The evidence, so far, is clearest with regard to innovation and exports. These findings are important given the growing body of evidence that OFDI can support developmental goals for source economies. What are the implications for development? GDP = gross domestic product OFDI = outward foreign direct investment. Note: The five color thresholds correspond to shares of OFDI stock over GDP that are 0-5 percent, 5-10 percent, 10-15 percent, 15-20 percent and greater than 20 percent. Source: Computation based on UNCTAD and World Development Indicators, World Bank. For these economies, attracting FDI from developing countries may therefore be one of their best options to raise investment, in the relative absence of FDI from advanced economies (often less willing to enter challenging investment climates) or non-FDI alternatives (portfolio investment or debt). By 2012, this number reached 55 countries, many of which combine high host market risk and low financial development. At the beginning of the 21st century, only 11 countries had at least half of their direct investment stock in the hands of developing country investors. In parallel, the number of host economies increasingly relying on OFDI from developing countries has also shot up.

Today, that number has risen to 109 countries, with 26 of these having an OFDI-to-GDP ratio of 10 percent or more. In 1995, 87 developing countries were engaged in OFDI, but many only marginally. As a result, the number of developing countries engaged in OFDI has notably increased.

In 1995, OFDI from developing countries constituted just four percent of global FDI flows, while in 2014 this share reached a record 27 percent. The first edition of the World Bank Global Investment Competitiveness report examined the rise of OFDI from developing countries. For instance, Chinese firm JingkoSolar opened a photovoltaic module factory in Cape Town, South Africa, in 2014, that produces unites like the ones pictured here. Photo Credit: Dana Smillie / World Bank / Ain Beni Mathar Integrated Combined Cycle Thermo-Solar Power Plant.Ĭhinese firms are investing in renewable energy in Africa, where solar power in particular holds great potential. Some countries are thus using OFDI as a channel for new development and a catch-up strategy to acquire knowledge and technology, upgrade production processes, boost competitiveness, augment managerial skills, and access distribution networks. There is growing evidence that outward foreign direct investment (OFDI) can increase a country’s investment competitiveness, crucial for long-term, sustainable growth.

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