The World Bank has raised a red flag over a sharp and sustained decline in Foreign Direct Investment (FDI) to developing countries, highlighting that the lion’s share of global investment is increasingly flowing into just 10 emerging economies. This trend, according to the World Bank’s latest report, poses a serious threat to inclusive global growth and deepens inequality between the world’s wealthier and poorer nations.
FDI Plunge Raises Concerns
According to the World Bank’s “Global Investment Competitiveness Report 2025”, FDI inflows to developing countries fell by over 20% in the last fiscal year, with sub-Saharan Africa, low-income Asian economies, and fragile states bearing the brunt of this downturn. In contrast, countries like China, India, Brazil, Vietnam, Mexico, and a few Eastern European nations continue to dominate the FDI landscape, capturing nearly 80% of all FDI directed to developing economies.
“Investment flows are increasingly skewed, and this concentration risks leaving the poorest economies further behind,” the report stated. “Without robust private investment, these nations will struggle to finance sustainable development, infrastructure, and job creation.”
Investment Disparities Widening
The report finds that while middle-income countries still attract a moderate share of FDI due to better infrastructure, political stability, and market size, the least developed countries (LDCs) are being largely bypassed. Key deterrents include weak governance, political instability, low investor confidence, and poor regulatory frameworks.
Only a handful of LDCs saw modest increases in FDI, primarily through extractive industries and donor-supported infrastructure projects. However, these were neither diversified nor consistent enough to drive long-term development.
Risks to Sustainable Development
The World Bank warned that the current investment pattern could undermine progress toward the United Nations Sustainable Development Goals (SDGs). Countries most in need of capital for health, education, green energy, and climate resilience are being cut off from global finance.
“Private investment is essential for inclusive growth,” said Mari Pangestu, World Bank Managing Director for Development Policy and Partnerships. “If capital continues to bypass the world’s most vulnerable economies, we risk reinforcing global inequality.”
Policy Recommendations
To reverse this trend, the World Bank urges a multi-pronged approach:
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Strengthening investment climates in poorer countries by enhancing governance, transparency, and legal protections.
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Expanding public-private partnerships to de-risk investments in fragile states.
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Mobilizing blended finance tools to attract private investors.
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Promoting regional cooperation and trade integration to improve market access and scale.
Additionally, the report emphasizes the role of multilateral development banks, donor agencies, and sovereign wealth funds in channeling capital to underinvested regions.
A Wake-Up Call for Global Policymakers
The report is a wake-up call to the global community, especially as geopolitical uncertainties, climate risks, and economic fragmentation put further pressure on emerging markets. The World Bank called for renewed international cooperation to ensure equitable access to capital flows, especially in light of growing global economic disparities.
Without significant course correction, the report warns, the world’s poorest nations may remain trapped in a cycle of low investment, limited growth, and persistent poverty — a trajectory that could have far-reaching consequences for global stability.
