The world is not stopping globalisation, but it is changing\ndirection. Over the past few years, terms such as deglobalisation,\ndecoupling and reshoring have appeared more frequently in discussions\nabout the global economy. Geopolitical tensions, changes in trade\npolicy, tariff wars and supply chain disruptions have created the\nimpression that the world is moving towards an increasingly fragmented\neconomy. However, analysis by the McKinsey Global Institute (MGI) offers\na slightly different picture. What is happening is not simply the end of\nglobalisation, but a change in the configuration of the world\u2019s trade\nnetworks. Global trade is still growing, but trade and investment\nrelationships are increasingly being directed towards countries that are\ngeopolitically closer or more aligned.<\/p>\n
This change matters because the investment decisions companies make\ntoday are essentially an early picture of how the world\u2019s economic map\nwill be shaped in the years ahead. When a multinational company decides\nto build a factory, mine, energy facility or data centre in a country,\nthat decision not only creates economic activity at the time, but also\nhas the potential to change trade flows, supply chains, labour needs and\nbusiness relationships in the region.<\/p>\n
FDI is a signal for the future economy. Trade often only shows the\nresults of business decisions made years earlier. A product currently\nproduced in a country may be the result of an investment decision made\nfive or even ten years earlier. For this reason, FDI can be seen as one\nof the indicators that provides an earlier picture of the direction of\nchange in the global economy and trade. MGI tried to read that signal by\nanalysing around 200,000 FDI projects or announcements over a decade and\nlooking at what might happen if those projects were actually\nrealised.<\/p>\n
From that approach, it is clear that multinational companies are not\nonly changing the location of their investments, but also changing the\nsectors that are the main destination of capital. This shift shows that\nforeign investment is increasingly linked to structural changes in the\nworld economy. If trade reflects what has already happened, investment\ncan provide clues about the production capacity and business networks\nbeing built for the future.<\/p>\n
Global capital is flowing into the industries that will define the\nfuture. One of MGI\u2019s main findings is the growing concentration of\ninvestment in future industries and the resources needed to support\nthem. Around three-quarters of investment projects announced since 2022\nare directed at industries such as AI infrastructure, advanced\nmanufacturing, energy, mining, and sectors related to technological\ndevelopment and new production capacity.<\/p>\n
This change can be seen in the construction of semiconductor fabs,\ngigafactories for batteries, and data centres, which are expected to\nincrease two to threefold. What is interesting is not only the growth in\nthe number of these facilities, but also the change in their investment\nlocations. Semiconductor fab construction is increasingly shifting to\nthe United States, while gigafactories are no longer concentrated only\nin China, but are also developing in Europe, Indonesia, Malaysia and\nMorocco. In this way, future industries are beginning to spread to more\ncountries and are creating new production centres outside their\ntraditional locations.<\/p>\n
Geopolitics is increasingly determining the direction of investment.\nThis geographical change cannot be separated from geopolitical\ndevelopments. MGI found that geopolitical distance in trade has fallen\nby around 7 per cent since 2017. This means countries are increasingly\ntrading with partners that have a close geopolitical position. In FDI,\nthis tendency is even stronger, with changes in investment direction\ntaking place around twice as fast as changes in trade.<\/p>\n
This change is clearly visible in investment relations between\nWestern countries and China. New investment announcements from Western\nmultinational companies into China fell by around 70 per cent, while new\nprojects in developed countries increased. Investment entering the\nUnited States even increased significantly. Multinational companies\nappear to be replanning their operational footprints by considering not\nonly economic factors, but also geopolitical alignment with the\ncountries in which they invest.<\/p>\n
Asia is not moving in a single pattern. Amid these changes, Asia has\na very important position because the region accounts for around half of\nglobal trade flows and around half of global FDI flows. However, Asia\ncannot be seen as a single unit with a uniform investment pattern. MGI\nshows major differences between China, developed Asian countries, ASEAN\nand India in their positions towards global capital flows.<\/p>\n
China and developed Asian countries such as Japan and Korea are large\noutward investors, with outward investment flows far larger than the\ninvestment they receive. In contrast, ASEAN and India are net FDI\nrecipients, with inflows around three times larger than outflows. This\ndifference shows that changes in the global investment map are creating\ndifferent roles for each economic group in Asia.<\/p>\n
ASEAN offers different stories. Within ASEAN itself, the direction of\ndevelopment is not uniform. Malaysia and Thailand are experiencing\nstrong growth, particularly driven by advanced manufacturing.<\/p>", "url": "https:\/\/jawawa.id\/newsitem\/where-is-foreign-direct-investment-moving-1787053816", "image": "" }, "sponsor": "Okusi Associates", "sponsor_url": "https:\/\/okusiassociates.com" }