Investment Climate
OUR APPROACH TO INVESTMENT CLIMATE
Investment is an important driver of economic growth and job creation. By raising productivity, investment can ensure jobs are sustainable, increase incomes and help people out of poverty. When developing economies attract foreign direct investment (FDI), they absorb technology and management expertise. They can participate in supply chains and increase exports.
Yet after a 7% drop in 2023, FDI flows to low- and middle-income countries are close to 20-year lows.
The global economic outlook is subdued, with growth in 2024-25 expected to underperform its 2010s average in nearly 60 percent of countries, which represent over 80 percent of global population and world output.
Geopolitical tensions and fragmentation, pressure for trade protection, and elevated interest rates have reshaped global value chains and investment. Meanwhile, high levels of public debt are constraining governments’ ability to invest in growth-enhancing public capital investment or social spending.
The World Bank works with governments to address the legal, regulatory, administrative and institutional barriers affecting all phases of the business and investment lifecycle. We help countries establish a competitive investment climate that is favorable to private sector-led growth.
Capable of mobilizing a wide range of World Bank Group instruments—including advisory services and analytics and diverse lending products—to help developing countries, our experts on business environment and investment policy and promotion deliver integrated solutions founded on three pillars:
Evidence-Based Reform: Global analytics and benchmarks such as the World Economic Forum Global Competitiveness Index, B-Ready, WBG enterprise surveys, the Global Regulatory Risk Database, or Women Business and the Law have put business environment and investment policy reforms at the forefront of policy-makers’ agendas and created strong demand for support in this area. Identifying sources of entry barriers, market distortions, assessing binding constraints to firms, and quantifying potential impact of policy reforms have been enabled through the development of the latest generation of investment climate diagnostic tools.
Business Competitiveness: Unlocking private sector-led growth is contingent on a country’s ability to establish a regulatory and institutional framework that enables productive local and foreign firms to invest, form and grow, both domestically and internationally, and non-viable firms to exit so resources are allocated efficiently within and across sectors. Government policies and regulations play a decisive role in stimulating business activity and enhancing market contestability. With this aim, Investment Climate solutions are designed to improve the regulatory environment for foreign and domestic firms along all phases of the investment and business lifecycle. By supporting the implementation of transparent, inclusive, predictable and efficient policies and regulatory practices, the Investment Climate team helps governments unlock potential for developing the private sector, and incentivize firms to invest, compete and grow, which in turn creates productive jobs.
Investment Opportunities: Attracting FDI helps to link a country’s economy to global value chains and facilitates economic upgrading. FDI brings investment, jobs, increased exports, supply chain spillovers, new technologies and business practices to countries. While the benefits of FDI are well recognized, they do not flow without a conducive policy, legal and institutional environment. To fully capture the benefits of FDI, a country requires clear and effective implementation of investment strategies and policies.
In Bangladesh, the government introduced a broad simplification program including cost reductions for connecting to the electricity grid and a one-stop shop (OSS) for investors. The reforms resulted in over $721 million cost savings for businesses and citizens. Over 1,200 firms have benefited from the OSS to date.
In Ecuador, the team supported the introduction of a new simplified stock corporation, a more flexible legal form tailored to small- and medium-sized companies. Within two months, over 500 firms were created under the new type, amounting to 30% of all companies incorporated during that time.
Ethiopia opened six new sectors for FDI, attracting $96m in FDI. Ethiopia’s Investment Commission also established a mechanism to address investor grievances prior to their escalation to international disputes.
In Guinea, an online supplier marketplace platform was established to address the low levels of local supplier participation in the mining sector. 883 domestic companies (111 women-owned) registered on the platform. 77% of requests for proposal posted have been awarded to SMEs registered on the platform.
In Iraq, the establishment of an investor grievance mechanism within the Basra Investment Commission led to USD 220 million in FDI previously at risk of divestment being retained.
The removal of entry restrictions in Myanmar, through a new negative list opening 70 sectors to full foreign ownership and the reduction of FDI screening through a unified investment law, led to a six-fold increase in approved FDI projects between FY13 and FY16, from USD 1.4 billion to USD 9.5 billion.
In Saudi Arabia, the team worked with the Ministry of Commerce and Investment to lift legal barriers to women’s economic participation and pass a historic reform package which introduced freedom of travel and legal equality in employment and pensions, as well as removed the obedience provision and allowed women to be head of household among others. Over 5 million women over 21 years old are benefiting from the reforms and the number of women-owned businesses increased by 50%.
The first phase of a supplier development program in Vietnam has led to 70% increased capacity of SMEs through application of new standards and management tools, a 50% increase in profit and turnover, 42% established new connections with MNE buyers of which 9% became formal suppliers to MNEs.
The Western Balkans Investment Policy and Promotion Project provided support to the 6 economies of the Western Balkans - Albania, Bosnia and Herzegovina, Kosovo, Montenegro, North Macedonia, and Serbia - with harmonizing their investment policies and implementing a regional investment promotion initiative. The project resulted in 10 legislative and institutional investment climate enhancing reforms, including the adoption of regionally aligned standards for international investment agreements, and the generation of over $130 million in FDI for the region, creating more than 3,000 jobs, including 2,000 for women.
PROGRAMS & PROJECTS: INVESTMENT CLIMATE
Competitiveness
Competitive markets, private investment, and innovation drive jobs, productivity, and poverty reduction in developing countries over the next decade.