The Index is constructed using primary data from a proprietary survey of senior executives of the world’s leading corporations. The rankings are calculated based on questions about the respondents’ companies’ likelihood of making a direct investment in a market over the next three years.
In contrast to other backward-looking data on FDI flows, the FDI Confidence Index® provides unique forward-looking analysis of the markets investors intend to target for FDI in the coming years. Click here for the full methodology.
What is foreign direct investment (FDI)?
For our survey, we define foreign direct investment as an equity investment by a company in one country in a company in a different country.
It is based on UNCTAD’s definition that FDI is as “an investment involving a long-term relationship and reflecting a lasting interest and control by a resident entity in one economy (foreign direct investor or parent enterprise) of an enterprise resident in another economy (FDI enterprise or affiliate enterprise or foreign affiliate).”
Does the FDI Confidence Index actually predict future FDI flows?
Since its inception in 1998, the countries ranked on the FDI Confidence Index® have tracked closely with the top destinations for actual FDI flows in subsequent years. So at a macro level, the FDI Confidence Index® is a relatively reasonable predictor of where FDI flows will go in the next three years.
However, investor intentions can change due to economic or political developments in potential host markets, the availability of quality targets and projects in the potential host market, or other reasons. In addition, the FDI Confidence Index® is not an apples-to-apples comparison with FDI flows because the units of analysis are different. The FDI Confidence Index® gauges companies’ planned investments in a market, but not the size of those investments. FDI flows are usually reported in US dollars, so a big investment by one company can outweigh smaller investments by many companies.