In this article, we take a look at the 25 best countries to invest in. You can skip our detailed analysis of the global investment dynamics and go directly to the 10 Best Countries to Invest In.
There are trade-offs to investing in different countries. Investing in countries that are lower on the ladder of development is risky but the returns are much more lucrative than developed countries because of relative uncertainty but a lot of room for development. The opposite is true for developed economies.
The reason is that the GDP growth is lower in developed countries because the bigger proportion of spending shifts away from goods, and towards services, as noted in the book titled Fully Grown: Why a Stagnant Economy is a Sign of Success by Economics Professor Dietrich Vollrath.
However, a shift to services leads to a decline in productivity growth, not because of something inherently wrong with services, but due to the fact that manufacturing is far more complementary to economies of scale. Capital accumulation is also an aggregate source of GDP growth and it is lower in services relative to manufacturing.
This does not mean high returns are absolutely doomed in developed economies. Since 1967, the decline in manufacturing was the biggest contributor to transition to services in the US, which led to a consistent slowdown of the economy, but the US GDP grew at an average rate of 4.57% during the late 1990s because of the dot-com boom.
The growth resulted from the commercialization of the internet, and generated enormous wealth in the country, leading to the founding of giant American tech companies like Alphabet Inc. (NASDAQ:GOOG), Amazon.com, Inc. (NASDAQ:AMZN) and Paypal Holdings, Inc. (NASDAQ:PYPL), among others.
Alphabet Inc. (NASDAQ:GOOG) has become one of the biggest companies in the world, surpassing some countries’ entire GDPs combined, at a market cap of $1.2 trillion as of Q1, 2023. Amazon.com, Inc. (NASDAQ:AMZN) has the same story, while Paypal Holdings, Inc. (NASDAQ:PYPL) has a market cap of $88 billion as of the same quarter, with its payment system becoming one of the most popular in the world.
Advanced economies with high levels of innovation hold some of the best investment opportunities in the world. The top global technology companies are still responsible for quarter of the growth of the S&P 500 index. From 1996 to 2018, S&P 500 IT Services Industry Index grew by 900% relative to 400% growth for the S&P 500 overall.
Why Venture Capital is Critical for Scaling Innovative Startups?
The critical ingredient for innovation in a country is the health of its private equity markets, specifically, the venture capital market. If there’s a scarcity of investment, entrepreneurs coming up with efficient and improved business ideas will have a harder time putting them into action, or in this case, scale them up.
Although less than 1% of startups are funded by VCs in the US, they account for 50% of the startups that go public, and 90% of the research and development in the companies that go public. In this regard, venture capital is important for scaling innovative companies.
Companies in countries like the US, Israel and Germany have high access to venture capital and, therefore, are at the forefront of innovation and high returns on investment.
Real Estate
Apart from equity and debt markets in several top countries for investment, real estate is another way to generate decent returns. The real estate markets in countries like the US, Sweden, Norway and Turkiye are booming.
The United States’ commercial real estate market is especially a favorite among foreign investors, owing to greater liquidity and the potential for higher returns in comparison to the modest prime capitalization rates in some Asian and European countries.
With that said, let’s move on to the 25 best countries to invest in.
mandritoiu/Shutterstock.com
Our Methodology
We have defined ‘best countries to invest in’ as ones that have low market regulations, strong rule of law to protect property rights and enforce contracts, sophisticated infrastructure, strong startup scene, high access to capital and highly educated and skilled workforce.
In this regard, we have selected them based on the Venture Capital and Private Equity Country Attractiveness Index of 2021 and ranked countries in ascending order of high investment attractiveness. The index bases countries’ investment attractiveness on six latent drivers, including economic activity, depth of capital markets, taxation, investor protection and corporate governance, human & social environment, and entrepreneurial culture and opportunities. It further splits these drivers into subcategories.
For instance, the index breaks down the ‘entrepreneurial culture and opportunities’ driver into five subcategories, including innovation, ease of starting a business, and scientific and corporate R&D, among others. It further splits three of these subcategories into eight smaller subcategories and therefore, covers investment attractiveness of a country comprehensively. Finally, it rates countries on a scale of 1-100, with higher scores corresponding to higher investment attractiveness.
To complement the list, we’ve also discussed the net inflows of Foreign Direct Investment (FDI) in important countries. We’ve sourced the data for that from the World Bank.
25. Taiwan
Investment Attractiveness Score: 71.9
Taiwan dominates the semiconductor industry, with Taiwan Semiconductor Manufacturing Limited (TSMC) controlling 60% of the global foundry industry as of Q4, 2022.
It is regarded as one of the top countries for supply chains of electronics and semiconductors, and the government actively implements investor-friendly policies.
24. Ireland
Investment Attractiveness Score: 73.9
Ireland is considered one of most business-friendly countries in the world, which is why the country attracts significant FDI relative to its GDP. In 2021, Ireland received net investment inflows that made up 19.2% of the country’s GDP.
23. Malaysia
Investment Attractiveness Score: 74.8
Malaysia is located in Southeast Asia, and the country is one of the emerging powerhouses of Asia. It ranks on the 35th position on the aggregate logistics performance index, indicating sophisticated infrastructure.
22. Austria
Investment Attractiveness Score: 75
Austria is attractive when it comes to investment for several reasons. The country offers many grants to foreign investors for tax exemption. Moreover, Austria actively promotes corporate R&D. Companies in Austria are eligible for a 14% research bonus from the government. In addition, it offers credit guarantees and subsidies to stimulate innovation.
21. Belgium
Investment Attractiveness Score: 75
Belgium is one of the best European countries to invest in as of late. There are no trade restrictions in Belgium, and the country is a gateway to 500 million European consumers within a radius of 500 miles. Moreover, the infrastructure in Belgium is one of the best in the world, taking the top fourth spot on the aggregate logistics performance index.
20. Spain
Investment Attractiveness Score: 76.1
Spain has one of the best property markets in Europe and also has a well developed infrastructure. It has a score of 76.1 on VC and private equity country attractiveness index and ranks 18th on the aggregate logistics performance index.
19. Israel
Investment Attractiveness Score: 76.5
Israel is the most advanced country in the Middle East, and among the most advanced in all of Asia. It has a rich startup scene with lucrative returns on investment. For this reason, the country attracted 28 times more venture capital per capita than the US in 2021.
In the same year, 57 Israeli startups raised an aggregate sum of $4 billion and went public. These included companies like SentinelOne, WalkMe and IronSource. Much of the country’s startup talent is concentrated in Tel Aviv.
18. New Zealand
Investment Attractiveness Score: 76.7
New Zealand’s market is one of the best in high tech innovation, backed by generous fundings from the government and private equity firms. In the first two quarters of 2021, early stage investment increased by 78% from the first two quarters of 2020, and 42% out of this investment went to high tech startups.
One of the most notable companies that has originated in recent years in the country is Dennisson Technologies, which is developing exo-suits with 4D materials to help people with physical disabilities.
17. Norway
Investment Attractiveness Score: 78.1
Norway’s infrastructure grabs the top 20th position on the aggregate logistics performance index, and in 2021, net inflows of investment in the country made up 2.2% of its GDP. The government also incentivizes business growth and foreign investment.
Norway is known for some of the biggest companies in the world, and is also a hot spot for many US companies like Alphabet Inc. (NASDAQ:GOOG), Amazon.com, Inc. (NASDAQ:AMZN) and Paypal Holdings, Inc. (NASDAQ:PYPL).
16. Finland
Investment Attractiveness Score: 78.9
Finland is located in the Scandinavian region of Europe. In 2021, the FDI net-inflows in the country made up 5.5% of its GDP, indicating the attractiveness of Finland among foreign investors. Innovation in Finland’s market is 135.5% of the EU average.
15. Switzerland
Investment Attractiveness Score: 79.5
Switzerland is one of the best countries to invest in. It has one of the lowest federal corporate tax rates in the world, at 8.5%, allowing businesses to save a significant amount of money on their profits.
Switzerland’s innovation performance is 142.4% of the EU average. Further, in corporate R&D, the country’s performance is 227% of the EU average.
14. Denmark
Investment Attractiveness Score: 80.8
Denmark has a vibrant corporate R&D scene. The workforce in the country is highly educated and skilled. Denmark has other advantages as well. Copenhagen is widely regarded as the logistics hub for Scandinavian countries, enabling goods shipment to 100 million Scandinavian consumers within 24 hours, making Copenhagen one of the most important links in the Scandinavian value chain.
13. Sweden
Investment Attractiveness Score: 81
Sweden is among the top European countries that attract the most FDI. In 2021, foreign investment in Sweden comprised 9.2% of its GDP. There are several reasons why the country is so attractive to investors.
These include top of the line infrastructure, with Sweden being the top third country on aggregate logistics performance index, and high innovation, with the country’s performance in innovation being one of the highest in Europe, at 136% of the EU average.
12. Netherlands
Investment Attractiveness Score: 81.7
The Netherlands is one of the best countries to invest in, especially when it comes to its agritech companies. The country has one of the highest-educated workforces in the world and its regulatory framework is efficient and friendly towards the market.
11. Hong Kong
Investment Attractiveness Score: 82.4
Hong Kong had FDI net-inflows of 36% of its GDP in 2021. One of the reasons is that the country is exceedingly open to business, with a two-tier corporate tax system. The first $0.25 million of corporate profits is taxed at 8.25%, while the outstanding profit is taxed at 16.5% in the country, making it extremely attractive for small to medium-sized businesses.
Other reasons include Hong Kong being the gateway to the huge Chinese market. Two of its top investment sectors include the financial sector and the real estate sector.
Click to continue reading and see the 10 Best Countries to Invest In.
Suggested Articles:
- 25 Most Expensive Countries in Europe
- 25 Largest Ports in the World
- 25 Most Expensive Countries in Africa
Disclosure: none. 25 Best Countries to Invest In is originally published on Insider Monkey.
Hedge Fund Resource Center