The New Landscape for Foreign Direct Investment

FDI is an engine for growth, but inflows—and competition for them—are tightening. Governments need to take an end-to-end approach to accelerate and attract investment.

Foreign direct investment has undergone a sea change as digital economies, geopolitics, and factory automation spark declines in FDI inflows. To attract investment, governments need to create value propositions that don’t just resonate but differentiate.

Some countries are already on this path. With strategies to spur local innovators, ecosystems, and talent, they’re creating assets—and opportunities—that help them stand out in a heated FDI environment. Success requires a holistic, end-to-end approach to drawing and facilitating investment. For many countries, that will be a sea change, too.

BCG’s Approach to Foreign Direct Investment

With many products now taking a digital form, and Industry 4.0 technologies making it more practical to reshore certain work, governments need to create an effective—and sustainable—engine for FDI.

We work with key stakeholders—such as investment promotion agencies (IPAs) and ministries of development—to create strategies and structures that drive FDI, job creation, and economic development for the long term.

And because we can call on a global network of experts, covering a full range of topics and capabilities, we can help at every step along the FDI journey:

  • Diagnosis. We assess a country’s FDI readiness: analyzing the quantity and quality of FDI inflows; measuring the effectiveness of current enablers, policies, and incentives; and identifying roadblocks.
  • Value Proposition. We help countries identify ways they can leverage their existing, nascent, and potential strengths to meet important market needs—and stand out in a crowded FDI landscape.
  • Enablers. We work with governments to develop policies, incentives, and resources that support their value propositions and accelerate investment. This includes everything from streamlining bureaucratic processes to creating full-fledged innovation centers.

Our experience on the other side of the equation—assisting global companies with their location and sourcing strategies—is another key asset we can call upon. By understanding business requirements and challenges, in industries as varied as agriculture and technology, we help countries develop the kind of compelling value propositions that generate FDI opportunities. And keep generating them.

One other unique resource we tap: BCG’s FDI Toolbox, a set of proprietary tools that support BCG experts and clients in assessing FDI readiness, identifying obstacles, and attracting FDI in a more efficient and sustainable manner. Chief among these tools:

Health Check

We use this tool to assess a country’s ability to attract and facilitate different kinds of FDI. The health check looks at underlying conditions that can enable—or hinder—investment, such as the physical and digital infrastructure, education level, and market access, as well as government policies, incentives, and regulatory frameworks. This lets us rapidly create a baseline and identify opportunities for improvement and change.

Acceleration Framework

In FDI engagements, we follow a holistic framework comprising five key phases: preproject diagnosis (assessing the current FDI landscape); country strategy (identifying sectors and opportunities to prioritize); FDI enablers (creating incentives, policies, and structures to increase investor interest); IPA operations (designing strategy and governance to help IPAs promote and close deals); and postproject diagnosis (assessing FDI performance and economic impact).

Our Client Impact in Foreign Direct Investment

The geographies and strategies may differ, but all of BCG’s FDI work shares one overarching goal: to convert investments into sustainable economic development. We achieve this through experience, collaboration, and innovation. Here are a couple of examples.

Meet Our FDI Consultants

Learn More About Foreign Direct Investment

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