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Notes on Statistics
Comparisons economies are a good indication of how well countries are doing against the competition, while comparisons with better performing economies can show where to head in the future. Since attracting FDI is now an important policy concern for countries at all levels of development, it is useful to develop benchmarks of inward FDI performance. One simple way to benchmark FDI performance is to compare the absolute values of inflows or the shares of FDI in national investment. The World Investment Report has long provided such data. These comparisons do not, however, take into account the size of the host economy. It is a reasonable assumption that the larger the economy (as measured by GDP) the more FDI it will get. It is more interesting to assess how successful an economy is in attracting FDI after taking size into account. This can implicitly capture the effect of other factors to which foreign investors are sensitive: political and macroeconomic stability, the FDI policy regime, industrial competitiveness, natural and human resources, and the like.
UNCTAD Inward FDI Performance Index
The Inward FDI Performance Index is the ratio of a country' s share in global FDI flows to its share in global GDP. Countries with an index value of one receive FDI exactly in line with their relative economic size. Countries with an index value greater than one attract more FDI than may be expected on the basis of relative GDP.
They may have exceptionally welcoming regulatory regimes, be very well managed in macroeconomic terms, or have efficient and low-cost business environments. They may offer other competitive attractions: good growth prospects, ample and economical skilled labour, natural resources, good R&D capabilities, advanced infrastructure, efficient financial support or well-developed supplier clusters. Or they may have privileged access or a favourable location for exporting to large markets, or serve as entrepot bases or tax havens, and so on. On the other hand, countries with index values below one may suffer from instability, poor policy design and implementation or competitive weaknesses in their economies.
The Inward FDI Performance Index should be treated with care as an indicator of countries inward FDI positions. There are problems in compiling and comparing FDI inflow data. Tax havens will tend to show massive inflows in relation to their size. Some countries may have lumpy inflows for short periods, say because of newly discovered resources, mega M&As involving foreign investors or large privatizations. Economies that have been relatively isolated from international capital flows and have recently opened up may also get a substantial wave of FDI. Even countries with steady FDI inflows may change ranks if their share in global GDP changes.
Inward FDI Potential index
UNCTAD Inward FDI Potential index is based on FDI inflows, based largely on structural economic factors. It is the average of the scores on eight variables for each country. The eight variables are GDP per capita, Real GDP Growth, Exports, Number of telephone lines per 1000, commercial energy use per capita, R&D expenditure as a percentage of Gross national income, Students in tertiary education as percentage of total population, and Country risk. UNCTAD index for APEC economies are listed in table below.
| Member Economy | UNCTAD Inward FDI Performance index 1998-2000 | UNCTAD Inward FDI Potential index 1998-2000 |
|---|---|---|
| Australia | 0.6 | 0.569 |
| Brunei | 0.1 | 0.424 |
| Canada | 1.6 | 0.629 |
| Chile | 2.3 | 0.342 |
| China | 1.2 | 0.251 |
| Hong Kong | 5.9 | 0.589 |
| Indonesia | -0.6 | 0.189 |
| Japan | 0.1 | 0.586 |
| Korea | 0.6 | 0.558 |
| Malaysia | 1.2 | 0.368 |
| Mexico | 0.7 | 0.278 |
| New Zealand | 1.0 | 0.492 |
| Papua New Guinea | 1.5 | 0.263 |
| Peru | 0.8 | 0.282 |
| Philippines | 0.6 | 0.265 |
| Russia | 0.3 | 0.291 |
| Singapore | 2.2 | 0.641 |
| Chinese Taipei | 0.3 | 0.570 |
| Thailand | 1.3 | 0.298 |
| USA | 0.8 | 0.666 |
| Vietnam | 2.0 | 0.277 |