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U.S. Increases Lead in 2014 FDI Confidence Index

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A.T. Kearney, Chicago, Ill., USA, this week released its 2014 Foreign Direct Investment Confidence Index (FDICI), which examines current, forward-looking investment sentiment. In this year’s ranking, the U.S. not only maintains its first place position from last year, but also increases the lead it had in the 2013 study, which was referenced in the recent White House report, Winning Business Investment in the United States.

The findings bode well not only for the U.S., but for the global economy—nearly  four out of five respondents are more optimistic about the global economy than they were a year ago. Since its inception, the study has consistently pointed toward top global choices for foreign direct investment, with the top 10 most attractive FDI destinations receiving a majority share of global FDI inflows roughly next year after the survey.

In January 2014, U.S. President Obama referred to the prior FDICI findings in his State of the Union address, saying that "for the first time in more than a decade, business leaders have declared that China is no longer the world’s number one place to invest—America is." With an unprecedented swing in positive outlook by global executives surveyed in the 2014 FDICI, half of the respondents indicated that they have a more positive outlook on the U.S. than two years ago. No country has ever recorded a higher positive outlook from investors in the history of the Index. Driven by overriding factors such as the increasingly strong prospect of U.S. energy independence, leading executives continue to plan increased investments in the U.S.  

Paul A. Laudicina, founder of the FDI Confidence Index and A.T. Kearney chairman emeritus, notes that "despite racking volatility and economic uncertainty on a global scale, the findings from the 2014 FDICI suggest that a corner is being turned. Corporations sitting on massive cash reserves are increasingly confident that they can parlay these into productive investments with attractive returns."

As the survey highlights, despite unresolved deficits in the euro zone, 11 European countries still rank in the top 25, some entering the ranking for the first time. Canada moved up to the third spot, 39% of respondents voiced a more positive sentiment than last year for second-ranked China, and Russia (last year’s No. 11) fell off the top 25 ranking, despite the fact that the survey was fielded prior to the current political imbroglio in Ukraine.

"We feel confident that despite a slow and uneven economic recovery, executives who make FDI decisions are regaining a sense of measured confidence," said Erik Peterson, A.T. Kearney partner and a co-author of the study. "The 2014 FDICI is not only an indicator of FDI flows, but an excellent telescope into specific economic stories around the globe. We’re pleased that this year’s study portrays a more optimistic picture globally."

Each region has an interesting unfolding story seen through the lens of the FDI Confidence Index, with many of the winners riding on stability after the ongoing post-recession economic turbulence. Asia, which attracts roughly a third of all foreign direct investment, has shown particular resilience, with China at the top of the investment ladder as it attracts higher-end manufacturing from overseas. Australia and India both experienced a cooling off among investors. Conversely, Singapore, with its famously predictable regulations and low corporate tax rate, moved up a notch in the ranking.

In the Americas, Brazil ranked among the top five most preferred FDI destinations for the fourth consecutive year, incentivized by new industrial policy measures. Mexico, ranked twelfth, is a quiet beneficiary of the wave of U.S. reshoring, due to its integration with U.S. supply chains. Chile’s stable economy and investment climate translated to a five-notch climb in the Index, to No. 17.

Europe attracts more than a quarter of the world’s total FDI inflows, due to its highly qualified labor force, sophisticated/well-heeled consumers, and world-class infrastructure. The Northern European nations of Sweden and Denmark make it to the top 25 for the first time, while Belgium and the Netherlands return to the index after some time off investors’ radars. The U.K., amid discussions of a potential opt-out from the EU, rose four positions to fourth. France, currently under President François Hollande’s efforts to increase the country’s competitiveness, has reclaimed a place in the top 10. Below is a table of the 2014 FDI Confidence Index.  

 Country 2014 Bank   2013 Bank  Change
 United States  1  1
 China  2  2
 Canada  3  4 +1 
 United Kingdom  4  8 +4 
 Brazil  5  3 -2 
 Germany  6  7 +7 
 India  7  5 -2 
 Australia  8  6 -2 
 Singapore  9  10 +1 
 France  10  12 +2 
 UAE  11  14 +3 
 Mexico  12  9 -3 
 South Africa  13  15 +3 
 Switzerland  14  18 +4 
 Malaysia  15  25 +10 
 Sweden  16  __ N/A 
 Chile  17  22 +5 
 Spain  18  16 -2 
 Japan  19  13 -6 
 Italy  20  -- N/A 
 Belgium  21  -- N/A 
 Netherlands  22  -- N/A 
 Denmark  23  -- N/A 
 Turkey  24  -- N/A 
 Indonesia  25  24 -1 


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