International investment is evolving, influenced by three megatrends: technology, sustainability, and geopolitics. Together, these megatrends are reshaping global economic geography and governance, leading to significant developments in trade and, in so doing, investment into services.

Investment into services now accounts for a whopping 72% of the total foreign direct investment (FDI) stock, in turn helping services to account for 67% of global GDP.

The growth of cross-border investment into services is a long-term trend. In each decade since 1990, FDI into services has grown significantly, five-fold in 2000, four-fold in 2010 and again by over 50% in 2020. This growth in FDI in the tertiary (services) sector has significantly outpaced FDI into both the secondary (manufacturing) and primary (natural resource) sectors.

Part of the reason why investment into services has been growing is that services play a dual economic role. Services can not only serve as final exports (think of insurance services for individuals) but also intermediate inputs into production (think of insurance services for shipping). With the growth of global value chains (GVCs), services have increasingly become the glue linking activities across economies, and thus requiring investment into services for GVCs to work.

The role of services as intermediate inputs into production also means that services are fundamental to the competitiveness of economies and firms across all sectors. In other words, efficient services inputs will not only help determine the competitiveness of other service sectors, but also of an economy’s natural resource, agriculture, and manufacturing activities. For instance, without efficient transportation services, it will be hard for an economy to provide competitive minerals, grains, or refrigerators on the international market.

Looking ahead, six transformations are creating new opportunities for investments into services. Governments need to put in place the right enabling policies – and firms the right strategies and investments – if they are to seize these opportunities.

1. Investment in ‘servicification’ and ‘servitization’ of manufacturing

2. Investment in digital services

3. Investment in high-value added service offshoring

4. Non-equity modes of investment

5. Investment in sustainability

6. Investment in resilience

(World Economic Forum)