TThe United States may still be deemed a world leader in many ways, but according to the Global Investment Location Database (GILD), developed by IBM-Plant Location International (IBM-PLI), the U.S. no longer ranks as the leading investment destination. “In the past year, the United States was overtaken by China and India as the leading investment destination, both in the number of projects and in the number of jobs involved in those projects,” said Roel Spee, associate partner for IBM-PLI. “Reasons for this recent trend are the cost attractiveness of [India and China], combined with the presence of a strong skill base.”
The United States has traditionally attracted most foreign direct investment (FDI) projects.
“This mainly was driven by its large consumer market, which attracted many companies that aimed to serve that market through a physical presence,” Spee said.
IBM-PLI tracks every sector in its database, and reports on any possible sector, sub-sector or activity.
Brussels, Belgium-based IBM-PLI is the global key practice within IBM Business Consulting Services, which specializes in corporation location and investment promotion/economic development services.
According to database findings released in September, the United States ranked No. 1 for FDI only in the financial intermediation category during the first half of 2004, a position it also maintained in 2003. China ranked No. 2 in 2004, up from No. 3 in 2003, followed by India, the Russian Federation and the United Kingdom.
India surpassed the United States as the No. 1 destination for business services FDI in the first half of 2004. The United States was followed by China, the United Kingdom and Australia.
In chemicals, China was ranked No. 1 for the first half of 2004, followed by the United States, which held the lead in 2003. Japan (No. 3), India (No. 4) and Brazil (No. 5) followed.
China also ranked No. 1 for the first half of 2004 in motor vehicles, followed by the United States, Brazil, Hungary and Mexico.
For 2003, most investments were in business services and chemicals, according to GILD, and the automotive sector was bypassed by financial intermediation.
Cross-Border Trends
According to GILD, worldwide cross-border investment increased by 3.5 percent from 5,342 projects in first half of 2003 to 5,530 projects in the first half of 2004. Job opportunities increased by 7 percent, with 718,000 new jobs created in the first half of 2004 compared with 671,100 in the first half of 2003.
The United States still attracts more cross-border investments than any other nation. IBM-PLI calculated that about 950 greenfield and expansion projects took place in the U.S. during the first half of 2004 compared with more than 730 during the second half of 2003 and more than 920 in the first half of 2003.
China has moved up quickly, however, with about 800 projects in the first half of 2004, compared with 775 in second half of 2003 and 660 in the first half of 2003. India (No. 3) had more than 570 projects in the first half of 2004 compared with 320 in second half of 2003 and 310 in the first half of 2003.
In the first half of 2004, India attracted significantly more jobs than in previous periods with about 125,800 compared with China (No. 2) with 110,900 and the United States (No. 3) with 90,200.
The United States also continues to invest more abroad than any nation. In the first half of 2004, GILD counted about 1,700 FDI projects being made by U.S.-based companies outside of the United States, similar to the first half of 2003.
Japan remains Asia’s leading FDI investor, having made more than 600 projects in the first half of 2004. Germany and the United Kingdom are the main European investors.
“Our most recent data show that the main economic markets in Europe, particularly Germany and France, generate more outward investment than they attract new inward investment,” Spee said. “This is influenced by the cost differences between these countries and other parts of the world.”
China and India are also developing into outward investing countries, Spee said. India is already among the top five outward investing countries globally. The main sectors are life sciences, ICT and automotive. China is following a similar development.
Regional Investment Trends
In the Western Hemisphere, the United States outweighs all other nations in attracting FDI. For the first half of 2003, the United States attracted 58 percent of investment, with Brazil (No. 2) receiving 11 percent of projects locating in the hemisphere.
India and China maintained their leading positions in attracting job-enhancing projects to the Asia-Pacific region.
India weighed in at 31 percent for the first half of 2003 and increased to 35 percent in the first half of 2004; China, 24 percent in the first half of 2003 and 32 percent in the first half of 2004.
The Europe and the Middle East Area (EMEA) showed more of a mixed bag with the “other” category dominating in terms of employment (22 percent in the first half of 2003 and 20 percent in the first half of 2004).
The United Kingdom is still No. 1 in Europe at 14 percent in the first half of 2003 and 11 percent in the first half of 2004. However, its share is decreasing.
Meanwhile, Russia, Germany and France maintained their positions. Russia accounted for 9 percent in the first half of 2003 and 8 percent in the first half of 2004; Germany, 7 percent in the first half of 2003, 6 percent in the first half of 2004; and France, 7 percent in the first half of 2003, 5 percent in the first half of 2004.
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