Singapore achieved a top-ten ranking in the 2016 AT Kearney Foreign Direct Investment (FDI) Confidence Index. The city-state climbed five positions, representing the most significant advancement in the rankings, securing the 10th spot.

This index provides a future-oriented assessment of how political, economic, and regulatory shifts are likely to influence FDI inflows into various countries in the coming years. Since its inception in 1998, the study has consistently identified the preferred global destinations for FDI, with the index rankings closely mirroring actual global FDI inflows.

The index relies on primary data gathered through a proprietary survey distributed to senior executives from leading global corporations. In the latest survey, 31% of respondents expressed heightened optimism regarding Singapore’s economic outlook for the next three years compared to the previous year.

Soon Ghee Chua, Partner and Head of Southeast Asia at AT Kearney, a global management consulting firm, highlighted Singapore’s status as a regional financial hub. He attributed this to the country’s robust economy, political stability, lack of corruption, and skilled workforce, all of which contribute to its attractiveness for global businesses.

Singapore’s consistent ranking as one of the easiest places to conduct business has led major international companies to establish their regional headquarters there. Additionally, as a member of the Association of Southeast Asian Nations (ASEAN), Singapore offers companies access to the growth potential of this ten-nation economic bloc, further enhancing its appeal for FDI.

The index findings also underscore the significance of factors such as domestic market size, labor costs, regulatory transparency, and absence of corruption in shaping executives’ investment decisions.

Notably, five Asian countries secured positions within the top ten rankings, underscoring global business leaders’ confidence in the region:

• China maintained its second-place ranking for the fourth consecutive year.
• Japan’s ranking continued its upward trajectory, rising one spot to 6th place.
• Australia made a significant leap, advancing three spots to claim 7th place.
• India rejoined the top 10, climbing two places to secure the 9th spot.

The US retained its position at the top of the FDI Confidence Index for the fourth year running, with global business executives expressing greater confidence in the US economic outlook compared to any other economy. China secured the second position for the fourth consecutive year, although investor sentiment toward the Chinese economy became more cautious. Executives indicated a potential reduction in FDI to China if market instability persists.

Paul Laudicina, founder of the FDI Confidence Index and chairman of AT Kearney’s Global Business Policy Council, emphasized the consistent dominance of the US and China despite significant global shifts over the past four years. He attributed this enduring appeal to the substantial size and favorable economic prospects of these two leading economies. The 18-year history of the assessment reflects a sustained investor preference for large, economically robust markets.

Despite a broader trend of slowing globalization, global executives are increasingly turning to FDI to unlock growth opportunities. Global FDI flows surged by 36% to an estimated US$1.7 trillion in 2015, reaching their highest point since 2007. A majority of executives believe that FDI will become increasingly crucial for corporate profitability and competitiveness in the near future. Consequently, over 70% of surveyed firms intend to increase their FDI levels within the next three years. This trend is likely influenced by rising protectionist sentiments in many countries, necessitating a stronger local presence for effective business operations.

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*Methodology of the 2016 AT Kearney Foreign Direct Investment (FDI) Confidence Index

The 2016 AT Kearney Foreign Direct Investment (FDI) Confidence Index is based on primary data collected through a proprietary survey administered to senior executives from the world’s leading corporations in January 2016.

Survey participants included C-level executives, as well as regional and business unit leaders. All participating companies have annual revenues of US$500 million or more and represent various sectors across 27 countries.

The selection of countries for executive participation is determined using data from the United Nations Conference on Trade and Development (UNCTAD). The 27 countries represented in the FDI Confidence Index collectively account for over 90% of global FDI outflows in recent years.

Service-sector firms comprised 45% of respondents, followed by industrial firms at approximately 35% and IT firms at around 15%.

The index calculation involves a weighted average of high, medium, and low responses to questions regarding the likelihood of making a direct investment in a specific market within the next three years. Index values exclude responses from companies headquartered in the target market. For instance, the index value for the US was calculated without input from US-based investors. Higher index values signify more desirable investment destinations.

FDI flow figures represent the latest available statistics from UNCTAD, with all 2015 figures being estimates. Additional secondary sources include investment promotion agencies, central banks, ministries of finance and trade, and other major data providers.