Globalisation
s the earth spun into 2020, a new virus was emerging in the Chinese city of Wuhan. Before the year was out, it would change every country on the planet. Not even multinational enterprises, usually so adept at hopping borders in search of the most favourable conditions, could escape its clutches. In fact, they seem to have been pulled in precisely the opposite direction. In total, global foreign direct investment (FDI) flows tumbled 35% to $1trn from $1.5trn in 2019, according to the UN Conference on Trade and Development’s World Investment Report (UNCTAD WIR) 2021. Yet while foreign investments in developed economies fell by 58%, FDI in what the WIR classifies as developing Asia increased by 4%. For the first time ever, that region accounted for more than half of the planet’s FDI spend, up from just a third in 2019. Readers of the top-line figures would be excused for wondering what happened to their global crisis.
Rising in the east A
Worry not: Covid impacted everyone – it’s just that some countries were better prepared than others. As Mike Pfister, senior economic advisor at the OECD, points out, one of the key differences between developing Asia and the rest of the world is that the former group consists largely of states that experienced a comparable health crisis, Sars, less than 20 years ago. In other words, the region’s governments had applicable expertise in responding to a – more lethal, if less transmissible – coronavirus across what Pfister calls the three “fronts” of public safety, regulation and economic support. By the same token, the fallout from the financial crash of 2007–08 gave central banks and economic regulators everywhere a harsh lesson in doing whatever it takes to keep the economy afloat. Regulatory processes made more responsive after the financial crisis facilitated the movement of essential goods and services across borders when supply chains were
Despite the pandemic, foreign direct investment (FDI) is enjoying a boom east of Suez. In China, it increased by 6% last year, to $149bn. Hong Kong and India have seen similar rises – even as much of the developed world has struggled. So, what does this gap mean for the global economy? And do the events of the past year represent a more fundamental shift in where foreign investment ends up? Isabel Ellis catches up with Mike Pfi ster at the OECD to understand the current state of FDI, why developing Asian economies are proving such popular spots for growth, and what that means for global business at large.
Finance Director Europe /
www.ns-businesshub.com
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Zapp2Photo/
Shutterstock.com
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