Top FDI regions have economies on average 27 times larger than bottom regions
Unequal impact: the number of jobs created by greenfield FDI in the top regions is three times higher on average than in bottom regions. Image via Getty Images
A new OECD report published on December 15 has found that regional disparities in foreign direct investment (FDI) are far greater than disparities in other economic metrics such as gross domestic product (GDP) and productivity.
Using fDi Markets data between 2003 and 2021, the report found that the top 10% of regions in OECD countries with the highest greenfield FDI attracted on average 700 times more than the bottom 10% of regions. By comparison, a top OECD region has a GDP per capita that is on average 2.3 times larger than a bottom region.
Fares Al-Hussami, an OECD economist and co-author of the report, tells fDi that this “large variation” between regions shows that multinational companies not only seek large and productive regions, but invest in “the top of the top” regions.
“These very large variations across OECD regions are mostly driven by variation within countries rather than between countries,” he says, noting that this is a sign that it is locations, regions and cities in competition for investment rather than countries.
The UK, US and Australia accounted for more than half of the top 10% of the 432 regions included in the OECD
The impact of greenfield FDI in more developed OECD regions was also found to be more pronounced. The report noted that while greenfield FDI generates about 2.5 jobs per million of US dollars invested, this varies greatly between the top (4.1 jobs) and bottom (1.3 jobs) of regions.
Among the bottom 10% regions, more than 60% were in Colombia, Turkey and France, according to the OECD analysis. Some 14 regions included within the analysis did not attract any greenfield FDI in the 18-year period covered.