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REGIONS EUROPE


Rising divestment andhowto deal with it


Q&A: JAMESZHAN


UNCTAD’S JAMES ZHAN TALKS TO ALEX IRWIN-HUNT ON THE FACILITATION OF SUSTAINABLE AND RESPONSIBLE DIVESTMENT


divest from one location and invest into another. As evidenced by Honda’s exit from Swindon in the UK, this can have a hugeimpact on local economies. James Zhan, the director of investment and


A


CURRICULUMVITAE JAMES ZHAN


2008 Unctad Director of investment and enterprise


Also UN Sustainable Stock Exchanges Initiative, chair of governing board


will be growing, because the phenomenon is growing, and there will be a transformation of globalvaluechains(GVCs) inthecomingdecades. Several forces are driving this: the sustaina-


Q A


bilityimperative; thenewindustrial revolution and technology; the global governance realign- ment, withsystemic competitionand geopoliti- cal rivalries; and the resilience-driven restruc- turing of GVCs. The latter involves all kinds of business restructuring, such as reshoring, nearshoring and regionalisation.


ernments can try to fix that. Investorsmay have specific problems with production on the spot, and governments can try to resolve them — whatwe’d call traditional investment retention. But if the divestment is a result of structural


Q A


transformationdueto technologyfundamentally changing an industry, such as the automobile industry, then the challenge for governments is different. It’s not a question of investment reten- tion, it is aquestionof divestment facilitation. That means encouraging firms to ensure


they divest in a responsible manner, such as taking care of the environment and the social dimension — namely the labour, community and supply network — around the plant. The firm that is divesting has a social obligation,


74


How can governments deal with differ- ent types of divestment?


If it is divestment due to rising costs or reg- ulatory changes at the local level, then gov-


enterprise at the UN Conference on Trade and Development (Unctad), talks withfDi about the drivers and impacts of the rising wave of divest- ment, and what the public and private sectors can do to dampen the blow.


What are the macro drivers behind divestment?


Divestment is a hot topic and of major con- cern for all countries. I think this concern


confluence of factors is leading invest- ing companies to restructure their global operations, leading many to


but also the capacity to a certain extent to help with the downstream. The host government can also do matchmaking with potential domestic and foreign investors to help the firms identify new acquirers.


the vehicleandrequiresaround20parts. But the traditional combustion engine requires 2000 moving parts—thenumber ofparts is shrinking from 2000 to 20, meaning value chains are becomingsmaller andmore consolidated.


Q A


central and eastern Europe position themselves as big suppliers or assembly lines for the German auto industry. The shift to EVs is quite challenging, but the technology and skills are already there in these locations. One of the future industries that might be


Q A


able to replace automotive is industrial robots. Looking to this industry for new investment to replace the old industry is taking into account sustainability and technological development.


Q A


What about the replacement of high- skilled manufacturing jobs with lower paid jobs in industries such as logistics?


The future transformation of GVCs is that the manufacturing value chain will be


shorter, while the service value chain will be longer. Service channels are going in the oppo- site direction to manufacturing, where it becomes more fragmented and there is more offshoring. In the case of the site Honda has left in


Swindon, it will unlikely be totally filled by a large online retailer. The UK government can still use this to promote investment opportu- nities for high-tech industries, such as indus- trial robots.■


James Zhan is the director of investment and enterprise at the UN’s Conference on Trade and Development.


www.fDiIntelligence.com June/July 2021


What can countries do to manage the divestment process?


Host countries need to shift their strate- gies. The UK and many other countries in


Why is divestment taking place in the automobile industry?


Electric vehicles [EVs] require a battery, which accounts for over 40% of the costs of


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