The FDI angle:

  • The average capital expenditure pledged to greenfield foreign direct investment (FDI) last year rose to its highest level since 2008.
  • This is driven by extraction and manufacturing projects, particularly in strategic sectors like batteries, semiconductors and critical minerals.
  • Why does this matter? Competition for larger greenfield FDI projects has become more fierce.

The capital intensity of greenfield FDI projects in 2023 reached its highest level since the financial crisis, showing how the need for larger investments has grown in line with the energy transition and increasing digitisation of the global economy.

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In 2023, average capital expenditure (capex) hit $81.1m per announced FDI project, up from $77.1m a year earlier, according to fDi Markets. This was the highest figure recorded since 2008, when capital intensity of greenfield FDI was $83.7m. 

Greenfield FDI projects usually require significant upfront investment because they involve a company setting up whole new operations in a foreign country. Higher capital intensity is due to a number of factors. These include land acquisition costs, construction of buildings and infrastructure, workforce training programmes and the purchase and maintenance of expensive cutting-edge machinery required for production processes.

Extractive FDI projects, such as those in fossil fuels and mining, had the highest capital intensity in 2023 with an average of $787m per project, down from an all-time high of $1.7bn set in 2022. Higher average investment in extraction is largely due to significant equipment costs and infrastructure. Many sites are in remote, undeveloped areas or inhospitable environments such as offshore. Companies often need to build roads, bridges, pipelines and facilities to transport and process resources they extract.

More FDI data trends you may have missed:

The average capital expenditure pledged to greenfield manufacturing FDI projects in 2023 was $238m, the highest ever figure apart from the all-time high of $286m recorded a year earlier. René Buck, CEO of consultancy BCI Global, says that growing capital intensity of global FDI is likely driven by larger manufacturing investments in strategic sectors such as electric vehicles, batteries and semiconductors. 

Capital intensity of investments in these sectors is evidenced by the top 10 confirmed FDI projects of 2023. Taiwan’s TSMC announced the most capital-intensive FDI project last year: a €10bn plan to build a fabrication plant in Dresden, Germany. Four of the 10 FDI projects with the highest pledged capex in 2023 were in batteries, namely by Volkswagen and Northvolt in Canada, India’s Tata in the UK and Prologium in France.

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While FDI capital intensity in semiconductors fell from a record high of $1.09bn in 2022, it remained at the second highest level ever recorded in 2023. Meanwhile, metals and minerals last year recorded their highest ever average capex of $269m and $564m, respectively.

Governments, particularly in North America and Europe, have rolled out the red carpet for companies to attract large, transformational projects in these sectors. “Countries are really competing in a narrow set of sectors to attract FDI,” said Ayhan Kose, the deputy chief economist of the World Bank Group, in a recent interview with fDi Intelligence. 

“When you have more competition … you have to provide more incentives — in a sense you need to compromise more — to bring foreign investors into your country,” he added, noting that there is also a need for countries to implement reforms and improve their policy framework to attract these mega projects.

While strategic sectors were in the limelight for their capital intensity, a number of other major industries saw growth in average capex announced in FDI projects. Pharmaceuticals recorded their highest ever average capex in 2023, with about $61.9m pledged to each project. This was helped by mega projects such as Eli Lilly’s plans to invest $2.5bn into a site in Germany and Danish drug maker Novo Nordisk’s plans to invest DKr16bn ($2.3bn) to expand production in France.

Other sectors with notably high FDI capital intensity in 2023 included chemicals ($143m), communications ($126m), ceramics and glass ($106m), building materials ($99.6m) and rubber ($95.9m). Preliminary fDi Markets data for the first month of 2024 shows average capex is on track to have another strong year. 

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