FDI FDI flows (outward $millions)

2.2m 2.0m 1.8m 1.6m 1.4m 1.2m 1.0m 0.8m 0.6m 0.4m 0.2m

2006 2008 2010 2012 2014 2016

cramped up. And though vaccines might eventually get us out of our basements and back to the pub, the prognosis for FDI remains bleak. According to work by the United Nations Conference on Trade and Development (UNCTAD), for example, most sectors will likely struggle through 2021. It’s tempting to think of all this just as figures on a chart. Resist that temptation. Especially for developing countries, this drop is likely to cause serious pain – even if the investments that finally emerge are more thoughtful and environmentally aware.

FDI don’t know

If you had to ask anyone about the present and future of FDI, you could do worse than tap Terry Toland. With a CV that spans the Marshall Fund, the Center for Strategic and International Studies – and even the UK Parliament – he’s done his fair share of work on global markets. When Toland speaks, in short, it’s worth taking his comments seriously. It’s just a shame that what he has to say (about FDI anyway) is so depressing. “In the near term, we expect that FDI levels will remain depressed, particularly as many profit margins have been squeezed by the pandemic,” explains Toland, the head of thought leadership at Kearney’s Global Business Policy Council. That’s especially true, he adds, given companies are likely to hold off on big investments until the economic picture gradually becomes sharper.

This seems like a reasonable assessment. But to truly understand the scale of the challenge facing FDI, it’s not enough to analyse the present. Rather, it’s vital to grasp just how far graphs have spiralled over the past year. Look at the numbers: according to the UNCTAD, global FDI dropped by 42% in 2020, a figure rising to 69% across the developed world. Even in China, with its gigantic industrial base and mercifully brief lockdown, foreign investment

Finance Director Europe /

Decline in FDI from its 2007 peak 60000

55831 55000 50000 45000 World OECD-Total 40000 35000 32149 30000 EU 26661 25000 2018 Jan 2018 Jul 2018 Jan 2019 Jul 2019

slumped by more than a tenth. The reasons for this are easy enough to guess. With lockdowns stopping industry and construction in its tracks, there was little appetite to write more checks. That’s doubly true in certain countries, particularly in Europe, which have seen wave after wave of restrictions. It’s worth adding, too, that some nations – notably the US – were struggling with FDI even before the pandemic. After then-President Trump pushed major tax cuts through Congress in 2017, investors were less eager to send their money abroad.

“FDI is likely to take a backseat as fragile macroeconomic conditions will deter many investors.”

Whatever its causes, though, it’s clear that the collapse in FDI is going to have a lasting impact on the balance books of countries worldwide, to say nothing of workers’ paychecks. To take countries of origin first. According to research by the Peterson Institute for International Economics, FDI by US multinationals ultimately leads to higher domestic employment. Though Apple now assembles its iPhones in China, for instance, around 90% of the profits return to US shores. All told, a 10% in overseas employment can lead to a 4% increase in domestic employment, as well as a 5% rise in research and development (R&D) spending. At any rate, just as Toland emphasises that “the benefits” of FDI to the donor country are obvious, so too are the dangers when funding dries up. Arguably, things are even more desperate for those countries that receive investment. As Toland notes, the benefits of FDI to these (often developing) nations is undeniable, from increased expertise to capital accumulation. That’s certainly true for

Jan 2020 Jul 2020 OECD Data 54341 54400 49694 48155 43747 40052 54191 52259 51995


A small jump in worldwide FDI can add 0.04% to global pollution. Science Direct


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