WORLD INVESTMENT REPORT 2024: Investment Facilitation and Digital Governance
Introduction
The 2024 World Investment Report (WIR) by the United Nations Conference on Trade and Development (UNCTAD) focuses on the critical role of investment facilitation and digital government in fostering a conducive environment for sustainable investment. The report highlights the stagnation in global foreign direct investment (FDI) flows, the challenges in Sustainable Development Goal (SDG) investment, and the need for a robust sustainable finance industry.
Global Investment Trends
In 2023, global FDI flows remained stagnant at $1.3 trillion, continuing the trend from the previous year. The decline was particularly pronounced in developing countries, with a significant drop in new industrial and infrastructure projects. Investment in sectors relevant to the SDGs fell by over 10%, exacerbating the challenges in achieving the 2030 Agenda. High interest rates and geopolitical tensions were identified as major factors hindering investment flows.
Sustainable Finance Market
The sustainable finance market, despite its growth, showed signs of a slowdown. The value of sustainable investment products grew by 20% to over $7 trillion in 2023. However, greenwashing concerns and insufficient growth in sustainable bonds and funds were major challenges. Green bonds drove marginal growth, while other segments, such as social bonds, saw declines. Net inflows into sustainable funds dropped significantly, highlighting the need for stringent standards and transparency to combat greenwashing and enhance investor confidence.
Investment Policy Measures
In 2023, investment policy measures were down by 25% from 2022, with 72% of the measures being favorable to investors. Developing countries focused on promoting and facilitating investment, while developed countries implemented more restrictive measures, particularly in critical sectors. The introduction and expansion of FDI screening mechanisms became prevalent, with four additional countries adopting such measures in 2023. The growing importance of sustainability and geopolitical considerations influenced the evolution of outward FDI policies.
Reform of International Investment Agreements (IIAs)
The reform of old-generation IIAs, which still cover about half of global FDI, has been slow. Only 16% of global FDI stock is covered by new-generation IIAs, which aim to mitigate the risk of investor-State dispute settlements (ISDS). UNCTAD continues to lead efforts in IIA reform, promoting sustainable development-centric investment regimes. In 2023, 29 new IIAs were concluded, incorporating broader economic provisions and emphasizing investment facilitation.
Digital Government and Investment Facilitation
Digital government solutions have become integral to investment facilitation, aiding in streamlining procedures, enhancing transparency, and improving governance. The proliferation of online single windows and other digital tools is crucial for attracting and retaining investment, particularly in developing countries. The report underscores that digital business and investment facilitation are not merely technical solutions but essential components of broader digital government implementation.
Key Challenges and Recommendations
The report highlights several challenges and recommendations in the investment landscape:
- The decline in investment in SDG-relevant sectors threatens the achievement of the 2030 Agenda. Urgent action is needed to remove obstacles and create a transparent, streamlined investment climate.
- High interest rates and tight financing conditions are significant barriers to investment flows. Policymakers need to prioritize the mobilization of sustainable finance at scale.
- Greenwashing remains a significant issue, affecting investor confidence in sustainable finance products. Implementing well-defined standards, robust disclosures, and external auditing is essential to address this challenge.
- Balancing investment promotion with the necessary restrictions to safeguard national security and sustainability goals is necessary.
Conclusion
The 2024 World Investment Report emphasizes that investment is not just about capital flows but also about harnessing human potential, ensuring environmental stewardship, and striving for a more equitable and sustainable world. Policymakers and stakeholders are urged to embrace sustainable investment strategies, prioritize the mobilization of sustainable finance, and leverage digital solutions to create a conducive investment climate. The choices made today will significantly impact the future, shaping a sustainable and inclusive global economy.