The real story behind global foreign direct investment rankings

Every year, the release of Foreign Direct Investment (FDI) rankings sparks celebration in some countries and disappointment in others. Governments proudly highlight improved positions as evidence of economic progress, while declining inflows often raise concerns about the investment climate.

Yet the rankings tell only part of the story. The more important question is not which country attracted the most investment, but why investors chose one destination over another.

Behind every dollar of FDI lies a careful assessment of policy, governance, taxation, infrastructure, regulation, security and long-term economic confidence. In many respects, FDI rankings are less a measure of wealth than they are a report card on a nation's competitiveness.

According to the latest United Nations Conference on Trade and Development (UNCTAD) World Investment Report, global FDI reached approximately $1.6 trillion (Sh 244.8 trillion) in 2025.

The United States remained the world's largest recipient with about $232 billion (Sh30.7 trillion), followed by Singapore at $151 billion (Sh22.3 trillion) and Hong Kong (China) at $126 billion (Sh16.6 trillion).

Despite the differences in geography and resource endowment among these economies, they share a common characteristic. They have intentionally created competitive investment ecosystems built on policy certainty, efficient institutions, world-class infrastructure, and innovation.

Their success illustrates that attracting foreign direct investment is a calculated national strategy rather than a mere coincidence.

Africa presents a different picture, with the continent attracting $69.5 billion (Sh10.7 trillion) in FDI in 2025, a decline of 26 per cent from the previous year.

Egypt remained Africa's leading destination with $15.45 billion (Sh2.5 trillion), followed by Guinea, Mozambique and Nigeria. Kenya ranked eighth, having attracted  $3.2 billion (Sh520 billion), representing an encouraging 38 per cent increase.

While this reflects growing investor confidence, it also highlights the significant opportunity that exists for Kenya to strengthen its competitiveness and move into Africa's top investment destinations.

The reality is that investors do not invest in countries simply because they offer tax incentives or possess abundant natural resources. They invest where they believe their capital will be safe, productive and profitable.

Before committing billions of dollars, multinational corporations assess political stability, macroeconomic performance, regulatory quality, taxation, infrastructure, access to markets, labour productivity and geopolitical risks. Every investment decision is essentially a long-term assessment of opportunity versus risk.

Investors are drawn to countries with consistent policies, as predictable laws and economic frameworks foster long-term investment by reducing uncertainty.

The quality of institutions also plays a crucial role, with efficient public administration, independent courts, protection of property rights, and effective contract enforcement enhancing investor confidence.

Additionally, transparent and predictable taxation systems are preferred over low tax rates, as investors prioritise stability and certainty in fiscal policies to support sustainable business growth.

Infrastructure plays a critical role in reducing production costs and enhancing competitiveness, as reliable electricity, efficient transportation, modern ports, high-quality airports, and digital connectivity are essential for business success.

Countries that prioritise infrastructure investment create favourable environments for businesses to thrive. Moreover, global investment trends are shifting toward economies that facilitate modern industries through efficient logistics, innovation, and resilient supply chains.

In the current economy, nations compete not just on cost but on productivity, efficiency, and the overall ease of doing business.

Kenya possesses many of the ingredients required to become one of Africa's leading investment destinations. Its strategic location linking East and Central Africa, relatively diversified economy, vibrant financial sector, expanding digital ecosystem and improving transport infrastructure provide a strong foundation.

Nairobi has established itself as a regional headquarters for many multinational corporations, while Kenya's leadership in renewable energy offers an additional competitive advantage as global investors increasingly prioritise sustainability.

However, these strengths alone are not enough.

Kenya must maintain macroeconomic stability, strengthen policy predictability, simplify business regulations, reduce bureaucratic delays, enhance investor protection, improve judicial efficiency and sustain the fight against corruption.

Continued investment in energy, transport and digital infrastructure remains essential, while Special Economic Zones should evolve into integrated industrial ecosystems connected to local suppliers, research institutions and export markets.

Kenya has already earned its place as one of Africa's leading regional business hubs. The challenge now is to move up the value chain by attracting investment in manufacturing, technology, research, logistics and high-value services.

This will require continued improvements in productivity, infrastructure, regulatory efficiency, and industrial competitiveness so that Kenya becomes not only a gateway to regional markets but also a destination where investors choose to produce, innovate, and export.

Ultimately, the real story behind FDI rankings is not about which country attracted the most money in a particular year. It is about which countries have built the confidence, competitiveness, and institutional capacity to consistently attract investment over time.

Kenya already possesses many of the ingredients needed to become one of Africa's leading investment destinations.

The challenge is no longer identifying what must be done but implementing the necessary reforms consistently and decisively.

In the global competition for investment, capital responds not to mere promises but to genuine preparedness.

Countries that build robust institutions, maintain sound policies, invest in infrastructure, and foster a predictable business environment attract investors naturally. Rather than chasing after investors, these countries find that investors actively seek them out.

- The author is a TVET and human capital development expert