Chart of the week: the seed investments that fail to sprout
Foreign direct investment is supposed to stimulate productivity and growth in other countries by transferring skills, technology and capital. But much of it isn’t doing that,
Foreign direct investment (FDI) is supposed to stimulate productivity and growth in other countries by transferring skills, technology and capital. But a large percentage of the world's total FDI isn't doing that, according to a study by the International Monetary Fund and the University of Copenhagen. Around $15trn, or 40% of the global total, is "phantom" investment, with money coming in, but not stimulating business activity. Multinational companies are channelling cash through "empty corporate shells" in other jurisdictions to minimise their tax bill. Luxembourg and the Netherlands account for half the phantom FDI. In Malta, Ireland and Switzerland less than 50% of FDI is real.
Martin Vander Weyer, The Spectator