LOS ANGELES— Foreign direct investment (FDI) has never been more important in catalyzing growth, whether in the developed or developing world. It now accounts for 11 percent of global GDP and more than 80 million jobs worldwide. But which countries are creating the best environments to capture these growth-fuelling investments?
In a report published today, "The Global Opportunity Index: Attracting Foreign Investment,
? research economists at the Milken Institute provide answers. The Global Opportunity Index ranks 98 countries for which data are available. Sixty-seven variables were assessed across five broad categories: economic fundamentals, regulatory barriers, ease of doing business, regulatory quality, and the rule of law.
Hong Kong and Singapore lead the index, with Canada, Switzerland, Australia and five members of the European Union rounding out the top ten. Second from the bottom is Venezuela; as the report notes, the nationalization of foreign firms pursued by the late President Hugo Chavez has made the country a "precarious location for FDI.
"The Global Opportunity Index helps identify opportunities for companies contemplating making investments of aEUR~patient' capital,
? says Keith Savard, senior managing economist and one of the authors of the report. "For policy makers in the host countries, the Index helps illuminate policy changes that can be implemented quickly and often at low cost, in order to make their countries more attractive for FDI.
To create a baseline, Milken Institute researchers also compiled data for 2007, before the onset of the global financial crisis. Their results show how countries responded to economic headwinds with varying results: two nations in southern Africa— Mozambique and Botswana— showed the most improved scores. Three Latin American nations— the Dominican Republic, Colombia, and Guatemala— were also among the ranks of the most-improved. China ranked highest among so-called BRIC group, recording the only meaningful increase between 2007 and 2011.
The rank of the United States? Twenty-two— one place behind France. In Europe's economically-troubled periphery, only Ireland remained in the top 10, while Greece plunged below China and many other emerging economies.
"'The Global Opportunity Index' shows the great progress many countries in the developing world have made in implementing growth-friendly environments for foreign investments,
? says Savard. "Conversely, it reveals that some developed countries need to do more to remain competitive.
Accompanying the report, a web tool, http://www.globalopportunityindex.org, provides full access to the rankings, in each of the five categories, with an interactive feature that allows users to customize the rankings, screening for the investment factors that matter most to them.
The Global Opportunity Index is part of the Milken Institute's Access to Global Capital Initiative, which has been developed in partnership with Liquidnet. Google provided support for transparency indicators, which are incorporated within the Index.
"The Global Opportunity Index: Attracting Foreign Investment,
? by Keith Savard and Heather Wickramarachi with Ross C. Devol and Apanard (Penny) Prabha is available for download at no charge: http://www.milkeninstitute.org/publications/publications.taf?function=detail&ID=38801401&cat=resrep.