Top 20 Countries for Foreign Investment

Which sovereign states are most hospitable to outside investment?

Our neighbor to the north outranks us—by far. Our neighbor to the north outranks us—by far.

Last week came word the United States ranks 19th worldwide in the retirement security of its citizens. Now it appears it doesn’t even crack the top 20 when it comes to rolling out the red carpet for foreign investors.

On Tuesday, The Milken Institute released its annual roundup of the countries that are most hospitable to foreign direct investment (FDI). The institute notes that FDI now accounts for 11% of global GDP and more than 80 million jobs worldwide. But which countries are creating the best environments to capture these investments?

The report, titled "The Global Opportunity Index: Attracting Foreign Investment," has Burundi at the bottom of the list, and second from last is Venezuela; as the report notes, the nationalization of foreign firms pursued by the late President Hugo Chávez has made the country a "precarious location for FDI."

As for the United States, it ranks 22nd, behind such countries as Chile, Estonia, Iceland and even Cyprus. Surprisingly, Ireland placed well in the ranking.

"The Global Opportunity Index helps identify opportunities for companies contemplating making investments of 'patient' capital," Keith Savard, senior managing economist and one of the authors of the report, said in a statement. "For policymakers in the host countries, the index helps illuminate policy changes that can be implemented quickly and often at low cost, in order to make their countries more attractive for FDI."

The index ranks 98 countries for which data is available. Variables were assessed across five broad categories: economic fundamentals, regulatory barriers, ease of doing business, regulatory quality and the rule of law.

To create a baseline, Milken Institute researchers also compiled data for 2007, before the onset of the global financial crisis. Their results show how countries responded to economic headwinds with varying results: two nations in southern Africa—Mozambique and Botswana—showed the most improved scores. Three Latin American nations—the Dominican Republic, Colombia and Guatemala—were also among the ranks of the most-improved. China ranked highest among the so-called BRICs, recording the only meaningful increase between 2007 and 2011.

"The Global Opportunity Index shows the great progress many countries in the developing world have made in implementing growth-friendly environments for foreign investments," Savard added. "Conversely, it reveals that some developed countries need to do more to remain competitive."   

Here are the top 20 countries for foreign investment:

*Numbers following each category are the rank for that specific category.

Kuala Lumpur, Malaysia20. Malaysia

Population: 29,179,952
GDP Per Capita: $16,200 (2011 est.)
Economic Fundamentals: 29
Regulatory Barriers: 79
Ease of Doing Business: 27
Quality of Regulations: 14
Rule of Law: 6

19. Cyprus

Population: 1,138,071
GDP Per Capita: $27,500 (2011 est.)
Economic Fundamentals: 47
Regulatory Barriers: 25
Ease of Doing Business: 36
Quality of Regulations: 17
Rule of Law: 15

18. Chile

Population: 17,067,369
GDP Per Capita: $17,400 (2011 est.)
Economic Fundamentals: 12
Regulatory Barriers: 30
Ease of Doing Business: 33
Quality of Regulations:  19
Rule of Law: 19 

17. Austria
Population: 8,219,743
GDP Per Capita: $41,600 (2011 est.)
Economic Fundamentals: 9
Regulatory Barriers:  18
Ease of Doing Business: 20
Quality of Regulations: 19
Rule of Law: 29

Harbor in Oslo, Norway 16. Norway

Population: 4,707,270
GDP Per Capita: $53,400 (2011 est.)
Economic Fundamentals: 49
Regulatory Barriers: 38
Ease of Doing Business: 7
Quality of Regulations: 14
Rule of Law: 6

15. Iceland

Population: 313,183
GDP Per Capita: $38,100 (2011 est.)
Economic Fundamentals: 19
Regulatory Barriers: 30
Ease of Doing Business: 2
Quality of Regulations:  23
Rule of Law: 18

14. Belgium

Population: 10,438,353
GDP Per Capita: $37,800 (2011 est.)
Economic Fundamentals: 7
Regulatory Barriers:  13
Ease of Doing Business: 20
Quality of Regulations: 27
Rule of Law: 15

13. Sweden

Population: 9,103,788
GDP Per Capita: $40,700 (2011 est.)
Economic Fundamentals: 19
Regulatory Barriers: 65
Ease of Doing Business: 19
Quality of Regulations: 6
Rule of Law: 10

Luxembourg flag, with a beer!11. Luxembourg

Population: 509,074 GDP Per Capita: $80,600 (2011 est.)
Economic Fundamentals: 4
Regulatory Barriers: 38
Ease of Doing Business: 17
Quality of Regulations:  7
Rule of Law: 25

11. Estonia

Population: 1,274,709
GDP Per Capita: $20,400 (2011 est.)
Economic Fundamentals: 13
Regulatory Barriers: 21
Ease of Doing Business: 13
Quality of Regulations: 11
Rule of Law: 24

10. Ireland

Population: 4,722,028
GDP Per Capita: $40,800 (2011 est.)
Economic Fundamentals: 32
Regulatory Barriers: 9
Ease of Doing Business: 3
Quality of Regulations: 35
Rule of Law: 5

9. Australia

Population: 22,015,576
GDP Per Capita: $40,800 (2011 est.)
Economic Fundamentals: 15     
Regulatory Barriers: 44
Ease of Doing Business: 11         
Quality of Regulations: 4        
Rule of Law: 15

Downtown Zurich, Switzerland8. Switzerland

Population: 7,925,517
GDP Per Capita: $44,500 (2011 est.)
Economic Fundamentals: 5        
Regulatory Barriers: 9   
Ease of Doing Business: 28         
Quality of Regulations:  2            
Rule of Law: 26

7. Finland

Population: 5,262,930
GDP Per Capita: $36,000 (2011 est.)
Economic Fundamentals: 36      
Regulatory Barriers: 18
Ease of Doing Business: 3           
Quality of Regulations:  8            
Rule of Law: 12

6. Netherlands

Population: 16,730,632
GDP Per Capita: $42,000 (2011 est.)
Economic Fundamentals: 1        
Regulatory Barriers: 1   
Ease of Doing Business: 15
Quality of Regulations: 14           
Rule of Law: 21

5. United Kingdom

Population: 63,047,162
GDP Per Capita: $36,500 (2011 est.)
Economic Fundamentals:  9       
Regulatory Barriers: 1   
Ease of Doing Business: 18         
Quality of Regulations: 21
Rule of Law: 3

Hong Kong4. Canada

Population: 34,300,083
GDP Per Capita: $40,500 (2011 est.)
Economic Fundamentals: 13      
Regulatory Barriers: 25
Ease of Doing Business: 8
Quality of Regulations: 9            
Rule of Law: 3

3. Denmark

Population: 5,543,453
GDP Per Capita: $37,000 (2011 est.)
Economic Fundamentals: 8        
Regulatory Barriers: 9   
Ease of Doing Business: 24         
Quality of Regulations: 5             
Rule of Law: 6

2. Singapore

Population: 5,353,494
GDP Per Capita: $59,700 (2011 est.)
Economic Fundamentals: 2        
Regulatory Barriers: 4   
Ease of Doing Business: 5
Quality of Regulations: 2             
Rule of Law: 1

1.  Hong Kong

Population: 7,153,519
GDP Per Capita: $49,400 (2011 est.)
Economic Fundamentals: 3       
Regulatory Barriers: 4   
Ease of Doing Business: 1
Quality of Regulations: 1            
Rule of Law: 2

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