• New study by KfW and the University of Göttingen: A two-thirds increase in private direct investment
• Analysis of around 2,000 project locations in 71 emerging and developing countries
• Projects that receive a positive rating after an assessment are more often linked to investments by companies in Germany and the EU

KfW development projects create opportunities for German and European companies. This is the result of a new study by KfW and the University of Göttingen. It shows that the probability of direct investment from Germany and the EU in locations where a KfW project had previously been launched rises by two thirds – namely from 3.2 per cent to 5.3 per cent – in the following years.

This correlation is particularly pronounced for infrastructure projects and initiatives rated positively in independent evaluations. The analysis was based on around 2,000 project locations in 71 emerging and developing countries.

Christiane Laibach, member of the KfW Group Executive Board:

"Successful development projects help to increase the visibility of investment opportunities. In particular, companies from Germany and Europe are investing in those areas where development cooperation generates economic prospects and boosts confidence in local conditions."

The study authors cite several possible reasons for this finding. Development projects can provide potential investors with indicators about a location's economic potential, such as the ability to cooperate successfully with local institutions. Furthermore, development projects – for example in infrastructure and education – can significantly improve the conditions for private investment.

Foreign direct investment is considered a principal source of capital, technology and expertise in developing and emerging economies. It contributes to economic development and provides companies with access to new markets and local partnerships.

The study ‘Linking KfW-financed Aid Projects and FDI: Global Evidence at the Sub-national Level’ analyses for the first time at sub-national level whether KfW-financed projects are subsequently followed by foreign direct investment in the same location. The analysis is based on data relating to various KfW project locations, which has been linked to data on foreign direct investment for the period from 2003 to 2018.

The full study is available to download via this link: Linking KfW-financed Aid Projects and FDI: Global Evidence at the Sub-national Level

Further information on the work of the KfW Development Bank Evaluation Department is available via the following link: KfW Development Bank Evaluation Department