This year's edition of the Foreign Direct Investment Confidence Index is titled Glass half full. It finds that while business executives are increasingly worried about the negative effects of politics, they are nevertheless optimistic with regards to the global economy and the opportunities that foreign direct investments bring. "For the third year in a row, the business executives view the increase in geopolitical tensions as the highest risk in the external environment. Investors' concerns about geopolitics and rising protectionism are likely driving the motivation to increase foreign direct investments. In an environment of slowing global trade growth and increasing barriers to trade, foreign direct investments may offer a localization strategy for investors in key markets," says Branko Žibret, managing partner of A.T. Kearney for Eastern Europe, explaining the results of the research.

USA again tops the Confidence Index, holding its first-place position for the fifth year in a row.
Business executives view the economic outlook of the USA more positively than any other economies. The sustaining attractiveness of the American market for foreign direct investments is the result of not only size and transparency, but also the relatively efficient American legal and regulatory environment. Germany is placed second, followed by China. The United Kingdom is in fourth place, with Canada in fifth.

11 European markets can be found on the 2017 Index - the most of any studied region - but the number is still smaller compared to last year's 13, since Norway and Denmark are no longer among the ranked countries. Germany rose to second place while Great Britain gained a spot and ranked fourth. France rose to 7th place, Spain to 11th, and Switzerland dropped one spot to rank 12th on the index. Sweden made the largest gain out of any country in comparison with the last year's situation and ranked 15th, while Italy (13th) and Ireland (20th) both climbed three spots. The Netherlands holds steady at 14th, while Belgium (22nd) and Austria (24th) as the final two round out the European representatives on the Index. In 2017, Europe maintains the considerable interest of business executives and has the third-highest level of regional inflows from foreign direct investments according to UNCTAD estimates.

Business executives are increasingly more optimistic about the European economic outlook. Over a third of the surveyed are positively disposed towards the European economic outlook, especially in Germany and Sweden. By ranking second, Germany is sitting in its highest-ever position in the Confidence Index, as well as earning the title of the highest-ranked European country for the second year in a row. Investor interest in Germany is growing. It is possible that after the exit of the UK from the EU Germany will be one of the great winners. In the final part of 2016, for the first time in four years, more investment flowed into German real estate than into the United Kingdom. The jump of the United Kingdom to fourth place of the index happened contrary to expectations. Despite the threats that Brexit represents for the economy, foreign companies are opting for foreign direct investments into markets such as the United Kingdom and the USA before the latter could start closing the doors on global investors.

"Despite the growing trend of global uncertainties, investors are still optimistic about the global economy and see many opportunities for foreign direct investments worldwide. For the first time since the global financial crisis we see more emerging markets ranked on the Index. This could bring important changes to the Foreign Direct Investment Confidence Index where mostly developed markets have been dominating for years." adds Branko Žibret.

What is the state of the FDI in Slovenia?

After several years of growth of foreign direct investments, on account of the sale of certain Slovenian companies such as Mercator, Pivovarna Laško, and Fructal among other things, the inflow of foreign direct investments into Slovenia dropped in 2016. The level of greenfield investments is also low. Compared to other countries in the Eastern Europe region Slovenia lags behind the Czech Republic, Croatia, and Poland in the area of inbound foreign direct investments. The highest growth of foreign direct investments is in the area of manufacturing as well as financial and insurance activities.

"Slovenia will probably never place among the top 25 countries on the Foreign Direct Investment Confidence Index and the reason for that is simple. Among the most important factors affecting the investment decisions is the size of the market. The Slovenian market is simply too small, but there is nothing wrong with that." says Branko Žibret. "What is more concerning is the fact that greenfield investments in Slovenia are still insufficient, and it is precisely these investments that are directly linked to new jobs opening. By improving the business environment, reducing some regulatory hurdles and mostly by implementing a systemic and organised approach to obtaining greenfield investment Slovenia could promote their growth."

The 2017 A.T. Kearney FDI Confidence Index®

 

Country	Rank 2017	Change from 2016
United States	1	-
Germany	2	+2
China	3	-1
United Kingdom	4	+1
Canada	5	-2
Japan	6	-
France	7	+1
India	8	+1
Australia	9	-2
Singapore	10	-
Spain	11	+2
Switzerland	12	-1
Italy	13	+3
Netherlands	14	-
Sweden	15	+7
Brazil	16	-4
Mexico	17	+1
South Korea	18	-1
Thailand	19	+2
Ireland	20	+3
United Arab Emirates	21	***
Belgium	22	-3
New Zeland	23	***
Austria	24	-
South Africa	25	***

 

About the 2017 Foreign Direct Investment Confidence Index®
The A.T. Kearney Foreign Direct Investment (FDI) Confidence Index® is an annual survey of global business executives that ranks which markets are likely to attract the most investment in the next three years. In contrast to other backward-looking data on FDI flows, the FDI Confidence Index provides unique forward-looking analysis of which markets investors intend to target for FDI in the coming years. Since its inception in 1998, the countries ranked on the FDI Confidence Index have tracked closely with the top destinations for actual FDI flows in the subsequent years.

The 2017 FDI Confidence Index is constructed using primary data from a proprietary survey of senior executives of the world's leading corporations. The survey was conducted in January 2017.

Respondents include C-level executives and regional and business leads. All participating companies have annual revenues of $500 million or more. The companies are headquartered in 30 different countries and span all sectors. The selection of these countries was based on United Nations Conference on Trade and Development (UNCTAD) data, with the 30 countries represented in the FDI Confidence Index originating more than 90 percent of the global flow of FDI in recent years. Service-sector firms account for about 45 percent of respondents, industrial firms for 40 percent, and IT firms for 15 percent.

The Index is calculated as a weighted average of the number of high, medium, and low responses to questions on the likelihood of making a direct investment in a market over the next three years. Index values are based on responses only from companies headquartered in foreign markets. For example, the Index value for the United States was calculated without responses from US-headquartered investors. Higher Index values indicate more attractive investment targets.

About A.T. Kearney
A.T. Kearney is a leading global management consulting firm with offices in more than 40 countries. Since 1926, we have been trusted advisors to the world's foremost organizations. A.T. Kearney is a partner-owned firm, committed to helping clients achieve immediate impact and growing advantage on their most mission-critical issues.