The resilience that Costa Rica has shown during the Covid-19 pandemic has secured it the top ranking as the world’s best performing location relative to its size, when it comes to attracting foreign direct investment (FDI). 

Costa Rica climbed to the top of this year’s annual Greenfield Performance Index with a score of 11.4. This puts it significantly ahead of the runners-up, Lithuania with 8.3 and the UAE with 7.1.

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Of the 84 countries analysed by fDi in the 2021 Greenfield Performance Index, 64 had an index score greater than 1.0, while 20 had a score of 1.0 or lower. A score of 1.0 indicates that a country’s share of global inward greenfield FDI in 2020 matches its relative share of global gross domestic product (GDP), while a score greater than this indicates a larger share and a score of less than 1 indicates a smaller share. Costa Rica is therefore attracting 11 times the amount of greenfield FDI that might be expected given the size of its economy.

At the other end, China and Japan stand out as the lowest performing countries, scoring 0.18 and 0.28 respectively. While its GDP withstood the pandemic relatively well, China witnessed a 55% drop in FDI project levels during 2020, fDi Markets data show, which sank the country to the bottom of the index ranking. South Korea (0.34), Bangladesh (0.35) and Indonesia (0.4) are also attracting much less FDI in proportion to the size of their economies.

Costa Rica, one of Latin America’s smallest countries, attracted 96 projects in 2020, according to fDi Markets data. While this represents a drop of 7.7% from 2019, it remains the country’s second-best year since records began in 2003 — a performance that stands out even more considering the challenging investment environment of last year, when greenfield FDI projects fell by about a third globally. The country has come a long way since being an exporter of agriculture commodities decades ago; in 2020, medical devices, software and IT and business service sectors accounting for 60% of its inward FDI projects. Among others, the country managed to secure a $600m investment commitment by Intel to reestablish assembly and testing operations in the country after a hiatus of seven years — the US company had terminated its local manufacturing functions in 2014 — to address the global shortage of microchips. 

Emerging European economies also performed well in this year’s index, securing six of the top 10 positions. Lithuania, another country that showed a certain level of FDI resilience to Covid-19, jumped from sixth place in the previous iteration of the ranking to second in the 2021 index, improving its score by 1.8 points. Estonia scaled the ranking from 34th place in 2020 to fifth this year, after increasing its project levels by 37% year-on-year in 2020 and improving its score by 2.99 points.

The UAE also scaled the ranks, jumping from 12th place to third this year, despite a 14.7% drop in project levels from 2019. Software and IT services was the country’s leading FDI sector in 2020 and witnessed a 35% increase in the period.

The Greenfield Performance Index uses a methodology devised by Unctad for overall FDI, and applies it to only greenfield FDI, excluding mergers and acquisitions, intra-company loans and other forms of cross-border investment. 

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Regional Analysis

Africa

A total of 12 African countries made it into the index this year — nearly half the amount in last year’s index. Of those, nine have a score of more than 1.0, the exceptions being Nigeria (0.9), Egypt (0.87) and Ethiopia (0.83). Zambia is the leading African country, and ranks tenth overall, with a score of 3.94. Last year’s top performers and new entrants Togo and Rwanda did not qualify for this year’s index.

Asia-Pacific

Some 10 of the 20 Asian countries that were included this year received a score of more than 1.0. Singapore ranks first in Asia-Pacific with a score of 6.2, and ranks fourth overall. Cambodia climbs from fifth to second place in the region and Vietnam maintains third place from the previous study. Last year’s regional winner, Georgia, did not qualify for this year’s ranking.

Emerging Europe

All but one of the 16 emerging European countries analysed received a score greater than 1.0, with Russia (0.78) being the only country to fall below the proportional benchmark. Lithuania (8.25) and Estonia (6.12) pushed ahead to top the region, coming first and second respectively. The two countries noted a marked improvement on last year’s index, improving their scores by nearly three points each. Last year’s regional winner Serbia slipped to third place.

Latin America & Caribbean

Panama (3.30) pushed past Columbia (2.58) and Chile (3.03) to place second. All 11 of the countries analysed in this region scored above 1.0. 

Middle East

Some four of the six Middle Eastern countries analysed had scores above 1.0. The UAE remains the leading Middle Eastern country with a score of 7.14, and is once again followed by Bahrain (3.23) and Oman (2.65) in second and third position, respectively.

North America

While project numbers in both Canada and the US dropped last year, the two countries witnessed a slight improvement in this year’s ranking. Canada scored 1.33, up by 0.27, and the US scored 0.53, up by 0.07. 

Western Europe

Ireland is the leading Western European country in the index, with a score of 3.88. The country witnessed a small increase in projects during 2020, bucking the global trend. It is closely followed by Finland (3.31) and Portugal (2.77) who retain second and third place. Last year’s regional winner, Malta, did not qualify for this year’s ranking, after having attracted fewer than 10 projects. 

Greenfield FDI data used in the index is derived from fDi Markets and excludes retail investments. The 2020 index included 84 countries, which is 17 fewer than in the previous index. The Democratic Republic of Congo was the only new entrant. To be included in the index, a country must have received at least 10 greenfield FDI projects in 2020. The 2019 FDI figures were revised from last year’s index as further project information became available in 2020/2021. GDP figures were also revised on more recent data from the IMF (from the fourth quarter of 2020).

This article first appeared in the August/September print edition of fDi Intelligence. View a digital edition of the magazine here.