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Home / Inside fDi / Inside fDi: SDGs can help FDI get over GDP break-up

With foreign investment and GDP seemingly undergoing a messy divorce, Courtney Fingar is urging the newly single, and struggling, FDI to strike up a relationship with the UN’s Sustainable Development Goals

The past year has not been a good one for FDI. Starting from the low bar set in 2017, when there was a 23% decline in headline global FDI flows, 2018 has managed to look even more dire. The first half of 2018 saw them fall a further 41% and FDI flows are currently at the lowest level in a decade, according to Unctad. This flies in the face of more positive trends in global economic growth and trade volumes – both of which expanded in 2017 and 2018. As we highlighted in The fDi Report 2018, our annual assessment of global greenfield investment trends, the happy tandem in which GDP and FDI normally work has been busted and it is unclear when the relationship will resume.

Addressing the World Investment Forum 2018 in Geneva in October, James Zhan, head of the investment and enterprise division of Unctad, struck a gloomy note. “The juxtaposition of falling investment levels against improving other macroeconomic variables highlights the challenging nature and complexity of the current investment situation,” he told a nervous crowd of investment promotion officials.

“Investment storm clouds,” he warned, “continue to grow.”

Indeed, there isn’t much reason to think 2019 will be much rosier on the FDI front despite expectations of a small recovery in volumes. The threats to stability posed by Brexit, ‘Trumponomics’, trade tensions and tax reforms are likely to undermine FDI recovery and inject volatility over the next year or more.

Among the biggest challenges to be faced for the future is the mainstreaming of sustainable development; it is also one of the biggest opportunities. The UN's Sustainable Development Goals (SDGs) set out the framework for the global development agenda through to 2030. Achieving the goals is not possible without mobilising private sector investment, as our cover story emphasises.  

In theory, it is easy for almost everyone to agree with this. But as the reality of lower investment volumes and tighter competition bites, it would be equally easy to take eyes off the SDGs and just chase money in whatever form it could be found. However, that would be a mistake on all sides. Now, more than ever, the quality and the eventual outcome of investments matters enormously; and more than being just a meaningless acronym, the SDGs are actually the best current metrics we have for gauging whether capital is put to productive use. Having broken up in dramatic fashion with GDP last year, perhaps now is the time for FDI to get itself entwined in a virtuous union with the SDGs.

Courtney Fingar is editor-in-chief at fDi Magazine. Email: courtney.fingar@ft.com

This article is sourced from fDi Magazine
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