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BEYOND20


COMMENT


2019 tech FDI projects made up 18.3% of the global total. Richard Bolwijn, head of investment


research at Unctad, says that “the first 10 years of this century sawrapid growth ofGVC-related investments. But after 2010, investmentbecame more intangible and driven by intellectual property and e-commerce.” This growing intangibility is shown in how


overseas operations have become less depend- ent on investment into physical assets. Since 2010, global services exports and fees earned from royalties and licensing have been rising. Meanwhile, goods exports and the underlying trend in global FDI here stagnated.


Manufacturing’s relative decline The shift from GVC-intensive industries to ser- vices illustrates this trend plainly.Whenrecords began in 2003, business services operations accounted for 12% of the global total of green- field projects, while manufacturing made up 37.8%. By 2019, business services attracted 2.3% more of the global total than manufacturing. Over the past decade, the value of green-


field FDI intomanufacturing has fallen by 22%, according to fDi Markets data. Another fundamental shift to the intangi-


ble economy has been the growing popularity of e-commerce and supporting logistics infra- structure. fDi Markets data indicates that the value of greenfield FDI into logistics, distribu- tion and transportation operations has almost doubled over the past decade, reaching an esti- mated $73.5bn in 2019.


Green transition Cross-border investment trends also reflect other major shifts, particularly in the transi- tion away from fossil fuels. In 2003, global greenfield FDI intofossil fuels stoodat $235.4bn (including estimates), accounting for almost a third of the global total. Between 2015 and 2019, the sector accounted for an average of just 14.2%of total greenfield FDI expenditure. Meanwhile, the renewable energy sector’s


share of global capital expenditure on green- field FDI rose from 1% in 2003 to over 12.2% in 2019. There were a record 559 renewable


energy projects announced by foreigninvestors in 2019 — more than double the number announced in 2010. Technological advances and scientific dis-


coveries have buoyed life sciences companies to also rapidly expand their global footprint. Since 2010, greenfield FDI in the life sciences sector has climbed every year, reaching a record 1124 projects in 2019, according to fDi Markets.


Geographical shifts While FDI has changed profoundly across industries, seismic shifts have also occurred in the destinations and sources of cross-border investment projects. The hegemonic standoff between theUSand China is just oneexample of the profound role geopolitics can play in shap- ing global investments. Events ranging fromthe 9/11 attacks and the IraqWar to the Arab Spring and Brexit have all shifted companies’ focus and led to a redistributionof FDI. Over the past 17 years, FDI bound for


advanced and emerging economies has diverged. The share of global FDI going to OECD countries — the group of the world’s 37 largest economies—grewto over two-thirds in 2019,up from 46.1% in 2003, fDiMarkets figures show. Meanwhile the BRICS economies — namely


Brazil, Russia, India, China and South Africa — saw their share of global FDI decline from 27% in 2003 to just over 10%in 2019. Part of that decline is explained by China’s


flip from being a major FDI destination to a growing source market.


Covid-19 And now, in 2020, the outlook on global invest- ment is as misty as ever. According to Unctad forecasts, FDI flows are set to decline by 30–40% this year, and up to 10% in 2021, following a slash in companies earnings and uncertainty caused by the pandemic. The latest fDi Index, which tracks investor


sentiment, stood at 703 points in October, indi- cating that it is down by 34.4% from a year ear- lier. While the pandemic poses the latest chal- lenge for investing companies considering inter- national expansion, one can only wonder what will be the defining trends of the next 10 years.■


December 2020/January 2021 www.fDiIntelligence.com 25


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