Greenfield investment into advanced economies over the past 17 years has consistently grown at a faster pace than emerging market inflows, data collected by FT-owned investment monitor fDi Markets reveals.

It challenges the idea that Covid-19 has prompted investors to seek safety in advanced economies, suggesting instead that the pandemic has simply fortified their long-standing preference for stable regulatory environments and strong rule of law.

From 2003 to 2019, the number of greenfield projects launched in the Brics (Brazil, Russia, India, China and South Africa) fluctuated between 2,074 and 3,645 per year, fDi Markets figures show. Over the same period, new projects in OECD (Organisation for Economic Co-operation and Development) countries increased more than threefold, reaching 15,277 in 2019.

The matrix of global FDI adjusted accordingly. 

While Brics countries received 27% of global foreign direct investment (FDI) projects in 2003, their share plummeted to 10.45% in 2019, and fell further to 8.8% in the first eight months of 2020, fDi Markets figures show. 

Meanwhile, the share of global FDI projects of OECD countries, generally perceived as safer investment destinations because of their commitment to global standards of public governance and market institutions, rose to 66.9% in 2019, from 46.1% in 2003, fDi Markets figures show. The pandemic further boosted their investment appeal, pushing their share of global FDI projects to 73% in the first eight months of 2020. (Although seven new members joined the OECD since 2003, they accounted for only 3.3% of the announced FDI projects to date)

Brics were the darlings of the FDI world in the early 2000s, but, in some ways, they became the victims of their own success. “They first appeared on the radar as interesting places to invest because they presented cost advantages. But as these economies have risen, they aren’t so cheap any more, especially China,” said Mark O’Connell, CEO of OCO Global. “There is less of a cost-incentive to do work there.”

Meanwhile the predictability of developed markets has a timeless appeal. “Page 1, chapter 1 of the FDI playbook is to invest in countries with economic and political stability,” said Mr O’Connell. “OECD obviously delivers that more than emerging markets, so the balance of investors around the world will be conservative and risk adverse.”

Global FDI is projected to drop 40% in 2020 with developing markets expected to be hit hardest. It is backed up by fDi data year-to-date which show that new projects in the Brics are more than half of 2019 levels, while new projects in OECD countries are down by 38%.

fDi data from the global financial crisis also supports claims that FDI into advanced markets will rebound quicker than their emerging peers. Brics project numbers peaked in 2008 before starting a bumpy decline, while OECD projects dipped slightly in 2009 before recommencing their upward trajectory.