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By Sandra Waliczek
In early 2015, the United Nations Conference on Trade and Development (UNCTAD) published the Global Investment Trends Monitor report. The figures revealed that global foreign direct investment (FDI) declined by 8% in 2014 and that China emerged as the largest recipient of foreign investment.
In 2013 SelectUSA, a U.S. investment promotion agency hosted an investment summit for global leaders and investors with many influential speakers including President Obama. The purpose of this event was to show them the benefits of investing in the United States. During the Investment Summit President Barack Obama said “To all the business leaders here today and around the world: We want to be your partner in helping to write the next chapter in our history. We want you to join the generations of immigrants and entrepreneurs and foreign investors who have discovered exactly what it means when we say we are the land of opportunity.” If China is currently receiving the most foreign investment, does this mean that it is the new land of opportunity?
First, the numbers:
Investments in the U.S. fell from $230.8 billion in 2013 to $86 billion in 2014. The United States is currently in third place, behind China ($127.6 billion) and Hong Kong ($111 billion). The United States has been the top destination for FDI, and this is the first time since 2003 that the U.S. was not number one. According to the UNCTAD World Investment Report, prior to 2003 various countries in Europe were top destinations for FDI, but based on the current economic downturn, these countries will most likely not beat the U.S.
Although China is in first place for FDI in 2014, this is not indicative of a long-term trend. Our generation of up and coming businessmen and women still view the United States as the best and safest place for investment. According to 2014 A.T. Kearney Foreign Direct Investment Confidence Index, which ranks countries on how political, economic, and regulatory systems affect the attraction of FDI, the United States was ranked number one. The study surveyed 300 companies from every industry sector and from 26 countries around the world. The report further concluded that 49% of respondents indicated that their outlook for the U.S. is more positive than it was two years ago. This is the highest positive net gain since the index was started 16 years ago. Based on the fDi Report 2014, the United States is the largest source for investment around the world. The dominance of the U.S. as a destination for FDI over the past decade will continue because the U.S. is clearly on the minds of global business leaders as the best destination for investment and our investors are the ones holding the money.
When investors are looking for a place to spend their money they look for a country with plenty of sources of energy, a stable economy, a diverse consumer market, and a policy environment that supports the private sector says Paul Laudicina of the Global Business Policy Council. The U.S. possesses these qualities and one of the biggest reasons why investors recently have a strong positive view of the U.S. is because the International Energy Agency believes that the U.S. will be energy independent by 2020. This is a big selling point for investors and China is not close to that that kind of achievement.
Not only will the U.S. return to the top spot, but it will also be able to maintain its competitive position in the long-term. The Global Competitiveness Index, published by the World Economic Forum, measures how productively a country uses its resources and is able to sustain its economic position. The United States is ranked at number 3, while China is ranked number 28. Seeing as investing in China comes with a greater risk, investors will favor the U.S.
The U.S. investment promotion agencies, such as SelectUSA, have been attracting many foreign investors. As a result of their efforts, including the SelectUSA Investment Summit this month, the U.S. will surely gain FDI in the near future and due to the current favorable outlook of the U.S. it will remain ahead of others.
Foreign direct investment is critical to the United States economy because it is a large source of capital and creates more jobs. Based on the most recent statistics from the Bureau of Economic Analysis (BEA), foreign firms employed over 5.8 million people in the U.S. The U.S. position was threatened this year, but one year’s results do not indicate a long-term trend. As long as the U.S. continues to engage in investment promotion and keep Millennials and current investors aware of the successful U.S. investment environment, it will soon rise back to number one. The United States has been and will continue to be the land of opportunity for investors.
Sandra Waliczek is a second-year student at the McDonough School of Business at Georgetown University majoring in International Business and Finance and minoring in Chinese.
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