Record FDI. Compliments of the Chef.

Somewhere in the last decade, investment promotion quietly changed its primary product. It used to produce greenfield projects. Now it produces press releases about headline FDI.

The two are not the same thing. Most people in the industry know this. Almost nobody says it publicly.

Here is what the data — available in any serious national statistics office, in standard balance-of-payments tables, for virtually any developed economy — actually shows.

Inward FDI flows comprise three distinct components. Mergers and acquisitions: foreign buyers purchasing existing domestic assets, changing ownership without necessarily changing anything else. Reinvested earnings: an accounting convention that records undistributed profits of foreign-owned affiliates as if they were paid out and immediately re-contributed as equity. And “other flows” — the bucket that contains new equity injections, intercompany lending for expansion, and, critically, greenfield investment: new plants, new facilities, new productive capacity.

In most developed economies, in recent years, M&A and reinvested earnings together account for roughly three-quarters of total inward FDI. The “other” bucket — where Greenfield lives — typically accounts for around twenty to twenty-five per cent on average, and that share is volatile. In strong years for acquisition activity, it can drop by 20 per cent. In bad years, it can go negative.

This is not a secret. The decomposition is published quarterly by every statistics office that adheres to the IMF Balance of Payments methodology. It sits one click deeper than the headline number. Nobody in investment promotion uses it as their primary reporting metric.

The reinvested earnings problem

The political treatment of reinvested earnings deserves particular scrutiny, because it is where the language does the most damage.

“Foreign companies are reinvesting their profits here” sounds like vote of confidence. It sounds like evidence of commitment. It sounds like greenfield. It is none of those things.

Reinvested earnings tell you that a foreign-owned affiliate did not repatriate its profits during the reporting period. That is all. Those retained profits may fund domestic expansion. They may equally fund the affiliate’s own outward acquisitions, sit as cash, or accumulate as intra-group claims that will eventually leave anyway. The statistics do not tell you which. Anyone who presents reinvested earnings as equivalent to domestic reinvestment is either confused or counting on their audience to be.

The tell is straightforward: if large, sustained reinvested-earnings inflows were systematically being channelled into domestic greenfield capacity, you would expect to see a corresponding structural rise in the “other flows” component of FDI, and in private fixed investment more broadly. In most economies, you do not see that. Reinvested earnings are large and fairly stable. Greenfield-type flows remain the minority slice, are highly volatile, and show no durable upward trend despite years of headline FDI growth.

The governance failure

Investment promotion agencies exist to move the greenfield number. That is their mandate. Not to facilitate M&A, which happens without them. Not to retain earnings in foreign affiliates, which is an accounting entry beyond anyone’s control. Their specific, defensible contribution to economic development is attracting new productive capacity that would not otherwise have been built in their jurisdiction.

Evaluated strictly against that mandate, using the component of FDI they can actually influence, the performance of the investment promotion system — across multiple countries, across multiple economic cycles, across a decade of growing agency budgets and expanding headcounts — is at best ambiguous and at worst flatly contradicted by the data.

But agencies are not evaluated against that mandate. They are evaluated against total FDI flows. A number dominated by components they do not influence, reported against a benchmark they do not control, marketed to audiences who cannot easily decompose it.

When flows rise, agencies claim credit. When flows fall, they attribute the decline to global conditions. The metric is designed to be achievable. That is not a coincidence. It is the system working as designed, which is the problem.

The staffing and budget implications follow logically. Large teams at federal, regional, and city levels — each maintaining their own pipelines, attending the same conferences, courting the same investors — are all benchmarked against the same aggregate number. The number rewards the machine's existence, regardless of whether it is producing anything the mandate requires.

A reasonable ask

This is not an argument against investment promotion. It is an argument for measurement that matches the mandate.

The data already exists. Balance-of-payments tables in every major statistics office decompose FDI by type. The methodology is internationally standardised. The “other flows” series is not perfect — it includes intercompany debt alongside greenfield, and project-level data would be better — but it is incomparably more relevant to the investment promotion mandate than the headline aggregate.

The ask is specific and achievable: IPAs, EDOs, and the federal departments that fund them should be required to report their primary performance metrics against greenfield and expansion flows, not total FDI. Budgets should be justified against movement in the component that reflects their actual mandate, not the macro aggregate that moves with global cycles they do not control.

Headline FDI can continue to exist as context. It should stop functioning as a shield.

The decomposition is one click away. It's one click away because no one with budget authority has required the click.

None of this is unfixable. The data is already being collected. The methodology already exists. The only missing input is a policymaker willing to be evaluated against the metric that reflects their job. They are out there. Presumably.