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Foreign Direct Investment and Inclusive Growth
The impacts on social progress
A report developed by Deloitte UK, in conjunction with Social Progress Imperative, found that there is a positive and nuanced relationship between FDI and social progress. By better aligning the two, business, government, and non-government organizations can drive real and inclusive growth.
A positive, nuanced relationship
2015 could be a pivotal year for FDI in many countries around the world, with the majority of investment abroad now flowing to emerging markets. Foreign Direct Investment and Inclusive Growth highlights how this increased capital will have beneficial affects across the world:
There is a positive relationship between FDI and social progress in a country:
- FDI can encourage future social progress while, in turn, elements of social progress such as infrastructure, education, and personal and political security can help attract foreign investment.
Yet the relationship is nuanced:
- The development of individual social progress factors is associated to different stages of economic development and is characterized by foreign investment in different sectors. Investment in the right elements of social progress can help countries move up the ladder of development.
There are barriers which prevent FDI from enhancing social progress:
- Rapid economic growth exceeding the pace of social progress
- FDI being disproportionately directed to certain industries (e.g. resources or finance)
- Poverty traps
By illustrating the relationship, the report shows how social progress can act as a guide for investment by business and other organizations, highlighting risks, opportunities and the long-term positive impact of overseas investment. The report shows governments that social progress can be a tool to attract FDI and drive development.