Foreign direct investment rose in 2025, and the map still became narrower. Global flows increased 6% to $1.6 trillion, ending two years of decline. Yet 80% of that investment went to the top 20 recipient countries. More money crossed borders. Fewer places stood near the arrivals gate.
The recovery also favoured developed economies, where inflows rose 11%. Developing economies recorded only 2% growth. Strategic sectors accounted for 44% of announced greenfield project value, up from 16% in 2020. Capital is not simply returning. It is concentrating around scale, policy and perceived security.
The total recovered, but not all the lost ground
Moving from $1.5 trillion in 2024 to $1.6 trillion in 2025 is meaningful. The increase was about $92 billion. It reverses a period of weakness and suggests that companies remain willing to commit capital beyond their home markets.
The longer view is less celebratory. Current inflows remain more than one-third below the $2.2 trillion record reached in 2015. A 6% annual rise does not restore a decade of lost momentum. It marks a change in direction from a lower altitude.
Investment returns also fell to about 7% in 2025 after staying in double digits during the previous three years, according to an economic review of the global report. Investors are deploying more money while earning less from existing foreign assets. That can make boards more selective about the next project.
The rebound is real. So is the smaller circle invited to share it.
Concentration is the main story
If 80% of global foreign investment goes to 20 countries, the remaining economies divide a relatively thin slice. The leading destinations usually offer large markets, established supply chains, skilled labour, predictable regulation or strong policy support. Some offer several at once.
Concentration can reinforce itself. A region with suppliers, engineers and infrastructure attracts a factory. The factory attracts logistics, service firms and more suppliers. The next investor sees lower execution risk and chooses the same region. Capital forms hubs because hubs reduce the number of unknowns.
The opposite loop is painful. A country that misses several investment cycles may lack the very supplier base needed to win the next project. Offering a tax holiday cannot immediately create power reliability, technical schools, ports and local customers.
This does not mean smaller markets are excluded forever. It means they need a specific proposition. “Low cost” is too easy to copy. Reliable renewable power, a specialised workforce, access to a regional market or a strong raw-material position can create a defensible reason to invest.
Strategic sectors changed the destination board
Strategic sectors represented 44% of greenfield project value in 2025, compared with 16% in 2020. The category includes activities that governments connect to economic security and competitiveness: semiconductors, energy, critical minerals, digital infrastructure, advanced manufacturing and parts of health supply.
These projects are often large. A single fabrication plant, battery complex or energy installation can change a country’s annual total. That makes greenfield value volatile and makes project counts useful as a second measure. Ten modest factories may create broader employment than one enormous automated site, even if the headline capital is smaller.
Public policy is shaping location decisions through subsidies, procurement rules, financing and trade barriers. This is not unique to one country. The language varies, but governments across regions are trying to secure supply and capture industrial capability.
Analysis should use one standard. Public support at home cannot be called prudent strategy while similar support abroad is dismissed automatically as distortion. Compare scale, conditions, transparency and results. Nationality is not a method.
Developed economies captured the stronger gain
An 11% increase in developed-economy inflows against 2% in developing economies is the opposite of what many development strategies need. Countries with mature infrastructure and large budgets were able to offer lower project risk and stronger incentives. Capital seeking security moved toward places already well equipped to receive it.
Higher borrowing costs deepen this divide. A project in a lower-risk jurisdiction can finance at a lower rate. A similar project in a country with currency volatility or uncertain contracts must earn more merely to clear the investment hurdle. The factory may be equally useful, but the spreadsheet assigns it a more expensive departure gate.
Developing economies also face a composition problem. Resource extraction can attract large sums without building enough local processing, suppliers or skills. The inflow appears in the national total, while much of the value chain remains elsewhere.
The better question is not how much investment arrived. It is what stayed: knowledge, supplier capability, tax revenue, infrastructure, skilled employment and access to customers.
Foreign investment is not a suitcase of free money
Direct investment differs from short-term portfolio flows because it usually involves control, facilities and a longer operating horizon. It can bring technology and market access. It can also produce profit outflows, tax disputes, environmental costs and bargaining power over host governments.
A good project aligns investor return with local development. It trains workers, buys from capable local suppliers, meets clear environmental standards and remains competitive without permanent subsidy. A poor project extracts incentives, imports most inputs, contributes little knowledge and threatens to leave when support ends.
Governments should calculate the full package. Land, energy discounts, tax relief and public infrastructure all have a cost. The relevant comparison is not “investment or no investment.” It is the public contribution against credible jobs, exports, productivity and long-term revenue.
Headline value can mislead
Greenfield announcements describe intended spending. Projects can be delayed, reduced or cancelled. Merger and acquisition flows change ownership but may create little new capacity. Financial hubs can record large transactions that do not correspond to factories on the ground.
That is why serious monitoring follows projects after the press release. Has land been prepared? Has equipment been ordered? How much capital was actually spent? How many workers were hired? Did local procurement increase? The ribbon-cutting is the beginning of the audit, not the end.
Currency moves also affect totals stated in dollars. A project may be unchanged in local terms and appear smaller after exchange-rate movement. Cross-country comparisons need more than one year and more than one unit.
Returns at 7% will sharpen boardroom choices
Lower average returns make investment committees less tolerant of vague strategy. When existing overseas assets deliver 7% rather than double-digit returns, a new project must show why its risk is justified. Scale, subsidies or market access may carry more weight than low wages alone.
This can favour the top 20 destinations again. They have larger customer bases, deeper capital markets and more options if one supplier fails. Smaller countries need to reduce avoidable risk through stable rules, efficient customs, reliable utilities and credible dispute resolution.
There is a limit to incentive competition. A government can offer more cash than a neighbour and still lose if electricity fails or permits take years. Public money can bridge a cost gap. It cannot replace basic operating conditions.
Industrial policy needs an exit test
Strategic investment support can help build new capability, especially when early projects face high costs. It can also become a permanent transfer to firms skilled at negotiating. Every incentive package should have milestones and an expiry mechanism.
Milestones might include construction dates, employment, training, local research or production volume. They should account for economic shocks without becoming optional. If a project does not proceed, unused support should return to the public.
Policy should also protect competition. Directing most support to one large investor can weaken smaller domestic firms or lock a country into one technology. Supplier programmes, shared infrastructure and technical education often spread benefits more widely than a cheque to a single factory.
Developing markets can build regional scale
A small national market may struggle to justify a large plant. A predictable regional trade area can change the calculation. Common standards, efficient borders and transport links turn several countries into one addressable market.
This is harder than signing a declaration. Customs systems must work, rules of origin must be practical and political disputes must not close routes without warning. Investors price the actual border delay, not the language of the treaty.
Regional specialisation can also help. One country may provide energy-intensive processing, another component manufacturing, another logistics and services. The objective need not be to duplicate the entire chain behind every border.
The next report should be read through three filters
Supplier links decide whether value spreads
A foreign factory can operate as an island, importing equipment and components while selling abroad. It can also become an anchor that upgrades nearby firms. The difference rarely appears by accident.
Local suppliers need time to meet quality, volume and delivery requirements. Development programmes should begin before production, with clear specifications and independent testing. Forcing unrealistic local content on day one can increase defects or hide imports behind paperwork. Leaving procurement entirely to established foreign networks can freeze domestic firms out for years.
The useful middle route sets staged targets and invests in capability. Shared laboratories, technical training, supplier finance and transparent bidding help smaller firms qualify. Large investors should report local purchases in a way that distinguishes genuine domestic value from simple resale.
Knowledge transfer also needs measurement. Count engineers trained, processes certified, patents or research partnerships completed, and managers promoted into technical roles. A promise to “share technology” is too vague for public support.
When investment leaves, supplier capability can remain. That is the durable benefit. A host economy that learns to serve one demanding customer can often serve others. The best incentive package is the one that eventually makes the region attractive without another exceptional package.
First, watch distribution. Does the top-20 share fall, or does the map narrow further? A larger global total with deeper concentration will not resolve the development gap.
Second, watch conversion. Announced greenfield value should be compared with actual spending and operating facilities. Strategic megaprojects create impressive commitments and long implementation risks.
Third, watch retained value. Employment quality, supplier purchases, research capability and tax contribution reveal whether investment changes the host economy. Gross inflow alone cannot answer that question.
The 2025 figures contain a measured reason for optimism. Cross-border investment stopped declining and reached $1.6 trillion. They also contain a clear warning: developed economies gained faster, 20 countries captured four-fifths of flows, and strategic sectors dominated new project value.
For company boards, this means location choice should include stress tests for power, trade access, currency and policy change. For governments, it means fewer ceremonial targets and more attention to the daily conditions that keep a project operating. Capital does not remain because the welcome speech was generous. It remains because the plant can produce, hire, ship and resolve disputes predictably.
A useful annual target is not simply a larger inflow. It is a wider set of viable destinations and a higher share of projects that reach operation.
Capital has resumed travelling, but it is choosing fewer destinations; the countries left off the board need operating strength, not louder airport advertisements.