Asia top investment destination as global FDI rises 6% to $1.6 trillion

Global foreign direct investment (FDI) rose 6 per cent to $1.6 trillion in 2025, ending two consecutive years of decline, but the recovery masked widening disparities in where investment is flowing. Developing Asia remained the world's largest investment destination while capital became increasingly concentrated in a handful of economies and strategic sectors, according to a UN report.

The findings in the World Investment Report 2026 by the United Nations Conference on Trade and Development (UNCTAD) show that developed economies drove much of the recovery, recording an 11 per cent increase in FDI inflows compared with just 2 per cent growth in developing economies. The report also found that the top 20 recipient economies accounted for more than 80 per cent of global FDI, underscoring the increasing concentration of international investment.

The report, titled International Investment in a Turbulent Era, said a new investment landscape is emerging as geopolitical tensions, shifting trade policies, industrial subsidies and technological competition reshape where multinational companies invest. According to UNCTAD, foreign investment is increasingly being directed by strategic priorities and economic security considerations rather than cost efficiency alone, with governments playing a far greater role in steering capital towards priority industries.

Developing Asia retained its position as the world's largest recipient region, attracting $644 billion in FDI in 2025, equivalent to about 40 per cent of global investment and more than 70 per cent of inflows into developing economies.

The region also witnessed significant shifts in investment patterns. South East Asia overtook East Asia as the largest recipient subregion as inflows increased across South East Asia, South Asia, West Asia and Central Asia, while East Asia recorded lower inflows. India emerged as one of the strongest performers, posting a 44 per cent increase in FDI inflows and helping drive growth across South Asia. Eight of the ten largest developing economy recipients of FDI were in Asia, together accounting for about 60 per cent of total inflows into developing economies and more than 80 per cent of the region's investment.

"For decades, capital followed cost and efficiency, areas in which developing countries were able to compete. Today, investment follows strategic calculation and industrial policy marked by subsidies, economic security and technological advantage," United Nations Secretary General António Guterres wrote in the report's foreword. He warned that this shift increasingly favours economies with deeper financial resources and established industrial ecosystems, making it more difficult for many developing countries to compete for investment.

The report said Asia's importance is increasingly defined not only by the volume of investment it attracts but also by its growing role in advanced manufacturing, digital services, logistics and regional supply chains. However, it said economies would need stronger links between foreign investors and domestic industries, reliable infrastructure, skilled workforces and supplier ecosystems to translate investment into broader development gains.

Globally, investment is becoming more selective and increasingly concentrated in strategic industries. Semiconductors, digital infrastructure, artificial intelligence, advanced manufacturing and energy transition technologies accounted for 44 per cent of global greenfield investment project value in 2025, compared with 16 per cent in 2020, reflecting governments' growing focus on industrial policy, supply chain resilience and technology leadership.

The United States remained the world's largest FDI destination with inflows of $277 billion, followed by Singapore at $151 billion, Hong Kong, China at $116 billion and China at $105 billion. Brazil, the United Kingdom, Germany, Canada, the United Arab Emirates, Mexico, India, Indonesia and Viet Nam also featured among the world's top investment destinations.

Outside Asia, investment trends remained mixed. Europe drove the global recovery, with FDI inflows rising 39 per cent to $285 billion, lifting total inflows into developed economies to $723 billion. North America recorded a marginal 2 per cent decline to $344 billion. Latin America and the Caribbean registered a 14 per cent increase in inflows to $188 billion, supported by investment in commodities and energy transition sectors. Africa's inflows fell 26 per cent to $70 billion, although the report noted that this was still the continent's third-highest annual FDI inflow on record.

UNCTAD said the uneven regional picture highlights a broader shift in the global investment landscape. While countries are competing aggressively to attract projects linked to future industries, development outcomes will increasingly depend not simply on the amount of investment received but on where it is directed, what productive assets it creates and whether it generates jobs, technology transfer and stronger domestic supply chains. The report also noted that governments are becoming more selective, increasingly steering investment towards sectors aligned with national strategic priorities.

Pedro Manuel Moreno, acting secretary-general of UNCTAD, said foreign direct investment remains "a key driver of development" because it brings capital, technology, skills, jobs and market access. He added the policy choices governments make today will determine whether international investment becomes "an engine of shared development or entrenches divergence" as the global economy becomes increasingly fragmented and strategic competition intensifies.

Looking ahead, UNCTAD said the investment outlook remains fragile despite the recovery in 2025. Slower global economic growth, uncertainty over trade policy, geopolitical tensions and the conflict in West Asia could weigh on investment decisions by increasing costs, disrupting supply chains and delaying major projects. Although moderating interest rates and stable capital formation provide some support, the report cautioned that sustaining the recovery in global FDI through 2026 will remain challenging.

The report concluded that while companies are restructuring supply chains and opening new opportunities for some developing economies, these gains will not automatically translate into broad-based development. It calls for stronger international cooperation and national policies that improve infrastructure, build industrial capabilities and strengthen domestic enterprises so that foreign investment contributes to sustainable and inclusive economic growth rather than widening global disparities