Manufacturing investment in developing economies is losing momentum, with foreign direct investment (FDI) flowing into traditional industries declining sharply over the past decade, raising concerns about industrialisation, productivity growth and job creation.
The latest United Nations Conference on Trade and Development (UNCTAD) World Investment Report shows that FDI in traditional manufacturing industries fell by 17 per cent between 2015–2019 and 2021–2025.
The decline was even steeper in developing economies, where manufacturing investment dropped by 20 per cent. Least developed countries experienced the sharpest fall, with investment plunging by 65 per cent.
Manufacturing has long been regarded as a key driver of economic development, helping countries create jobs, expand exports and move into higher-value production.
However, the report shows that global investment is increasingly shifting towards strategic sectors aligned with emerging technologies and evolving economic priorities.
UNCTAD identifies five strategic sectors attracting a growing share of global investment: artificial intelligence infrastructure, advanced and sensitive technologies, critical minerals, energy-transition technologies and semiconductors.
Announced greenfield investment in these sectors rose from $109 billion (Sh14.1 trillion) in 2020 to $576 billion (Sh74.4 trillion) in 2025.
Their share of global greenfield investment also increased significantly, from 16 per cent to 44 per cent over the same period.
Artificial intelligence infrastructure attracted the largest share of strategic investment, fuelled by rising demand for data centres, cloud computing and cybersecurity solutions.
Semiconductors recorded the fastest investment growth, although funding remains concentrated in a small number of economies.
The report warns that many developing countries are being left behind as this new investment cycle gathers pace.
Low-income and lower-middle-income economies attracted only about 10 per cent of investment in strategic sectors, compared with more than 20 per cent of investment flowing into other industries.
According to UNCTAD, this shift could limit developing economies' ability to participate in fast-growing industries and widen existing gaps in global production networks.
Even as investment in strategic sectors accelerates, traditional manufacturing continues to face pressure from changing global supply chains, technological advances and shifting investor priorities.
For developing economies, the decline poses a major challenge as governments seek to expand industrial capacity and create jobs for rapidly growing populations.
Reduced manufacturing investment could slow efforts to strengthen local production, boost exports and drive broader economic transformation.
The report recommends that countries strengthen investment policies, improve infrastructure and build the skills needed to attract capital into both traditional manufacturing and emerging industries.
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