What's the purpose of the Global Opportunity Index?
The Global Opportunity Index answers a pressing need for information that's vital to a thriving global economy. What policies can governments pursue to attract foreign direct investment (FDI), expand their economies, and accelerate job creation? What do multinational companies, other investors, and development agencies need to know before making large-scale, long-term capital commitments?
The costs and conditions of doing business are central to the FDI equation. Natural resources and hardworking people have great value, of course, as do a sophisticated banking system and healthy industrial base. But countries that invest in their infrastructure, suppress corruption, and maintain sound regulations can claim important advantages.
The index provides a systematic, data-rich framework to shed light on nations' attractiveness to foreign investors, the kind that commit "patient" capital to strategic projects that benefit all parties well into the future. It not only considers economic variables but also examines key business, legal, and regulatory policies that can drive those decisions.
Some takeaways were predictable, some less so
Global Opportunity Index Top 10 (2015)
||Hong Kong SAR, China
Who's on top?
- Singapore, Hong Kong, and Finland achieved the highest scores. The top 10 are primarily economically advanced countries with longstanding institutions and traditions of transparency.
- Malaysia is the only developing country in the top 10 and is particularly strong in the Rule of Law.
Who's up and coming?
- Six sub-Saharan African countries Mauritius, South Africa, Botswana, Rwanda, Namibia, and Zambia are in the top 50 percent of the Index.
- Latin American nations the Dominican Republic, Colombia, and Guatemala were among the 10 most improved since 2007.
- In Latin America, countries with improving scores, including Chile, Uruguay, Panama, Colombia, and Ecuador, outnumbered those with declining scores by a 2-1 margin.
- From 2009 to 2015, there was a slight decline among many advanced economies and generally positive changes among developing countries, highlighting the hit that developed markets took during the financial crisis as well as continuing reforms in developing countries.
- Among all countries, Cote d'Ivoire and Burundi saw the largest increases in composite score, rising 26.5 percent and 34.4 percent, respectively. Burundi is an interesting example it is near the bottom of the index (ranked 135/136) due to general institutional deficiencies related to a prolonged civil war and political instability, poor infrastructure, and extreme poverty. However, in the past few years, the government established an investment promotion plan to ease the entry of capital and created a "one-stop shop" for investment procedures and information.
How does the index correlate with FDI and financial deepening?
- Each one-unit increase in index score is associated with a 42 percent increase in FDI per capita and a 55 percent increase in international portfolio flows.