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Attracting Sustained Investment into Commonwealth Small States: Challenges and Opportunities

Strategic Insights

— 1 min read

Small states within the Commonwealth face unique challenges in attracting foreign direct investment (FDI), given their narrow production structures, small domestic markets, and vulnerability to external shocks. Despite these challenges, FDI can be crucial in fostering diversification and driving sustainable economic growth. However, only a few Commonwealth small states have successfully adapted their business and regulatory environments to attract and retain investment.

Key Takeaways:

  • Only 15% of inward FDI to the Commonwealth was absorbed by 33 Commonwealth small states in 2023, with these countries receiving only 1.8% of greenfield investments that year.
  • Five countries - Malta, Guyana, Cyprus, Namibia, and The Bahamas - absorbed 91% of FDI destined for Commonwealth small states in 2023, with nearly two-thirds of greenfield investment in these countries going to Guyana, Brunei Darussalam, Papua New Guinea, Gabon, or Namibia between 2015 and 2023.
  • Some Commonwealth small states have implemented effective strategies to attract FDI, including investing in business and regulatory reforms, creating or strengthening investment promotion institutions, targeting regulatory reform, and simplifying tax and incentive regimes.
  • Innovative investor citizenship by investment (CBI) or residence by investment (RBI) schemes have been introduced by some Commonwealth small states, including Antigua and Barbuda, Dominica, Grenada, Malta, St. Kitts and Nevis, Saint Lucia, Samoa, and Vanuatu.
  • Countries such as Mauritius, Botswana, and Guyana have utilized FDI to drive structural economic transformation through a stable macroeconomic environment, competitive investment climate, and effective regulatory regimes.

Statistics:

  • 15% of inward FDI to the Commonwealth was absorbed by 33 Commonwealth small states in 2023.
  • Only 1.8% of greenfield investments in 2023 went to these countries.
  • Between 2015 and 2023, nearly two-thirds of greenfield investment in Commonwealth small states went to Guyana, Brunei Darussalam, Papua New Guinea, Gabon, or Namibia.
  • Five countries - Malta, Guyana, Cyprus, Namibia, and The Bahamas - absorbed 91% of FDI destined for Commonwealth small states in 2023.

Sources:

  • Balchin, N., & Kampel, K. (n.d.). Investment Flows into Commonwealth Small States: Trends, Challenges and Implications. Commonwealth Secretariat.
  • Commonwealth Secretariat. (2023). Press Release: A blog by Neil Balchin and Kim Kampel discussing their paper Investment Flows into Commonwealth Small States: Trends, Challenges and Implications.

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