As nations enhance their natural offerings with proinvestment policies, FDI investors must weigh myriad factors. Which nations are most attractive? Global Finance offers a new analysis and ranking.

Author: Maria Obiols
2018 FDI Superstars 300

The world’s multinationals are flush with cash, and the world’s nations are locked in a pitched battle to win some of that cash in the form of foreign direct investment (FDI).

Some countries boast a wealth of natural assets: cheap land, or rich mineral deposits or even white-sand beaches. Some are stronger in human assets: rich consumer markets or tech-savvy talent pools. Some tempt investors with policy enhancements—generous tax laws or loose transparency requirements. Of course, every country has a mix of all three, but which countries have developed a winning formula?

It starts with meeting the corporate investor’s desires and adapting when those desires change. “Companies take into account both market assets and regulatory factors,” says Courtney McCaffrey, manager of thought leadership at A.T. Kearney’s Global Business Policy Council. A.T. Kearney’s annual FDI Confidence Index report surveys corporate executives on the factors that drive their investment decisions.

“In recent years, investors have been focusing more on the governance and regulatory factors,” McCaffrey adds. “Countries that are seeking to attract more FDI can target these governance issues to improve their competitiveness.” She points to key governance factors such as improving security for operations in the country, reforming business regulations and dispute-settlement mechanisms, and lowering corporate tax rates.

Global Finance invites readers to consider various views of FDI attractiveness. First and foremost, we present the results of our multifactorial analysis, our FDI Superstars. The ranking is determined by an algorithm that incorporates not only four separate measures of FDI itself, but also two additional factors: each country’s scores on the World Bank’s Ease of Doing Business index and on the Global Peace Index, from the Australia-born Institute for Economics and Peace (IEP). These indices focus on factors determined by active government choices and thus give weight to countries that are making the most of what they have.

We also discuss which countries get the most absolute FDI, which ones are outperforming relative to their share of world GDP and which ones have improved their performance the most over the past decade.


Top 20 countries as ranked by score on the Global Finance FDI Index, an algorithm that combines historical measures of FDI performance with forward-looking measures of FDI appeal.
1 United Kingdom 11 China, Hong Kong
2 Singapore 12 Sweden
3 Netherlands 13 United States
4 Ireland 14 Malaysia
5 Australia 15 Panama
6 Luxembourg 16 Mozambique
7 Portugal 17 Belgium
8 Cyprus 18 Albania
9 Azerbaijan 19 Vietnam
10 Ghana 20 Italy

#1 The United Kingdom

This country is second in FDI received in the latest year, just behind the United States—even though it’s a much smaller market. The nation’s long history as a major global trade actor and its highly competitive financial center give it an edge.

However, Brexit looms as a potential game changer. Strangely, FDI spiked in 2016 after a few years of decline. McCaffrey notes that “increasing protectionist tensions are incentivizing FDI, because foreign companies want to keep a local presence,” and some experts consider Brexit’s effects in the short or medium term may not dampen FDI as initially expected.

“Leaving the EU does not mean leaving Europe,” says Antony Phillipson, the British consul in New York and the UK’s trade commissioner for North America. The British intend to “invest in global alliances with North America and China,” he says, and to “position themselves as a source of innovative regulation globally” in artificial intelligence and advanced manufacturing, as they’ve done in fintech. New industrial strategies and sector deals in automobiles and the life sciences “put numbers on specific activities and commitments, which is an important signal for investors,” he adds. Still, no matter how good the intentions on both parts for an amicable separation, the UK-EU relationship will look a lot different in the post-Brexit era.

#2 Singapore

With zero natural resources, this extremely business-friendly country had made itself second in the World Bank’s Ease of Doing Business ranking and become one of the world’s most important offshore financial centers. Singapore is the door to Asia for Westerners, while for Asians it is a key launch pad to the rest of the world. Stability, a highly developed financial sector, strong rule of law, a very favorable tax system. and this role as a gateway have launched the tiny country to the top ranks of FDI attractors.

#3 The Netherlands

The country boasts top-notch infrastructure, an excellent standard of living and a highly educated workforce mostly fluent in English. What the European Commission called in a recent report “aggressive tax planning” has also helped boost the country’s FDI appeal, but it is nonetheless a dynamic economy with vibrant industries in agribusiness, information technology, chemicals, mechanical products, trade, transport, telecommunications and financial intermediation. That has helped steal some of the UK’s thunder as Brexit looms. “Companies are worried about losing personnel or about increased bureaucracy as a result of the disappearance of many trade agreements and are considering moving to the Netherlands,” says Hugo Peek, an executive at ABN AMRO Corporate and Institutional Banking, pointing to the European Medicines Agency shift to Amsterdam and Unilever concentrating the functions of its global head offices at its headquarters in Rotterdam. “We’re seeing some financial institutions moving to the Netherlands, mostly in the high-frequency-trade business,” he adds. “Other kinds of financial institutions will probably favor Frankfurt, Paris or even Dublin.”

#4 Ireland

Ireland offers a famously favorable tax system that has indubitably helped the country draw in multinational investment, but it counts many other assets too: a young, well-educated, English-speaking, but relatively low-cost labor force, as well as access to the European labor market. That makes it “very easy for people to put teams together in Ireland at a cost that is at the low end of Western European levels,” says Breda O’Sullivan from IDA Ireland (Ireland’s investment promotion and development agency). “The country offers a lot of stability and a very consistent and stable approach to FDI. We’ve got a very supportive environment for innovation and a lot of collaboration between the private sector and the government in terms of funding innovation,” she adds. “It’s also a really good location from which to serve the EU and the MENA markets.”

#5 Australia

Australia is the only advanced economy showcasing 27 consecutive years of growth. Nonetheless, the country’s FDI suffered from the last global recession. After a rapid and significant recovery, 2015 was a disappointing year; but figures for 2016 were back to precrisis levels. In Australia, where natural-resource income is nearly 5% of GDP, mining has absorbed around 40% of FDI—followed by manufacturing (11.5%), real estate (10.6%) and financial and insurance activities (8.4%). Australia offers an advanced English-speaking economy at the door of Asia. “In recent years, there has been a solid increase in capital inflows from Asia,” according to a spokesperson for Austrade, the country’s trade and investment commission, “particularly China and the ASEAN region, reflecting Australia’s close ties to these important economies.”

#6 Luxembourg

Luxembourg, despite having virtually no natural resources, is the only country to rank in the top 20 on all our lists: Giants, Outperformers, Rising Stars, and Superstars. As one of the world’s most important financial centers, Luxembourg channels a good share of global FDI flows into and out of the country. It is a hotspot for special-purpose entities (SPEs), companies usually created to temporarily take on specific assets or loans that are often used in M&A deals, adding to FDI volatility. While it might be good to remove those for the purposes of analyzing “true” FDI, it’s difficult. “There is no clear-cut distinction between SPE and non-SPE companies,” explains Astrit Sulstarova, chief of the Investment Trends and Data Section at UNCTAD. “It is a methodological problem that we are discussing with both the IMF and the OECD.” Of course, SPEs are not exclusive to Luxembourg, but the effects on FDI data are particularly marked for this financial enclave. The country’s population, while small, makes for a rich market; it is consistently among the world’s richest nations in per capita GDP. 

#7 Portugal

Portugal has a moderate rank in raw and relative inflows, but much higher than 10 years ago; thus it shines by measures of improvement. In 2009, Portugal passed a tax reform that has made obtaining residency easy, quick and cheap, adding a financial incentive to its many quality-of-life enticements. The reform has drawn retirees from all over the world and made Lisbon and Porto attractive destinations for creative and technological entrepreneurs. That has pushed up Portugal’s scores and attracted more investment in real estate and technology. According to an Ernst & Young survey, 62% of investors perceive an increase in the country’s attractiveness.

#8 Cyprus

Its FDI figures oscillated greatly in the last 10 years, but in 2016 Cyprus was able to attract a share of FDI more than nine times its share of world GDP. A generous tax regime and removal of investment restrictions (part of joining the EU) helped develop a strong financial hub that has nevertheless suffered from the economic ups and downs of European economies, particularly that of Greece.

#9 Azerbaijan

Azerbaijan, like Portugal, makes the list largely due to its improved performance. While there’s still room to reduce bureaucracy or improve credit access, the country has been enacting reforms to boost trade and investment and now fares pretty well on many Ease of Doing Business factors. The oil and gas sector still captures most of the country’s FDI, with projects such as the Trans-Anatolian and the Trans-Adriatic gas pipelines, but opportunities beckon in other sectors. Non-oil industrial production increased by 5% in 2016, and the government is heavily investing in infrastructure and seems committed to diversifying investments into agriculture, transportation, tourism and IT. A free-trade zone was established in March 2016, and the customs tariff has been amended to exempt all capital-equipment imports from taxes for up to seven years.

#10 Ghana

The only African country in our top 10, Ghana offers one of the more stable political environments on the continent and has greatly improved its FDI performance in the last 10 years. Although Ghana is known as one of the world’s top cocoa producers, gold is still its most important export product. The discovery in 2007 of important offshore oil reserves is likely to change that. The UK’s Tullow Oil started production at the Jubilee field in 2010 and pumped the first oil from the TEN oil field in 2016. The Italian company Eni began producing in the Sankofa field in mid-2017. Public-private investments are ongoing for the fields of telecommunications and energy, for construction of new roads, and for port expansions at Tema and Takoradi. JP Morgan just announced that Ghana will be included in its Africa expansion plans.

#11 to #20

Each of the remaining winners offers investors a unique set of attractions. Hong Kong, a world financial center, also attracts a lot of capital as the gateway to China.

Sweden, Belgium and Malaysia all offer political stability. Sweden adds to that pro-business policies and a high-quality labor force. Belgium benefits from its economic and political connectedness, while Malaysia has provided steady growth. Vietnam offers some of the fastest growth.

The US makes the list due to its huge labor and consumer markets, vast natural resources, and investor-friendly regulations. Mozambique supplies natural resources, while Panama has leveraged advantageous FDI regulations and its famous canal. Albania, as a transitioning economy, offers opportunity.  Fast-growing Vietnam and resilient Italy round out the list.

These are the FDI Superstars of 2018: Countries that are showing extraordinary capacity to win over investors thanks to their unique combinations of national assets, both natural and man-made.


The top 20 countries by inward FDI flows, in USD millions, current prices
1 United States 391,104
2 United Kingdom 253,825
3 China 133,700
4 China, Hong Kong SAR 108,125
5 Netherlands 91,956
6 Singapore 61,596
7 British Virgin Islands 59,096
8 Brazil 58,679
9 Australia 48,190
10 Cayman Islands 44,967
11 India 44,485
12 Russian Federation 37,667
13 Canada 33,721
14 Belgium 33,102
15 Italy 28,954
16 France 28,351
17 Luxembourg 26,857
18 Mexico 26,738
19 Ireland 22,304
20 Sweden 19,583


The top 20 countries by inward FDI flows, in USD millions, current prices
1 United States 2,405,367
2 China 1,168,353
3 United Kingdom 897,878
4 China, Hong Kong SAR 879,366
5 Brazil 610,682
6 British Virgin Islands 551,301
7 Canada 515,940
8 Singapore 515,070
9 Netherlands 453,240
10 Ireland 441,912
11 Australia 439,244
12 Russian Federation 389,327
13 India 347,220
14 Belgium 345,055
15 Spain 339,721
16 Germany 335,850
17 France 305,703
18 Mexico 287,945
19 Cayman Islands 282,914
20 Luxembourg 238,472

The Giants

These are the countries that win the most total FDI in dollar terms, based on the latest figures from the World Bank. While this is certainly one way to measure FDI performance, it clearly seems to advantage size. All the big countries by GDP, population and land mass are featured in the top 20, including Australia, Brazil, Canada, China, India, the US and the Russian Federation.

FDI is just as important to these developed behemoths as it is for smaller, developing nations. President Trump openly claimed that his tax repatriation scheme would induce US and foreign companies to build more factories and facilities in the US—that was certainly part of the stated intent.

But size isn’t everything when it comes to drawing investment. Industrious Hong Kong and Singapore, discreet Luxembourg and the Cayman Islands, low-tax Ireland and the Netherlands also make the list of FDI Giants. These are countries large in wealth, not land or markets. Some are—often because of their colonial past—historical gateways for trade, and thus offer traditional processes, relationships, know-how and institutions that give them privileged platforms for international business. Others, precisely to overcome their small size, have equipped themselves with investor-supportive regulations and institutions, stilts that allow them to walk among giants.

Most of the countries on the 10-year list of cumulative FDI inflows are also on the latest single-year list, meaning these big-draw countries tend to hold their advantage over time. Still, looking over the past decade offers a window on how the impact of the financial crisis and subsequent recession varied from country to country.

Two countries in particular seem to have outperformed in 2016, however: Italy and Sweden. After a big dip during the recession, Italy and Sweden are now showing an upward trend in FDI. Germany’s FDI, on the other hand, recovered almost immediately after the crisis first hit, with investors looking for a refuge in Europe. More recently, as other eurozone members regain strength, Germany is on a downward trend. Spain, where recovery has been slower than elsewhere, has also lost its position in the ranking. Distrust in Spain’s finances may have hindered FDI flows until very recently. The increase of more than 50% in FDI inflows in 2016 might indicate an uptick in investors’ trust.

The Outperformers

Analysis of each country’s share of world FDI relative to its share of world GDP (table, next page) shows small economies with overgrown financial sectors and generous tax regimes leading the pack. The British Virgin Islands pull in FDI a staggering 2,700 times their weight in world GDP. For the Cayman Islands, next in line, FDI share is “only” 518 times GDP share. Luxembourg, Malta and Hong Kong round out the top five.

A second group of outperforming countries, mostly in Africa, primarily draw investors seeking to exploit natural resources. Despite recently low commodity prices, the most successful have been able to keep investment flows high. Political stability makes a big difference, as a precondition for improving business regulations, creating investment opportunities and safeguarding profits. 


Top 20 countries for FDI inflows as a proportion of their share of global GDP
1 British Virgin Islands 2,729.43
2 Cayman Islands 517.71
3 Luxembourg 20.14
4 Malta 15.49
5 Netherlands 91,956
6 China, Hong Kong 14.74
7 Mozambique 11.53
8 DR Congo 9.81
9 Singapore 9.13
10 Liberia 8.67
11 New Caledonia 7.13
12 Anguilla 6.39
13 Saint Vincent & Grenadines 6.02
14 Sierra Leone 5.73
15 Maldives 5.45
16 Angola 5.28
17 Azerbaijan 5.28
18 Netherlands 5.25
19 Georgia 5.17
20 Seychelles 4.86

Rising Stars

Some countries have dramatically improved their ability to attract FDI in the last 10 years—and it’s a pretty heterogeneous group.

From Europe, only Luxembourg and Portugal qualify. As a financial hub, Luxembourg occasionally sees large oscillations due to big international M&A deals. In 2007, our base year, the takeover of steel giant Arcelor by steel giant Mittal sent Luxembourg’s FDI figures below zero, which contributed to its extraordinary rise in the FDI-performance ranking. Portugal’s recovery after the recession, and tax reforms specifically aimed at attracting foreign investors, are behind its FDI-performance boost.

Azerbaijan, like other countries emerging from conflict or long dictatorships, showed minimal or even negative FDI flows in the base year of 2007. Some still show signs of fragility; others have been able to stabilize. For many such countries, the source of surging FDI has been discovery of big reserves of natural resources. Discovery of the Azeri-Chirag-Guneshli oil field and the Shah Deniz gas field were instrumental in sending Azerbaijan’s FDI figures soaring in the past 10 years. Chad started oil extraction in 2003; Mozambique discovered new coal and natural gas sources in 2009; Ghana found new offshore reserves in 2007.

It’s a similar story in Suriname, the third-fastest of the Rising Stars and the only one in the Americas. In 2014, the country secured a large investment in the gold mine at Merian. More recently, state-owned Staatsolie has signed production-share contracts with several multinationals to explore the country’s reserves in the Guyana-Suriname basin.

Myanmar gets most of its FDI from oil and gas initiatives, yet shows a somewhat more balanced sectoral distribution, with significant investments going into power generation, transport, telecom and manufacturing. Myanmar’s FDI took off in 2010, when the military regime allowed some reforms. In 2012, the country eased investment rules and created three special economic zones, which allowed it to start benefitting from the progresive lifting of international sanctions. China and Singapore, Myanmar’s main trade and investment partners, may gain from the further easing of investment rules in October 2016 and the relatively weak position of Western investors.

Whatever their strengths, all nations strive to leverage their assets to woo private companies to help finance and build hotels, airports, oil wells, roads, manufacturing plants, communications networks and laboratories, or to set up service-oriented subsidiaries that will hire local talent. Their histories, their natural assets or their locations largely impact their fates, but the ability to leverage its history, assets or location is what makes a country not just an attractive investment destination, but a Superstar. 


Countries that most improved at drawing FDI, as evidenced by gains in their relative FDI ranking
Rank Country Rise in Ranking 2007–2016
1 Luxembourg 193
2 Azerbaijan 174
3 Suriname 141
4 Chad 135
5 Myanmar 105
6 Mozambique 102
7 Togo 100
8 Ethiopia 100
9 Ghana 90
10 Sierra Leone 86
11 New Caledonia 85
12 Gabon 83
13 Rwanda 82
14 Portugal 78
15 Malawi 76
16 Turkmenistan 74
17 State of Palestine 69
18 Zimbabwe 67
19 Philippines 56
20 Niger 55


With so many variables, identifying the countries that are most successful at drawing FDI is tricky. A lot depends on how it’s measured. Global Finance studied various success metrics in its efforts to identify true superstars.

Raw inflows favor size, so this measure alone yields a list of economic powerhouses. (The Giants, p. 45). When we considered performance not only today, but over the past decade—in part to mitigate the notorious volatility of FDI figures—behemoth nations dominate the list, too.

Analyzing each country’s share of FDI relative to its share of world GDP helps level the playing field for smaller countries. This yielded a dramatically different portrait, heavily populated by offshore financial centers, which of course attract financial capital disproportionate to their share of global economic activity. (The Outperformers, p. 46)

A comparison of today’s list with that of a decade ago that ranks countries according to how much they had moved up or down, yielded a list showcasing the countries that have most dramatically improved their FDI competitiveness over the decade. (Rising Stars, p. 46)

But Global Finance sought to identify the countries with the best overall mix of FDI enticements—including not only the size of the economy and political stability, but also smart policymaking—to give a slight edge to the impact of policy choices over accidental benefits of geography. The algorithm thus adds two additional factors to the measures of raw size, relative size and growth over time: each country’s scores on the World Bank’s Ease of Doing Business index and on the Global Peace Index.

The World Bank’s Ease of Doing Business report annually ranks countries by business regulatory environment. The index evaluates the ease of starting a new business, obtaining construction permits, getting electricity, registering property, obtaining credit, paying taxes and dealing with customs. It also considers the level of protection afforded to minority investors and the difficulty of enforcing contracts and resolving insolvency issues.

The Global Peace Index—on the theory that factors that contribute to peace are also drivers for a stable thriving economy—tries to evaluate not only the absence of conflict, but also “Positive Peace.”

The index components include good relations with neighbors and a well-functioning government, but also a strong business environment, high levels of human capital, low levels of corruption, equitable distribution of resources, acceptance of the rights of others and the free flow of information. IEP estimates that in the period 2005–2016, countries improving in Positive Peace had 2% higher annual growth in per capita income than those deteriorating.