Kearney’s 2024 FDI Confidence Index® reveals continued optimism among executives about foreign direct investment in Asia Pacific

Arjun Sethi

Kearney’s Global Business Policy Council has released its 2024 Foreign Direct Investment Confidence Index (FDICI), a survey of investor sentiment regarding  FDI flows in the next three years. This year’s results reflect continued investor optimism for most Asia Pacific (APAC) markets as well as the strength of Southeast Asia (SEA) among emerging markets.

Improving investor optimism in APAC

53 percent of investors are more optimistic about the APAC economy compared to last year, following closely behind the Americas as the region showing the biggest increase in optimism.

Net optimism is particularly high in Australia, as the market leads optimism rankings among economies on this year’s Index alongside Canada and the United Kingdom.

A striking 88 percent of respondents across the region said they were planning to increase their FDI in the next three years – up one percent from last year. Furthermore, 90 percent – down marginally from 91 percent in 2023 – of APAC respondents said FDI would be more important to their corporate profitability and competitiveness in the next three years.

APAC has the second strongest showing in this year’s Index, behind Europe, with eight markets represented in the 25 spots of the world rankings – the same representation as last year. These include Mainland China, Japan, Australia, Singapore, New Zealand, India, South Korea, and Taiwan. A number of markets in the region have seen improved performance, including Mainland China that has jumped four spots to 3^rd position. Taiwan reappears on the main Index at 22^nd after last making the list at 25^th in 2020.

Most APAC markets, however, have not seen improvements in their ranks. Japan falls from 3^rd to 7^th and Australia holds firms at 10^th, while Singapore drops from 9^th to 12^th. New Zealand drops one rank to 16^th, and India drops from 16^th to 18^th. South Korea also drops marginally from 19^th to 20^th.

Southeast Asia continues to show strength in the emerging market rankings within the Index, with Thailand, Malaysia, Indonesia, and the Philippines placing among the top 15. This exclusive emerging market ranking was introduced in last year’s FDI Confidence Index® to give business leaders insights into which emerging markets are most appealing to investors now and over the next three years.

AI proliferates rapidly

The Index this year explores the impact of AI and technology and regulation in general on investor operations. A notable 72 percent of investors in APAC say they are making significant or moderate use of AI in their business operations. They anticipate their businesses will use AI for customer service and chatbots, automation of manual processes, supply chain enhancement and human resources. Notably, firms in APAC were found more likely to use AI for human resources purposes compared with the Americas and Europe.

Further, 67 percent of APAC investors say their organization will make significant or moderate increases in AI usage to guide their investment decisions. They cite cost or efficiency savings and decision-making accuracy as the top benefits they gain when using AI in their investment decision-making.

While 69 percent of APAC investors agree that the benefits of AI outweigh potential risks, concerns remain. Specifically, 33 percent of investors in APAC cite cybersecurity and 21 percent cite the potential risk of misinformation as the top two risks they associate with the use of AI in making investment decisions over the next three years.

“Our 2024 survey findings reflect investor enthusiasm for AI and technology innovation in the region. The AI capabilities of markets, therefore, are key factors for investors in their decision-making process,” says Arjun Sethi, Regional Head and Chairman, APAC, Kearney. “APAC markets including Singapore, Australia and India are investing heavily in developing their AI offerings to maintain their allure as stand-out destinations for global investors.”

Global uncertainties persist

Despite their overall optimism about the global operating environment, APAC investors were wary about the mounting risks in the world. 87 percent think an increase in geopolitical tensions will affect their investment decisions. Firms, as a result, are making decisions to nearshore and/or friendshore as a reaction to these lingering geopolitical pressures.

Also, investors anticipate that a more restrictive business regulatory environment in both developed and emerging markets is likely to pose risks in the year ahead. The proliferation of industrial policies and trade restrictions, including those related to emerging technologies, suggests more regulatory complexity that investors will need to monitor and comply with across markets.

“We are encouraged by APAC’s continued positive performance on the Index which reflects buoyant investor optimism pervading the region. It remains an engine of global growth, demonstrating high near-term growth prospects, a strong appetite for innovation and unwavering economic resilience,” says Arjun Sethi.

About the 2024 Kearney FDI Confidence Index^®

The Kearney FDI Confidence Index® is an annual survey of global business executives that ranks markets that are likely to attract the most investment in the next three years. In contrast to other backward-looking data on FDI flows, the FDICI provides unique forward-looking analysis of the markets that investors intend to target for FDI in the coming years. Since the FDICI’s inception in 1998, the markets ranked on the Index have tracked closely with the top destinations for actual FDI flows in subsequent years.

The 2024 Kearney FDI Confidence Index® is constructed using primary data from a proprietary survey of senior executives of the world’s leading corporations. The survey was conducted in January 2024. Respondents include C-level executives and regional and business leaders. All participating companies have annual revenues of $500 million or more. The companies are headquartered in 30 countries and span all sectors. Service-sector firms account for 46 percent of respondents, industrial firms for 45 percent, and IT firms for 9 percent.

The Index is calculated as a weighted average of the number of high, medium, and low responses to questions on the likelihood of making a direct investment in a select market over the next three years. Together, the markets presented to respondents in the survey received 95 percent of the world’s inward FDI flows in 2022, according to UNCTAD data.

Index values are based on responses only from companies headquartered in foreign markets. For example, the Index value for the United States was calculated without responses from US-headquartered investors. Higher Index values indicate more attractive investment targets.

All economic growth figures presented in the report are the latest estimates and forecasts available from Oxford Economics unless otherwise noted. Other secondary sources include investment promotion agencies, central banks, ministries of finance and trade, relevant news media, and other major data sources.