Unlocking Growth: Overcoming Barriers and Optimizing Investment Returns through Smart Outbound-Inbound Strategies
Description
In the midst of multiple global crises, more Global South nations have started to embrace a dual role in global capital flow by tapping into outbound investment strategies. For instance, in the context of FDI, a consistent growth rate in OFDI coming from developing economies was apparent from 2010-2022 (UNCTAD, 2023). Such was further vouched as China became the third largest contributor of FDI capital outflow worldwide per Q3 of 2023 (OECD, 2024). In addition, this occurrence happened at such a strategic timing: amidst the decreasing flow of investment from the North - as stated on UNCTAD's 2023 Global Investment Trends Monitor.
The World Investment Report illustrated that in 2022, while developed countries allocated an outstanding approximate of USD1 trillion for outbound investment in a form of FDI, developing and least-developed countries only receive around USD 400 million collectively in the same year. Upon closer inspection, a similar trend is spotted upon the findings of investment flow in the largest contributor of global outbound FDI, which was allocated mostly to the developed. Meanwhile, for example, funds catered to countries in Asia-Pacific --the second largest regional destination—by the same country only reached around 23% of the total allocation. In addition, the dissected data of the increasing outbound investment to developing countries illustrates that there is an imbalance of distribution. For example, if examined regionally, more than three fourths of the total flow was pooled to Asia and Latin America (UNCTAD, 2024).
There is also a trend of outbound investment that goes out from developing countries, to either the Powerful South or the North altogether - contributing to enlarging funding South-North investment gap. For instance, among the largest emerging developing countries most of its investment is catered to the developed states (OECD, 2023). At most times, developing and least-developed countries are left behind in the global investment distribution due to many pain points, including the amount of non-mitigatable risks, quality of demography, limited infrastructures, and overall lack of enabling ecosystem for foreign investments to thrive.
In addressing the imbalanced distribution, it is necessary to transform the current investing pattern and explore ways to craft a more diverse portfolio to ensure a more accessible investment for all, while still maintaining satisfactory investment returns and resilience against global volatility. At the same time, it is about time that countries learn how to craft a national environment to encourage a larger volume of foreign investments.
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