From the International Monetary Fund’s 2022 Statistics and Data

●   Foreign direct investment in the countries of the world

●      The United States of America appeared in first place, as the top destination in the world for foreign direct investment, for the tenth consecutive year at the end of 2021. In an article dated 7-12-2022 by Janik Damjark and Carlos Sanchez on the International Monetary Fund blog, it was shown that the United States recorded the largest increase in inward foreign direct investment of all economies in 2021. The latest edition of the IMF’s Coordinated Direct Investment Survey shows that the position of the United States rose by 506 billion dollars, or 11.3%, last year 2021, for 112 global economies that provided their data!

●      As the attached "chart of the week" in the article shows, the United States is now the top destination in the world for foreign direct investment, while China rose to third place. It also shows how smaller economies occupy prominent positions among the world’s top 10 countries, with the Netherlands, Luxembourg, the Hong Kong SAR, Singapore, Ireland, and Switzerland appearing on this list, despite none of these economies ranking among the top ten in terms of gross domestic product.

●      The total stock of foreign direct investment at the end of 2021 amounted to 39,624 billion dollars (thirty-nine trillion six hundred twenty-four billion US dollars). The ranking of the top 10 economies (entities) by foreign direct investment, as given in the article, is as follows in order: United States: 4,977 billion dollars, Netherlands: 4,331 billion dollars, China: 3,578 billion dollars, Luxembourg: 3,327 billion dollars, United Kingdom: 2,68 billion dollars, Hong Kong: 1,914 billion dollars, Singapore: 1,792 billion dollars, Ireland: 1,368 billion dollars, Switzerland: 1,208 billion dollars, Germany: 1,117 billion dollars..!

●      Foreign direct investment in the United States (tables 7–10) varies by country of the foreign parent company; five countries accounted for more than half of the total stock at the end of 2021. Japan remained the leading investor with 690.0 billion dollars, followed by the Netherlands (629.5 billion dollars), Canada (527.9 billion dollars), the United Kingdom (512.4 billion dollars), and Germany (403.6 billion dollars).

●      Foreign direct investment in the United States is concentrated in the manufacturing sector in the United States, which accounts for 42.4%, with significant investment also in finance and insurance (12.5%) and wholesale trade (9.7%).

●      Foreign multinational companies earned income of 275.3 billion dollars in 2021 on their cumulative investments in the United States, an increase of 82.4% over 2020.

●   American direct investment abroad

●      As for American direct investment abroad, recent statistics and data indicate that the US Bureau of Economic Analysis (BEA, reported that the United States’ direct investment position abroad, or the cumulative level of investment, rose by 403.3 billion dollars to reach 6.49 trillion dollars at the end of 2021 from 6.09 trillion dollars at the end of 2020, according to statistics issued by the US Bureau of Economic Analysis (BEA). This increase reflects an increase of 352.6 billion dollars in the position in Europe, particularly in Ireland and the United Kingdom. By industry, subsidiaries owned by American manufacturing companies experienced the largest increase.

●      US multinational enterprises (MNEs) invest in almost every country, but their investments in subsidiaries are concentrated in five countries and accounted for more than half of the total position at the end of 2021. The United States’ direct investment abroad was largest in the United Kingdom (1.0 trillion dollars), followed by the Netherlands (885.3 billion dollars) and Luxembourg (715.6 billion dollars). Ireland (556.6 billion dollars) and Canada (406.4 billion dollars) are near the top five positions.

●      By the industry of the foreign affiliate directly owned, the largest investment was in holding companies, which accounted for 47.3% of the total position abroad in 2021. Finance and insurance subsidiaries were second at 15.6%, and manufacturing subsidiaries ranked third at 14.1% of US investment, by the industry of the US parent company.

●      US multinational companies earned income of 542.3 billion dollars in 2021 on their cumulative investments abroad, an increase of 25.0% over 2020. Dividend payments, or repatriated profits, declined by 65.2 billion dollars, or 21.8%.

●   Why are the United States of America the primary destination for foreign direct investment for more than a decade?

●      To answer this question, 2019 statistics showed several reasons to consider the United States extremely attractive for foreign investment. The attractiveness of the United States to foreign investors is attributed to the following:

●      Its business-friendly regulatory environment, skilled workforce, technological efficiency, and large domestic market. The United States occupies a leading position largely due to its strong and sustained economic growth in recent years, as well as a generally stable business climate. In addition, the low level of financial market development in other countries will continue to support capital flows to the United States.

●      However, foreign investors continue to invest in the United States for other reasons, such as corporate governance, strong institutions, or to diversify their portfolios to reduce risk. In addition, investors from outside the United States may bring their funds here because of their strong ties within the United States through trade flows or "proximity" measures such as distance, sharing a common language, or low-cost connections.

●      At the national level, foreign direct investment in the United States contributes to productivity growth, generates US exports, and creates high-wage jobs for American workers. According to SelectUSA, in 2018 foreign direct investment, for example, was responsible for supporting 7.8 million jobs directly, 66.9 billion dollars in innovative research and development spending, and 24% of all US goods exports..!

●      Examples of foreign direct investment in other countries include an article by Carlos Sanchez Munoz, Silvia Matyi, and Kristy Howell dated December 16, 2021, reporting that a Japanese car manufacturer is building an assembly plant in Mexico; an Italian software company opened a sales office in Kenya to reach the Kenyan market with its services; and a large Australian mining company acquired a smaller Angolan company for diversification. These are all examples of foreign direct investment, where a business decision is made to take a stake or interest in a company in some way by an investor located outside its borders!