The FDI angle:

• Foreign direct investment (FDI) is sought after for its potential to create jobs and economic growth in recipient countries.
• The extent to which different industries can create high numbers of quality jobs differs greatly.
• Why does this matter? Governments should shape their investment promotion efforts around industries with the greatest potential to create high numbers of quality jobs.

The growth in jobs created by FDI since 2010 has been highest in the renewable energy sector, according to a new index underlining the industries likely to offer the largest employment dividend to locations in which they invest.

Based on figures and estimates by greenfield investment monitor fDi Markets, the FDI job index compares jobs created by announced FDI projects in a particular year with the base year of 2010. It shows the sectors with the strongest job creation momentum from FDI, rather than those with the highest planned absolute job creation figures.

The software and IT services sector had the second highest growth in FDI job creation between 2022 and 2010, followed by biotechnology, consumer products and the space and defence industries. 

Job creation by FDI into renewables shot up from 14,393 in 2010 to 91,600 in 2022, about 62% of which are from planned projects in hydrogen production and other emerging clean technologies. Hydrogen is seen as integral to decarbonising hard-to-abate sectors such as steel and shipping, but only 10% of announced projects have reached a final investment decision, according to the Hydrogen Council.

Michael Renner, the head of socioeconomics and policy at the International Renewable Energy Agency, says that renewables job creation has been driven by falling technology costs, enabling policies and rising investment. 

However, foreign investors are only a partial contributor to this job creation. This is shown by China, the largest investor in wind and solar energy projects, where the industry is primarily shaped by domestic firms. 

Further reading on FDI trends:

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• Countries setting new FDI records in 2023
• Brics expansion dilutes G7 investment influence
• The rise of the EU's formal FDI screening
• Chinese outbound FDI boom signals 'new phase'

The clean energy transition is expected to create employment in other areas like bioenergy supply, grids, storage and energy efficiency. The International Energy Agency estimates that the path to net-zero emissions will create 14 million new clean energy jobs by 2030. Compare this to 5 million lost jobs in fossil fuel industries, meaning a net gain of about 9 million jobs.

Richard Bolwijn, the director of investment research at the UN Conference on Trade and Development, cautions that renewable power generation projects create jobs during construction and installation, but few permanent roles in maintenance and operations. “It’s a very low job-generation industry,” he says.

Other industries have shown to have even greater employment potential, such as software and IT services, where FDI created an estimated 555,000 jobs globally in 2022, the highest of any industry and 5.7 times more than in 2010. While these announcements came in a year with major layoffs by big tech companies, Mr Bolwijn notes that FDI in the tech industry tends to be in active operations rather than construction.

About half of new tech FDI jobs in 2022 were created in India, a renowned destination for IT outsourcing. Multinationals like US-based DXC Technology plan to hire thousands of new workers in the world’s most populous country. France’s Capgemini announced plans in March 2022 to hire about 60,000 new employees in India, making it the greatest job creation of any FDI project tracked by fDi Markets last year.

FDI announced in the biotechnology sector created almost 17,900 jobs last year, the highest since records began in 2003. This was due to several large biological manufacturing projects. Notably, China-based Wuxi Biologics plans to employ 1500 staff at its new research, development and manufacturing centre in Singapore.

Higher job creation in the space and defence industry in 2022 reflected an all-time high of tracked FDI projects. France’s Thales Group plans to expand its headcount in Canada and the US by 1300 people. US-based Raytheon will employ at least 200 people at its new centre of collaboration in south-east Queensland.

While not featuring in the top five sectors in the 2022 FDI jobs index, semiconductors had the highest average job creation (320) per project. This is due to a surge of multi-billion-dollar capital foreign investment pledges by chipmakers. The US, EU and other countries have offered billions in incentives to attract large chip fabrication plants, which can employ thousands of people.

In terms of the capital intensiveness of job creation in 2022, other sectors stood out. For every $1m invested by foreign companies in the business machines & equipment sector in 2022, there were an average of 18.2 jobs created. This was followed by textiles (16.8 per $1m of FDI), business services (9.3 jobs) and tech (8.1 jobs).