -- Kearney's Global Business Policy Council today released its 2022 Foreign Direct Investment Confidence Index (FDICI), an indicator of future FDI flows. The ranking reveals rebounding investor optimism about the global economy when the survey was in the field in January. However, their sanguine views on the economy, plans to increase FDI, rising FDI country scores, and a belief that most countries in the Index would see their three-year economic prospects improve indicate that the conflict in Ukraine must have caught investors by surprise, as it did much of the world.

The 2022 FDI Confidence Index
The 2022 FDI Confidence Index(PRNewswire)

"Entering year three of the pandemic, investors seemed much more hopeful about the global economy and FDI flows than they did just a year ago," says Paul A. Laudicina, founder of the FDI Confidence Index® and Kearney's Global Business Policy Council. "They did, however, have concerns that a rise in commodity prices, escalating geopolitical tensions, and persistent inflation were likely in the year ahead. Just a few months into the year, these concerns have come to fruition and been exacerbated by the Russian military actions in Ukraine."

The results of this year's FDI Confidence Index® illustrate both areas of business leader foresight as well as the blind spots regarding the changes that were on the immediate horizon. While the results cannot show directly how investor sentiment has shifted since the conflict began, several findings suggest we are likely to see a continued shift in FDI to developed markets, capitalizing on destinations marked by regulatory transparency and stability. In fact, investors cite transparency of government regulations and lack of corruption as the most important overall factors when choosing where to make FDI.

It is no surprise, then, that the United States takes the top ranking on the Index for the 10th consecutive year. Germany and Canada take the second and third rankings, respectively. In fact, developed markets account for 21 of 25 spots on the Index, including the top nine. These markets continue to show their strength in the survey during periods of crisis, representing more safety to business leaders whose strategies and bottom lines have been shaken by the pandemic.

"The United States retains the top position on Kearney's 2022 FDI Confidence Index® for the 10th consecutive year," Laudicina notes. "Our findings suggest we are likely to see a continued shift in FDI to developed markets, with the US chief among them. Investors seek to capitalize on destinations marked by regulatory transparency and stability on the one hand and technological innovation on the other.  Robust US economic performance and bi-partisan action on the US infrastructure initiative also obviously have helped restore confidence in the country's longer term investment attractiveness, even as global geopolitical challenges persist."

Only four emerging markets are on this year's Index: China, the United Arab Emirates, Brazil, and—for the first time in the history of the Index—Qatar. China moves up two positions from 12th place last year to 10th, perhaps a reflection of the country's strong economic recovery in 2021 and continued solid growth projections over the next three years.

This year's report also includes a thematic section that reflects on how investors view their companies' environmental, social, and governance (ESG) commitments as well as those of their foreign investments. "Investors are clearly enthusiastic about pursuing ESG commitments," said Erik Peterson, managing director of the Global Business Policy Council and co-author of the study. Indeed, a striking 94 percent of investors agreed that their respective companies had developed a strategy to achieve their ESG commitments, 89 percent view their company's ESG commitments as a source of competitive advantage, and 73 percent said their ESG commitments had become stronger over the past three years. They also point to the role that ESG can play in improving supply chain issues and boosting productivity as among the most important factors driving their company's commitment to ESG. However, Peterson added, "Investors are still frequently split on which ESG goals to prioritize and how to measure them."

"The title of our 2022 FDI Confidence Index®, Optimism dashed, should be qualified: For how long? While global developments have certainly transformed the world, this does not preclude investors from building on existing momentum or pursuing new opportunities that arise," Laudicina said. "Focusing on investing in key sectors such as infrastructure and implementing ESG strategies sooner rather than later at home and abroad will provide a solid path forward for investors and companies, and ultimately help to build a stronger, more enduring investment environment consistent with fundamental changes evolving in global business conditions."

About The 2022 Kearney FDI Confidence Index®
The Kearney Foreign Direct Investment Confidence Index (FDICI) is an annual survey of global business executives that ranks markets that are likely to attract the most investment in the next three years. In contrast to backward-looking data sources on FDI flows, the FDICI provides unique forward-looking analysis of the markets that investors intend to target for FDI in the coming years. Since the FDICI's inception in 1998, the countries ranked on the Index have tracked closely with the top destinations for actual FDI flows in subsequent years.

The 2022 FDICI is constructed using primary data from a proprietary survey of senior executives of the world's leading corporations. The survey was conducted in January 2022. Respondents include C-level executives and regional and business leaders. All participating companies have annual revenues of $500 million or more. The companies are headquartered in 30 countries and span all sectors. The selection of these countries was based on UNCTAD data, with the 25 countries represented in the Index originating more than 95 percent of the global flow of FDI in recent years. Service-sector firms account for about 41 percent of respondents, industrial firms for 38 percent, and IT firms for 21 percent.

The Index is calculated as a weighted average of the number of high, medium, and low responses to questions on the likelihood of making a direct investment in a market over the next three years. Index values are based on responses only from companies headquartered in foreign markets. For example, the Index value for the United States was calculated without responses from US-headquartered investors. Higher Index values indicate more attractive investment targets.

All economic growth figures presented in the report are the latest estimates and forecasts available from Oxford Economics unless otherwise noted. Other secondary sources include investment promotion agencies, central banks, ministries of finance and trade, relevant news media, and other major data sources.

About Kearney
As a global consulting partnership in more than 40 countries, our people make us who we are. We're individuals who take as much joy from those we work with as the work itself. Driven to be the difference between a big idea and making it happen, we help our clients break through.

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For past editions of the FDI Confidence Index, please go to:

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