Net inflows of foreign direct investment (FDI) last year were down two percent in developing economies, including the Philippines, as a growing shift toward capital-intensive projects is making it harder for these countries to compete with developed economies.

Based on data from the United Nations Conference on Trade and Development (UNCTAD), FDI inflows to developing economies are estimated to be around $877 billion in 2025, compared to $894 billion in the previous year.

Also, last year, Asia fell two percent to $614 billion from $630 billion. Southeast Asia, in particular, settled at about $228 billion from $230 billion in 2024.

This is in sharp contrast to developed economies, where FDI inflows rose 43 percent to $728 billion last year, up from $509 billion.

Global investment last year stood at $1.61 trillion, up 14 percent compared to $1.4 trillion.

UNCTAD said the increase, which defied a year of economic uncertainties, was largely driven by new investments in several major global financial centers and investment hubs.

It noted that roughly $140 billion in investments were injected into developed economies such as the United Kingdom, Luxembourg, Switzerland, and Ireland.

Majority of these investments were poured into data centers, which accounted for more than $270 billion last year.

Data centers recorded an increase of $125 billion in greenfield investments, which refer to the development of a facility from the ground up, and $30 billion in international project finance.

“The bulk of the growth was thus through greenfield investment, contrasting with the traditionally more important role of international project finance within the telecommunications sector,” said UNCTAD.

Another sector that saw major FDI inflows in developed economies is semiconductors, which posted a 13 percent increase to around $208 billion in projects.

“While these investments lift overall figures, they remain highly concentrated and generate limited spillovers. Policies should aim to link digital infrastructure investment more closely to skills development, innovation systems, and local value creation,” said UNCTAD.

UNCTAD stressed that the growing concentration of FDI into these sectors is becoming a challenge for poorer countries to compete for new investments.

It noted that financing constraints, risk perceptions, and weaker investment frameworks are major obstacles for developing and least developed economies.

Excluding the impact of data centers and semiconductors, the number and value of projects in other major sectors primarily reported decline in investments.

The reduction is particularly apparent in global value-chain intensive industries, with projects falling to 3,645 from 4,849, while investment value dipped to $303 billion from $318 billion.

Investments were lower in industries such as electronics, automotive, machinery, and textiles on the back of “a strategic realignment of global production networks”.

This adjustment was fueled by the rise in protectionist policies last year, with the United States’ (US) reciprocal tariff policy taking the headlines.

Uncertainties and risks due to these policies forced investors to pull back from large-scale projects, such as those in the renewable energy (RE) sector, which took a nosedive to $197 billion from $272 billion.

For the year, projects in these sectors are expected to remain subdued given the continued policy uncertainties, on top of regional conflicts and geopolitical tensions.

“As in 2025, mega projects in strategic industries, including especially data centers and semiconductors, may support continued high aggregate capital expenditures, even if project activity remains stagnant and more concentrated geographically,” UNCTAD said.