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US tops the 2019 at kearney foreign direct investment confidence index®


The top 25 countries are indexed annually by A.T. Kearney through a survey of global business executives that ranks markets that are likely to attract the most investment in the next three years. This year's report keep the US at the top of the list with some interesting changes in overall trends of foreign direct investment. The full report is available on the A.T. Kearney web site here, and it well worth the read. Below is an excerpt of the report detailing the US position in the report:

"The United States maintains its top ranking in the Index for the seventh consecutive year, although by not as wide a margin as last year. The country’s continued attractiveness is likely in large part due to its sustained and robust economic expansion in recent years. The economy grew by 2.9 percent in 2018, compared with an average of 2.2 percent across developed markets. That said, the International Monetary Fund (IMF) forecasts slowing US economic growth in the medium term, which is consistent with declining investor optimism about the near-term US economic outlook.

Several US policies in recent years, including the Tax Cuts and Jobs Act and a sustained effort to weaken the regulatory requirements on companies, are aimed at improving the investment environment, likely contributing to the country’s sustained appeal to foreign investors. Other policy measures, however, have injected considerable uncertainty and disruption in the economy over the past year. Trade policy is the most notable example, including the still-unfinalized USMCA to replace the North American Free Trade Agreement (NAFTA) and the imposition of tariffs across a broad set of Chinese exports. Similarly, 2018 reforms in the operation of the Committee on Foreign Investment in the United States (CFIUS)—which greenlights or rejects foreign investments into the United States on national security grounds—will pose additional complications for FDI moving forward, particularly from China.

FDI inflows to the United States fell 18 percent in 2018 from the year prior, according to UNCTAD— part of a broad-based decline in inflows to developed markets. Part of the fall was due to fewer megadeals involving US-based companies in 2018 than in 2016 and 2017. That said, the United States remains a key market for cross-border M&A, with some of the largest deals focused on natural resources, such as upstream oil and gas development, midstream infrastructure such as pipelines, and metals and mining. The pharmaceutical and biotechnology sector was also involved in some of the largest M&A deals in 2018, including the French pharmaceutical firm Sanofi’s acquisition of Bioverativ, which specializes in treatments for hemophilia and other rare blood disorders, for $11.6 billion."

The conclusion of the research touches on the business implications of where foreign direct investment is headed, what it means for our economies, and how companies can keep a competitive edge:

"Today’s global operating environment is replete with paradoxes. Even as digital technologies enable greater global connectivity than ever before, global integration is becoming more challenged, and there is an ongoing shift toward regionalization of economic activity and interconnectedness. In addition, while country-level politics are characterized by populism and nationalism, more globally-minded cities are rising in importance in terms of both economic prowess and political leadership. And despite high levels of geopolitical risk, the global macroeconomic outlook remains relatively strong—although it is weakening relative to recent years. Each of these paradoxes, ultimately, is indicative of the rise of the age of multi-localism.

Understood in this context, the mixed signals that investors present in this year’s FDI Confidence Index results are less anomalous than they appear at first glance. Indeed, many of the seeming inconsistencies can be explained by the fact that the localization trend that emerged in last year’s Index has gained strength. This emphasis is likely to continue in the coming years, which will sustain the importance of FDI to profitability and competitiveness as companies seek to become local players in the markets in which they operate.To compete in this environment, companies will need to enhance regional supply chains and devolve management and operations to the local level. And countries seeking to improve their competitiveness in attracting FDI should therefore focus on engaging in more regional economic integration and fostering the dynamism of their largest cities."