World Bank Calls for FDI Boost in Emerging Markets

The World Bank has identified three policy priorities for emerging economies to help reverse the decline in foreign direct investment (FDI), which fell to $435 billion in 2023 – the lowest level since 2005.

First, it urges countries to streamline regulations and foster a more predictable business environment to enhance labor productivity and investor confidence.

Second, governments are encouraged to maximize the benefits of FDI by strengthening trade integration, investing in human capital and broadening local participation in the formal economy.

Third, the Bank calls for deeper international cooperation to support FDI growth through robust policy frameworks. For example, it notes that investment treaties can boost FDI flows between signatory countries by more than 40%.

“Reversing this slowdown is not just an economic imperative – it’s essential for job creation, sustained growth and achieving broader development goals. It will require bold domestic reforms to improve the business climate and decisive global cooperation to revive cross-border investment,” stated M. Ayhan Kose, the World Bank Group’s Deputy Chief Economist and Director of the Prospects Group.

Advanced economies also experienced a sharp decline, with FDI falling to $336 billion in 2023 – their lowest level since 1996 – driven by rising trade and investment barriers.