By Jakopo Dittoni

A deep process of reglobalisation is underway. The global market is more fractious and digital, and it’s trying to become sustainable too. Going into 2024, I expect five forces to shape the foreign direct investment (FDI) cycle in the new year. 

Next year will be the biggest election year ever, with about two billion expected to cast their votes in general elections in more than 70 countries around the world. In some cases, the outcome already seems a foregone conclusion: the ruling party is widely expected to remain in office in India and Mexico, and the opposition to come into office in the UK.

In others, it’s more uncertain. First and foremost is the US, where another Biden/Trump neck-and-neck showdown is a very plausible scenario at the moment. Today, with the mantra of free markets weakening by the day, domestic and foreign politics have come to play a major role in determining investment policies. Also considering the ongoing armed conflicts in Ukraine and Gaza, the biggest election year in history will have a profound impact on global FDI and its geography over the rest of the decade. 

But it’s not all elections: Chinese investors are back. The Covid-19 pandemic feels like a relatively distant memory for many countries, but not for China, where the government lifted zero-Covid restrictions only earlier this year. The country’s reopening is already reflected in the data, mostly when it comes to outward investment. In the first nine months of the year, Chinese companies shattered any previous full-year outward FDI record, data from fDi Markets show. More than 90% of their pledged capital investment went to developing countries, particularly nearshoring hubs in north Africa and south-east Asia. The Belt and Road Initiative may well have lost much of its hype, but it hasn’t lost its substance.  

Tourism growth is back too. The pandemic all but obliterated the sector, and global tourist arrivals haven’t fully recovered yet. However, with Chinese tourists back on the beaten track, 2024 looks to be a different story. Given their economic trajectory and proximity to China, growth markets in the Indo-Pacific region at large will experience the strongest tourism recovery. Investors have already reactivated their investment plans to chase growth in these regions. The tourism sector used to be a major contributor to global greenfield FDI before the pandemic. Those days are gone. The recovery road ahead is a long one, and it starts in 2024.  

The extraction cycle will accelerate too. The gap between supply and demand of critical minerals is well documented. Although mining companies, whose capital expenditure was heavily trimmed in the mid-2010s, remain conservative in their capex plans, they will have to pick up the pace to serve the energy transition. The landscape in oil and gas is harder to read as many developments ended up in the hands of private equity or private companies that often slip through the cracks of main reported statistics. But developing countries that have untapped hydrocarbon reserves remain very committed to developing them, and the push by European countries to diversify away from Russia is still underway. 

Lastly, artificial intelligence (AI) has been unleashed. The deployment of AI applications will progress at a very steady pace in 2024 too. The ramifications of an increasing uptake of AI-powered technologies are numerous, but also very uncertain at the moment. Yet it’s clear that several FDI-heavy sectors are already facing disruption. The call centre industry in particular, which employs hundreds of thousands of people in developing countries, risks being wiped out. On the other hand, AI companies are rapidly expanding their payroll and international footprint. It’s hardly a zero-sum game, but new jobs will be created too. 

Jacopo Dettoni is the editor of fDi.

This article first appeared in the December 2023/January 2024 print edition of fDi Intelligence