The FDI angle:

• Strong foreign direct investment (FDI) and macroeconomic prospects make countries more attractive to investment.
• The ten countries with the strongest FDI prospects for 2024 are spread across countries in Asia, Africa, the Middle East and Europe.
• Why does this matter? Investors should keep a track on these markets and the opportunities they may offer.

Foreign investment outlier Cambodia is expected to carry the strongest investment momentum into 2024, according to fDi’s annual FDI Standouts Watchlist. 

The study, which assesses the macroeconomic and foreign direct investment (FDI) trajectories of the world’s top 50 FDI destinations using data from the IMF and foreign investment monitor fDi Markets, singles out those countries that are entering the new year with a strong macroeconomic and FDI momentum as the world continues to grapple with a patchy post-Covid recovery. 

Asia has performed well in this year’s Watchlist, featuring six countries in the top 10: Cambodia — which leads the overall Watchlist — the Philippines in second, Iraq in fourth, Kazakhstan in sixth, Azerbaijan in seventh and India in 10th. Just three African countries made the top 10: Kenya in third, Namibia in fifth and Morocco in eighth. Serbia in was the only country outside Asia and Africa to make it into the top 10, securing ninth place.

Cambodia's economic recovery

With gross domestic product (GDP) growth forecasted at 6.1% in 2024, up from 5.6% in 2023, the IMF expects Cambodia to be the fastest growing economy in south-east Asia next year, with inflation contained at 3% in both 2023 and 2024. Structural and cyclical factors have contributed to the country's economic performance.

The country has strengthened its trade relationship via free trade agreements with China and South Korea, both of which came into effect in 2022. 

It is also a member of the Association of Southeast Asian Nations, the Regional Comprehensive Economic Partnership and has preferential access to the EU market, although it was partially withdrawn by the bloc over human rights concerns in 2020. 

At the same time, the south-east Asian economy has been benefiting from a recovery in tourism since China started lifting its Covid-related travel restrictions earlier in 2023. According to figures from the UN World Tourism Organization, tourism arrivals increased eight-fold in the first quarter of 2023 from the year before, although they remained 31% lower than in the first quarter of 2019. 

The recovery in FDI followed a similar trajectory. After all but vanishing in 2021, greenfield FDI has bounced back, reaching $2bn spread over 20 projects in the first nine months of 2023, according to fDi Markets figures. China accounted for more than two-thirds of the country’s greenfield FDI capital expenditure since 2021, with Chinese companies active across the board, from the construction and operation of a new $1.35bn expressway to manufacturing projects in tyres and solar panels.

Political change pays dividend

The IMF expects second-placed Philippines to grow its GDP from 5.3% to 5.9%, with inflation forecast at 3.2% in 2024.

Both public and private investment have played a key role in shoring up growth, with much of new president Ferdinand ‘Bongbong’ Marcos Jr’s reform agenda falling on liberalising investment since he took office in 2022. 

From an FDI perspective, the opening of the renewable energy sector to foreign investors has already effected major change. Historically, foreign ownership was capped at 40% in key sectors, including energy, telecommunications, airlines and shipping. Before FDI restrictions were scrapped in 2022, the OECD had ranked the country the third-most restrictive to FDI worldwide.

The impact of the reform was immediate. Major foreign companies of the likes of Danish Copenhagen Infrastructure Partners and German WPD pledged as much as $13.9bn in new wind and solar power projects across the country in the first nine months of 2023. That is about five times more than the country’s second-best performance in 2007, fDi Markets figures show. Although not yet fully reflected in FDI data, Chinese companies have also made major pledges around the development of the local renewable energy sector. 

More data trends you might have missed: 

• Renewables has highest FDI job creation momentum
• COP28: three FDI charts to grasp the tension between renewables and fossil fuels.
• The advanced economy forecast to double in size by 2024

Kenya's GDP is expected to grow by 5.3% in 2024, up from 5% in 2023, with inflation relatively high at 6.6% in 2024, according to IMF estimates. The country has been experiencing historically high greenfield FDI flows since 2021. 

One of the biggest FDI wins of newly elected Kenyan president William Ruto, who also came into power in 2022, comes from Moderna. The US-based pharmaceutical company has finalised an agreement to invest up to $500m as it plans to locate its first African facility for the production of messenger RNA (mRNA) vaccines in Kenya — one of the first of its kind in Africa.

The country’s energy sector has also attracted very strong FDI interest, with Dubai-based AMEA Power announcing in September 2023 the intention to produce green hydrogen in Mombasa, with total investment estimated at $2.29bn, fDi Markets figures show. 

Green hydrogen and stability

Green hydrogen is also behind the transformative FDI trajectory of fifth-placed Namibia (see page 66). The world’s second-most sparsely populated country is moving forward with a $9.4bn green hydrogen project in the Tsau Khaeb national park being developed by Namibia-based Hyphen Hydrogen Energy, a company that is partly owned by German renewables company Enertrag. The country has built much momentum around its green hydrogen push, with the likes of the EU and other European institutions and countries pledging their financial support for the country’s energy transformation. 

Finally, the energy potential of Iraq needs little introduction. But it is the country’s long-sought social and political stability (see page 62) that has been shoring up growth and FDI, helping it take fourth place in the FDI Standouts Watchlist 2024.

This article first appeared in the December 2023/January 2024 print edition of fDi Intelligence.

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