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, part of the Milken Institute's Access to Global Capital Initiative in partnership with Liquidnet, 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
Who's on top?
- Hong Kong, Singapore, and Denmark achieved the highest scores. The top 10 were all economically advanced countries with longstanding institutions and traditions of transparency.
- Ireland remained in the top 10, but with the exception of Italy, all other eurozone periphery nations declined in that period; Greece plunged below China and many other emerging nations.
Who's up and coming?
- Several African countries--most notably Mozambique and Botswana--showed impressive percentage increases since 2007. In fact, when it comes to Rule of Law, Ease of Doing Business and regulatory issues, Botswana beats China.
- Latin American nations the Dominican Republic, Colombia, and Guatemala were among the 10 most improved since 2007.
- China ranked highest among the BRIC nations, recording the only meaningful increase between 2007 and 2011.
- Where were Japan and the United States on the list? Nos. 22 and 23, respectively. Both saw marked deterioration in their scores over the five-year period. In fact, according to the data, foreign investors are likely to find Estonia more appealing than the United States. The small Baltic state, a former republic of the Soviet Union known for its tech-savvy and highly educated populace. The USA outscores Estonia in the Rule of Law ranking but trails in all the other criteria, including Economic Fundamentals.
- Where would you rather invest, Botswana or China? Botswana can't hold a candle to the Asian giant as far as industrial prowess goes, but it's one of Africa's leaders in per-capita GDP and FDI inflows, largely the result of effective management of natural resource revenue through good governance. When it comes to Rule of Law, Ease of Doing Business, and regulatory issues, Botswana beats China.
Any correlation between index score and FDI?
- Each one-unit increase in the Global Opportunity Index is associated with a 46 percent increase in FDI per capita.