The New Zealand Initiative’s latest report, Capital Doldrums: How globalisation is bypassing New Zealand, was released late last week. The report shows that while our domestic economy rapidly integrated with the rest of the world between the mid-1980s and 1990s, inwards foreign direct investment (FDI) stocks have since stagnated relative to GDP (albeit at quite a high point).

Confirming the findings from our newest FDI report, recently updated figures show that New Zealand’s international investment standing has dropped alarmingly.

The latest data from UNCTAD (United Nations Conference on Trade and Development) released early last week appears to suggest that the economy is no longer holding its ground in the international investment race.

The figures show that while global FDI flows have risen by 11 per cent from 2012 to US$1.46 trillion, the highest level since the global financial crisis, New Zealand’s inflows dropped by 75 per cent to US$500 million.

In contrast, Singapore, with a population of just over five million, attracted an inflow of US$56 billion in 2013. Inwards investment in China totalled some US$127 billion and India experienced a 17 per cent growth in inwards investment to US$28 billion.

New Zealand was not alone in this decline. Australia’s FDI inflow has also declined, but to a lesser degree, by 28 per cent to US$40 billion.

The UNCTAD figures support the case put forth by Capital Doldrums, namely that since the mid-1990s, New Zealand’s FDI competitiveness has declined markedly.

Although FDI stocks globally grew by more than 20 per cent of GDP between 1995 and 2012, New Zealand’s inwards FDI stock fell by 1.2 per cent of GDP and outwards stock rose by a paltry 6.4 per cent over the same period.

Our rank on UNCTAD’s FDI Attraction Index, which measures a country’s ability to attract FDI, has slipped dramatically from 73rd in 2000 to 146th in 2011, out of a total 186 counties. Bangladesh, Greece, Senegal and Swaziland all rank just ahead of us.

Furthermore, New Zealand’s score on the OECD’s FDI Regulatory Restrictiveness Index, which measures the extent to which a country’s regulations discriminate against FDI, remains far above both the non-OECD and OECD averages, being placed as the seventh most restrictive OECD member.

There is a well-established link between investment, FDI and economic growth. Our ability to attract FDI is an indicator of the attractiveness of our investment climate. If we are serious about improving prosperity in New Zealand, then improving the rules which govern inwards investment flows is a good place to start.