The world’s investment outlook gets bigger and gloomier

**Akshara** (0:04)
In today's episode, we'll break down two important stories. First, we'll talk about the world's investment outlook getting bigger and gloomier, and then we'll talk about whether India can formalize its informal economy.
Welcome back to The Daily Brief by Ziruda, where we cut through the noise to help you understand what's actually happening in the most important stories from business and markets. I'm your host Akshara, and today is Friday, 10th July.
Coming to the first story. So every year, the UN puts out a report that tries to answer one simple question.
Where is the world's money going? Here, we aren't talking about stock market flows, but companies building factories in other countries, buying up businesses across borders, funding roads and power plants that they'll be tied to for decades. This year's report just came out, and the top line looks great.
FDI investment went up 6% in 2025 to 1.6 trillion dollars. After a few brutal years, money seems to be flowing again. Except that number is lying to you a little. Or rather, it's hiding a lot. So one example of what's being hidden is that a big company will route billions through a financial hub like Switzerland for tax reasons or to shift cash between its own subsidiaries in different countries. Technically, that money crossed a border, so it counts as investment. But it built no factory and didn't hire anybody. It's just money passing through on its way somewhere else. Economists call these conduit flows. And there's such a big distortion that when the UN strips them out of the global total, that headline 6% growth shrinks to 4%.
Now, the report singles out Switzerland and Ireland, some of the world's biggest tax hub, as the two centres that drove most of the difference this year. There are some big, impressive numbers on top, and a lot of important nuance buried underneath this 200-plus page report. We'll look at the most important things that stand out to us. So the first thing to understand is that investment went up 6% is an average, and averages hide things. When you split the world into rich countries and poorer ones, the picture splits too. The investment into developed countries like the US and Europe jumped 11%, but on the other hand, investment into developing countries went up 2%.
So in a rich country, foreign investment is a bonus. Companies there already have banks, stock markets and investors lining up to fund them. But in a developing country, foreign investment is often the event. It's how you build roads, power grids and factories because there just isn't much local capital to do it. Roughly half of all the outside money developing countries get comes from this kind of investment. And it gets worse at the very bottom. The poorest countries in the world pulled in $43 billion between all of them, which is under 3% of the global total. And almost all of it went into digging things out of the ground. Oil, metals, minerals, rather than building anything that could employ people for the long term. So where is all the money going, if not into poorer countries? The answer is technology. In essence, that boils down to AI, and of course, the hardware needed to support it. Memory chips, interconnected semiconductors, critical minerals, and to some degree, clean energy. The report groups these as strategic sectors, and the shift here is dramatic. In 2020, these sectors made up 16% of new investment projects, and by 2025, they were 44%.
By now, all of us know that AI runs on giant data centers, and those data centers need land, a reliable supply of huge amounts of electricity, and water to keep the machines from overheating. Only a few countries can host all those things. A stable power grid, water, land, and an entire ecosystem of suppliers and engineers. So this money clusters. The top three countries getting strategic sector money grabbed 56% of it between them. Poorer countries don't even have the infrastructure to build a data center in the first place. Meanwhile, the kind of investment that used to help poorer countries grow is drying up. Once you strip out the strategic sectors, the value of new manufacturing projects like textiles, clothes, basic electronics, the ordinary stuff has fallen about 17% over the past several years. For decades, this was the escalator. A poor country offers cheap labor, foreign companies build factories, millions of people get jobs, and slowly the country moves up. But that escalator is slowly going down. The companies that used to chase cheap labor are now chasing chips and data centers, and those don't go into the places that need the jobs. And even who's doing the investing is changing. It's not just western private firms anymore. State-owned companies from China and sovereign wealth funds from the Gulf states are using their national wealth to snap up assets abroad. More than a quarter of the companies on the UN's list of the world's 100 biggest multinationals are now at least partly state-owned. That brings us to the second big theme. Governments have stopped sitting back and letting the market decide. In 2025, governments around the world passed 229 rules affecting foreign investment. That's the most ever recorded. For years, the standard playbook was to cut taxes, get out of the way, and let money flow to wherever it made the most sense. But that era is over. Governments are now actively steering where the money goes, and they're doing it in two opposite directions at once. Pulling some money in, and keeping other money out. So the pulling in part has changed shape. It used to be broad tax cuts for everyone, but now it's targeted cash. Rich countries are handing out massive subsidies, billions of dollars in grants and tax credits, but only to companies that build the things they want, like chip plants and battery factories, and only if they build them at home. The US and the EU are essentially in a bidding war, throwing money at the same handful of tech companies to get them to build locally. But developing countries find it harder to win a bidding war with such an approach. So they're trying something different. Instead of a blank tax holiday that costs them money for a decade, they're tying incentives to results. You get the tax break only if you actually hire local people, or transfer some technology, or use local suppliers. It's less them begging for investment, and more attaching some strings to it. Meanwhile, the keeping out part is growing fast. More and more countries are setting up systems to screen foreign investment for national security reasons. And they've increased their power to review and block a foreign company from buying something sensitive. In 2016, 21 countries had this, and by 2025, it more than doubled to 52 And what's more, the definition of sensitive has ballooned. It used to mean weapons factories and power plants, but now it can even include data centers, AI startups, telecom networks, and lithium mines. But that being said, few deals actually get blocked, but that's almost beside the point. The mere existence of these reviews can make foreign buyers nervous, slow deals down, and rack up legal costs. And the mere existence of these reviews may be a sign of a bigger expansion on what the term sensitive means. Now, there's one more thing worth mentioning, because it lands hard on poorer countries. See, old investment treaties often let a foreign company sue a government directly. Not in that country's courts, but in an international tribunal, if a new law hurts the company's profits.