Reigniting investment flows
G7 Summit

Reigniting investment flows

A pattern of weakening is emerging for international investment flows, writes Mukhisa Kituyi, secretary-general, UNCTAD, as he calls on G7 leaders to rekindle global investment in support
of the Sustainable Development Goals

International investment flows have been weak for a decade. Last year, global foreign direct investment fell again, by 13%, the third consecutive decline. While developed countries have seen the largest drops in FDI, flows to developing countries have also stagnated. Only developing Asia is still showing moderate growth.

The stagnating FDI trend of the past decade can be ascribed to a range of factors. First, the nature of FDI flows is changing. The adoption of digital technologies in global supply chains is causing a shift towards intangibles and increasingly asset-light forms of international production, which is also visible in a slowdown in global value chains. This has important implications for developing countries, which rely on investment in physical productive assets and on participation in global value chains for their development.

Second, there has been a significant decline in rates of return on FDI. The global rate of return on inward FDI dropped below 7% in 2017, a decrease of almost two points compared to a decade ago. Although rates of return remain higher on average in developing and transition economies, most regions have not escaped this erosion.

Third, the international trade and investment policy climate has become generally less favourable. At the international level, the investment policy regime is in flux. It is made up of more than 3,000 investment agreements, with many gaps, overlaps and inconsistencies. At the national level, investment policies are no longer universally moving in the direction of greater openness. Restrictions and regulation of investment are on the rise.

Long-term concerns

This troubling global investment picture is a long-term concern for policymakers worldwide. At the United Nations, we recognise the gravity of this issue as investment is central for sustainable development and inclusive growth. The UN Conference on Trade and Development estimates the investment gap to achieve the Sustainable Development Goals at $2.5 trillion per year in developing countries alone.

We need to mobilise more investment and channel it to where it can contribute most to sustainable development. UNCTAD plays a central role, through its policy frameworks, intergovernmental consensus building and technical assistance, which work as a point of reference and a common structure for debate and cooperation on national and international policies to channel investment to the SDGs. UNCTAD is also the key venue for discussions on reforming the International Investment Agreement regime to make it more friendly to sustainable development. International cooperation and debate on investment issues is further bolstered by capacity building and technical assistance on investment issues through investment policy reviews, support to investment promotion agencies, and through the implementation of investment facilitation tools such as iGuides, investor information portals and electronic single windows.

Tangible results in making investment work for sustainable development show promise. More than 150 countries have used UNCTAD policy frameworks in their national and international investment policymaking. New IIAs concluded in the past few years almost all contain the key elements of UNCTAD’s Reform Package for the International Investment Regime. UNCTAD’s investor portals are now present in 35 developing countries and its inventory of investment facilitation tools on the global enterprise registration portal ( has provided a baseline for ongoing international debate on the topic.

Unlocking investment flows

Major challenges remain, however, both at the international and national levels. In the international policy environment, IIA reform now needs to tackle the vast numbers of older treaties dating from before the reform process took hold. The stock of old-generation treaties is 10 times larger than the number of modern, reform-oriented treaties. In national policy environments, greater efforts need to be made to channel investment into SDG sectors and contribute more to sustainable development.

The G7 summit provides an opportunity for global leaders to renew their commitment to a conducive global policy environment for investment in sustainable development. To achieve prosperity goals, continued access to investment in productive capacity is needed to help developing countries, especially the least-developed countries, climb the development ladder. In addition, a conducive climate for investment is a precondition to boost financing flows to key SDG sectors including infrastructure, renewable energy, food security, water and sanitation, and others. Our latest research reveals that international investment flows in these sectors have not shown a significant upward trend since 2015, when the SDGs were launched. That worrying fact merits the attention of G7 leaders.