Why capital flows have the potential to change the economic world order

• Traditional capital flows dominated by Western economies are evolving – financial hubs are emerging across Asia and playing a larger role in global investment.
• The emerging new world order is the rising influence of domestic “pull factors,” such as strong economic growth.
• Sovereign wealth funds are driving investment into domestic markets, strengthening supply chains, fostering self-sufficiency and positioning emerging economies as global financial leaders.

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“Polycentric” and “multipolar” – terms increasingly used to describe our changing world.

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The evolutionary shift towards a new global order is not just a geopolitical phenomenon but an economic one as well, significantly impacting the flow of capital, trade and ideas across borders. In short, polycentrism is creating a more coherent and interconnected global financial system.

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Historically, capital flows have been dominated by a few major economies, primarily the United States and Western Europe. However, this influence has waned over the past decade and a half.

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Origins and destinations of capital flows are becoming more varied, with global centres emerging across Asia, including in India and the Middle East. It could be argued that these new patterns have begun to change the economic world order: today, several of the world’s most dynamic markets act as importers and exporters of capital.

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The forces reshaping capital flows

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So, what factors drive this shift? Traditionally, global macroeconomic, fiscal and policy fundamentals – known as “push factors” – led by advanced economies would be thought to be at work.

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However, in this emerging new world order, there are signs of an increasing influence of domestic “pull factors,” such as strong economic growth, robust market infrastructure and greater absorptive capacity for investment.

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Political and economic stability, fiscal responsibility and regulatory certainty are fundamental to attracting sophisticated investors. However, forward-thinking countries are proactively enhancing their appeal by establishing International Financial Centres, free zones and robust investor and trade networks – key initiatives that attract capital and position these nations as competitive hubs in the global economy.

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We see this in the United Arab Emirates (UAE), where financial centres such as Abu Dhabi Global Market and Dubai International Financial Centre have become global hubs for financial services institutions, family offices and fintechs seeking a business-friendly environment to establish their operations.

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Growth economies attracting investment

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In a recent paper – A New Era of Capital Flows in a Polycentric World – ADQ published with Abu Dhabi Global Market and NYU Abu Dhabi’s Stern School of Business, some of the world’s most prominent investment minds shared insights confirming that this phenomenon is already beginning to materialize. However, available data have not fully captured it.

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In a world where investors weigh the potential for high returns against the risks of entering new markets, growth economies are becoming increasingly compelling. For example, the UAE and Singapore, where comprehensive structural reforms and targeted measures to enhance market attractiveness have resulted in record foreign direct investment inflows in the recent past.

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The UAE is looking to double cumulative foreign direct investment (FDI) to $354 billion and reach a total FDI balance of $600 billion by 2031. The country’s dual role as an importer and exporter of capital has created a dynamic investment environment where FDI is on an upward trajectory.

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Similarly, other growth economies, such as Malaysia, are also benefiting, as their services and production sectors are thriving and supported by substantial investments from countries such as Japan and the United States.

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"In this emerging new global order, economic influence may be distributed across multiple regions rather than concentrated in a few traditional powerhouses."

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Sovereign capital as a catalyst

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The influx of capital into these countries is partly driven by the rapid growth of sovereign wealth. Sovereign investors are reallocating funds previously invested abroad to catalyze domestic economic development, thereby creating an environment conducive to investment.

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These sovereign-backed investments strategically strengthen supply chains, build homegrown business platforms with global reach and expand key industries.

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In turn, this approach creates a multiplier effect, reducing reliance on external markets while attracting foreign investment, now directed toward high-growth sectors poised for long-term success and supporting long-term objectives like diversification and self-sufficiency.

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Capital flowing beyond traditional destinations

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As capital moves beyond traditional destinations, the evolving global financial landscape presents a clear opportunity: growth economies that strategically harness these shifts are poised to shape the future, fostering a more interconnected, dynamic and resilient world.

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By leveraging unique advantages – such as robust economic growth, advanced infrastructure and favourable investment climates – these economies contribute to a more polycentric world.

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In this emerging new global order, economic influence may be distributed across multiple regions rather than concentrated in a few traditional powerhouses. For businesses, investors and policymakers, this offers a rare opportunity to drive long-term, sustainable growth that is diversified, resilient and adaptable to future economic shifts.