Investment Is Back, but It Is Flowing to Only a Few

In the first publication of the series, we showed that the global economy continues to grow amid expensive energy, elevated inflation, high interest rates, and geopolitical uncertainty. Such an environment narrows the space for investment and makes business decisions more selective.

The new UNCTAD World Investment Report 2026 adds an important clarification to this picture. After two years of decline, global foreign direct investment rose by 6% and reached $1.6 trillion in 2025. However, the recovery was narrow: inflows to developed economies increased by 11%, while developing countries saw growth of only 2%, to $901 billion. More than 80% of global flows went to the twenty largest recipient countries.

Behind the positive headline number lies a new structure of international capital. Investment is increasingly concentrated in a limited number of countries, in a few strategic sectors and around large projects — especially in economies able to offer ready infrastructure, skilled people, suppliers and predictable implementation conditions.

Therefore, the main question is gradually changing. Previously, investment policy was primarily about attracting capital. Now it is more important to understand how to secure a place in the production and technological systems around which the new investment cycle is concentrating.

This is the second publication in TALAP’s series on the new growth model. The next articles will examine energy and industrial infrastructure, the impact of AI on employment and regions, and the state’s ability to connect multiple sectoral transitions into a single delivery system.

The global volume of foreign direct investment remains an important indicator of the state of the world economy. It shows companies’ willingness to invest capital outside their home country, establish production facilities, acquire assets, and enter into long-term projects.

However, a single aggregate figure combines flows that differ in their economic substance.

Investments may go into establishing a new enterprise, expanding existing production, acquiring a company, financial structures and holding companies, a single large infrastructure facility, or a project that is almost unrelated to the rest of the host country’s economy.

Therefore, the same volume of direct investment can produce different results. One project creates jobs, suppliers, technologies, and an export chain. Another increases asset values while preserving the existing production structure. A third creates a capital-intensive facility with limited employment and a high dependence on imported equipment.

UNCTAD notes that a significant share of the recovery is linked to a small number of megaprojects, especially in digital infrastructure related to AI development. The increase in the value of announced projects was driven primarily by data centers, the oil and gas sector, and semiconductor manufacturing.

This means the investment upswing is becoming less broadly distributed. The total amount is growing faster than the number of countries, sectors and regions that derive sustained benefit from it.

Over the past five years, there has been a sharp shift in the sectoral structure of investment.

UNCTAD classifies as strategic sectors those areas related to AI infrastructure, semiconductors, critical minerals, the energy transition, and advanced manufacturing. In 2020, they accounted for 16% of the value of global greenfield projects. By 2025, their share had reached 44%. The value of announced projects in these sectors rose from $109 billion to $576 billion.

Several processes converge in this shift.

• First, the digital economy is becoming physical. AI requires data centers, power capacity, cooling systems, communications networks, semiconductors and specialized equipment.
• Second, the energy transition is creating demand for new forms of generation, storage, power grids, metals, and processing capacity.
• Third, geopolitical competition is increasing the importance of economic security. Countries are seeking to control the supply of components, raw materials, technologies and infrastructure on which industrial activity depends.
• Fourth, companies are restructuring supply chains to account for political risks, trade restrictions, transport resilience, and product origin requirements.

As a result, capital flows to places where the entire production system can be assembled. The presence of a single resource or incentive offers only a limited advantage when energy, water, transport, specialists, suppliers, and access to markets are lacking nearby.

In 2025, the three largest investor countries accounted for 72% of the value of projects in strategic sectors. This increases the dependence of global flows on the decisions of a limited circle of corporations, financial institutions, and states.

Large-scale investments are increasingly being incorporated into national industrial strategies. States support companies through subsidies, guarantees, export financing, public procurement, and diplomatic support.

Investment decisions are therefore shaped by a combination of commercial and strategic factors. Returns remain important, but so do supply security, technological leadership, political relations and the ability to control critical links in a chain.

The three largest recipient countries attracted 56% of the value of projects in strategic sectors. The top twenty countries received more than 80% of all global direct investment.

Capital gravitates toward locations where a large market, an industrial base, energy and transport infrastructure, trained specialists, a developed supplier network, access to financing, clear rules, and the ability to implement a project quickly already exist.

This creates a self-reinforcing effect. A country with infrastructure and industrial capabilities receives a new project. The project expands infrastructure, increases demand for labor, and strengthens suppliers. These changes make the country more attractive to the next investor.

Economies with a weak initial base face a reverse cascade: infrastructure shortages reduce investor interest, the absence of projects limits the development of suppliers and capabilities, and a weak production system preserves dependence on raw material extraction or imports of finished goods.

A large data center, a semiconductor plant, or an oil and gas complex can alter a country’s annual investment statistics. At the same time, the macroeconomic effect depends on the project’s structure.

A high-cost facility may be associated with few permanent jobs, high import content, limited participation by domestic suppliers, heavy consumption of energy and water, repatriation of a significant share of profits and weak technology transfer.

The size of a project therefore does not fully capture its development value. What matters is what remains in the economy after construction: production capacity, skilled people, suppliers, a tax base, export opportunities and access to technology.

Developing Asia remains the largest recipient of investment among developing regions. In 2025, it attracted $644 billion. Eight of the ten largest developing recipient countries are in Asia. At the same time, investment within the region is also becoming more concentrated. The bulk of flows is directed to a limited number of economies with large markets and developed production chains.

The gap becomes especially pronounced in strategic sectors. Low- and lower-middle-income countries received about 10% of global investment in such industries in 2020–2025. In other sectors, their share exceeded 20%.

Thus, the new investment cycle can simultaneously increase global capital and widen the structural gap between countries.

Economies integrated into the production of semiconductors, equipment, materials, and digital infrastructure gain access to new technologies and markets. Countries that remain suppliers of raw materials or sites for isolated standalone facilities capture a smaller share of value added.

The difference lies in the position within the chain:

Mineral deposit → primary processing → materials → components → equipment → final product → services and technology.

The further a country moves along this chain, the greater the opportunities for productivity, skilled employment, and exports.

The changing investment environment is affecting not only corporate behavior. Governments are revising their approach to foreign capital.

In 2025, countries adopted a record 229 investment policy measures. Most of the decisions remained investor-friendly, but incentives were increasingly directed toward digital infrastructure, advanced manufacturing, the energy transition, and critical minerals. Half of the favorable measures consisted of various forms of investment incentives.

At the same time, scrutiny of investments in sensitive assets is expanding. The number of countries with foreign investment screening mechanisms rose from 21 in 2016 to 52 in 2025. Particular attention is being paid to critical technologies, data, infrastructure, and strategic resources.

A new model of investment policy is emerging.

States continue to compete for capital, but seek to channel it toward national priorities, limit risks, and strengthen domestic economic impact.

For developing countries, this creates a complex challenge. They must remain open and offer competitive conditions while preserving room for industrial policy, securing localization and technology transfer, avoiding excessively costly subsidy competition and maintaining predictability for investors.

Attracting a project at any cost is gradually losing its economic rationale. Subsidies, tax incentives, infrastructure, and state guarantees are justified when the public return exceeds the budgetary cost.

OECD Responsible Business Outlook 2026 shows another filter that influences the allocation of international capital and the inclusion of local companies in supply chains.

About 69% of the largest publicly listed companies have announced at least one commitment in the area of responsible business conduct. Half report that they use environmental or social criteria when selecting suppliers, yet fewer than 20% assess the relevant risks in supply chains.

Government regulation is also tightening. Environmental and social due diligence requirements for supply chains have been introduced in 84% of OECD countries.

For recipient countries, this means that investment attractiveness increasingly includes the ability to verify the origin of raw materials, labor conditions, environmental parameters of production, respect for human rights, supplier transparency, corruption risk management, and the reliability of corporate reporting.

These requirements are sometimes perceived as an external administrative barrier. At the same time, they are becoming a condition for participation in major international supply chains.

A domestic supplier with verified management quality can gain access to a global corporation’s supply chain. A company without transparent reporting and a manageable risk-control system may remain outside the project even if it offers a lower price.

Therefore, responsible business conduct is gradually evolving from a reputational issue into a component of industrial competitiveness.

A comparison of the World Investment Report and the UN report on the Sustainable Development Goals reveals a paradox.

The global economy has significant private capital at its disposal, and the volume of foreign direct investment is growing again. At the same time, the annual financing gap for the Sustainable Development Goals in developing countries remains at roughly $4 trillion.

The reason lies in the difference between having money and being willing to finance specific projects.

Private capital prefers projects with clear cash flow, manageable risks, sufficient scale, prepared documentation, reliable counterparties, and an exit option.

Many social, utility, and climate projects have high public value but weak commercial returns. Water supply, regional infrastructure, climate adaptation, and basic social services require long payback periods and complex risk allocation.

Therefore, investment policy includes two related tasks.

• The first is to attract commercial capital into competitive projects.
• The second is to create financing structures for socially important areas through guarantees, blended finance, public participation and international development institutions.

Confusion between these tasks leads either to inflated expectations of private capital or to an excessive burden on the budget.

Investors assess the availability of electricity, water, transport access, land, communications, and utility infrastructure.

A general promise to build the required capacity sends a weak signal when timelines and financing remain uncertain. A ready-to-use site shortens implementation time and reduces the risk of project cost overruns.

A large enterprise requires suppliers, service companies, maintenance, logistics, laboratories, and professional services.

Localization depends on a prepared network of companies able to meet technical and managerial requirements. A formal local-content target delivers limited results unless suppliers themselves develop stronger capabilities.

Modern projects compete for engineers, technologists, data specialists, operators of sophisticated equipment, and managers.

For the investor, what matters is the current availability of personnel and the ability of the education system to scale up training for the project.

The quality of legislation remains a necessary condition. However, investors also assess the state’s actual ability to make coordinated decisions on land, networks, permits, environmental matters, taxes, customs, and infrastructure.

The gap between formal rules and implementation raises project costs more than individual administrative requirements do.

The country’s domestic market may be insufficient for large-scale production. Export routes, trade regimes, standards compatibility, and proximity to consumers become important.

Geographic location becomes an advantage when it is supported by reliable logistics and clear conditions for cross-border trade.

Kazakhstan is entering the new investment cycle with clear initial advantages: a resource base, a position between major markets, industrial assets, energy potential, and interest in critical minerals, logistics, processing, and digital infrastructure.

At the same time, the global shift raises the bar for the quality of investment policy.

In January–June 2026, investment in fixed capital in Kazakhstan reached 9.5 trillion tenge. In physical terms, it increased by 9.6% compared with the first half of 2025. These figures indicate high investment activity within the country, although they include public, private and domestic investments and are not equivalent to foreign direct investment.

The government aims to attract at least $150 billion in foreign direct investment by 2029 and, at the same time, declares a shift from implementing individual projects to building production chains with deep processing and an export orientation.

The second element is decisive. The amount of capital attracted by itself does not show whether a project creates new economic capabilities.

For Kazakhstan, five key tasks can be identified.

Investment priorities are often formulated broadly: energy, the agro-industrial complex, transport, digitalization, mechanical engineering, and critical minerals.

For both the investor and the state, a more specific framework is needed.

For example, a critical minerals strategy may include:

Exploration → extraction → beneficiation → processing → materials production → components → export contract.

Infrastructure, technologies, partners and risks differ at each link. A portfolio approach makes it possible to see which link is missing and why the chain as a whole has not yet come together.

Large-scale projects in metallurgy, data centers, processing, and chemicals compete for energy, water, rail capacity, and skilled personnel.

When several sectoral programs rely on the same limited resources, hidden competition emerges between projects.

The investment plan therefore requires a coordinated balance across generation and grids, water resources, transport capacity, industrial sites, workforce, and public financing.

Without such a balance, signed agreements can outpace the physical capacity for implementation.

Purchasing construction materials or simple services domestically increases local content. The long-term effect arises when national companies master design, component manufacturing, equipment maintenance, and technological management.

Localization should therefore be assessed across several dimensions: the share of domestic suppliers, the sophistication of the products supplied, the number of trained specialists, technologies transferred, engineering and research functions created, and suppliers’ ability to enter other markets.

This approach reduces the risk that local content will end when the facility is completed.

A large project is attractive as a source of capital and a visible result of investment policy. However, a full assessment of such a project requires taking into account employment, productivity, exports, the import content, the burden on energy and water, budget incentives, supplier development, transfer of competencies, and the duration of the effect.

A project with a smaller investment volume can produce a stronger structural outcome if it creates a supplier network and technological capabilities that can be replicated elsewhere.

Large investors often require coordination among several ministries and regional authorities. Investment task forces make it possible to resolve individual issues promptly.

A sustainable result emerges when recurring problems are translated into changes in the overall system. Each complex project can reveal typical constraints, such as insufficient grid capacity, inconsistent permitting, a shortage of land with ready infrastructure, weak local suppliers, the absence of the required educational program, and conflicting sectoral requirements.

Project support acquires systemic value when accumulated experience lowers barriers for the next investor.

The new geography of investment shows that countries are no longer competing for abstract global capital.

They are competing for specific production systems: data centers together with energy and communications, critical minerals together with processing, the energy transition together with grids and storage, industry together with suppliers and specialists, transport corridors together with logistics services and manufacturing.

In this competition, a tax incentive rarely compensates for the lack of infrastructure. Low labor costs offer only a weak advantage without the required skills. A resource base creates an initial position, but value added is generated at the subsequent stages.

For Kazakhstan, the central choice lies between two investment models.

• The first model is focused on the volume of capital attracted and the number of signed projects. It provides a visible inflow of investment, but preserves the risk of fragmentation, high import dependence, and weak links with domestic suppliers.
• The second model views investment as a way to build a production chain. The state identifies the missing links, connects the project to infrastructure, prepares suppliers and personnel, and aligns support with measurable economic impact.

Such a model requires more complex governance, but delivers a more sustainable outcome: technologies, productivity, exports, and new opportunities for domestic business.

Global capital has indeed returned. But it is flowing to a small number of countries and sectors capable of bringing infrastructure, capabilities and state delivery together into one system.

The next question concerns the physical foundation of the new investment cycle. Strategic projects sharply increase demand for electricity, grids, storage, and critical minerals. The availability of raw materials and generation capacity no longer guarantees a position in the new energy landscape. What matters is the ability to build the entire industrial chain.

The next publication in the series is titled “The New Energy System Requires a New Industrial System.” It will examine why the energy transition depends on grids, storage, processing and critical minerals, and what role Kazakhstan can play in this system.

The main source for the article is the World Investment Report 2026; OECD and United Nations materials supplement it with requirements for supply chains and the broader picture of the development financing gap.

1. UNCTAD — World Investment Report 2026: International Investment in a Turbulent Era

https://investmentpolicy.unctad.org/publications/1324/world-investment-report-2026-international-investment-in-a-turbulent-era

2. UNCTAD — Investment in Strategic Sectors Is Expanding, but Many Developing Economies Risk Being Left Behind

https://unctad.org/news/investment-strategic-sectors-expanding-many-developing-economies-risk-being-left-behind

3. UNCTAD — Developing Asia Leads Investment among Developing Regions, but Patterns Shift within the Region

https://unctad.org/news/developing-asia-leads-investment-among-developing-regions-patterns-shift-within-region

4. UNCTAD — Governments Still Want Foreign Investment, but on More Selective Terms

https://unctad.org/news/governments-still-want-foreign-investment-more-selective-terms

5. OECD — OECD Responsible Business Outlook 2026: Making Commitments Count

https://www.oecd.org/en/publications/oecd-responsible-business-outlook-2026_2b15370f-en.html

6. United Nations — The Sustainable Development Goals Report 2026

https://unstats.un.org/sdgs/report/2026/

7. Bureau of National Statistics of the Republic of Kazakhstan — Investment in Fixed Capital in the Republic of Kazakhstan, January–June 2026

https://stat.gov.kz/ru/industries/business-statistics/stat-invest/publications/347200/

8. Government of Kazakhstan — Investment Policy Concept of the Republic of Kazakhstan through 2029

https://primeminister.kz/ru/news/pravitelstvom-utverzhdena-kontseptsiya-investitsionnoy-politiki-rk-do-2029-goda-29402