世界发展银行-FDI-Watch---Quarterly-Report,-Issue-1,-December-2020_38页_1mb

FDI Quarterly Report Summary - Issue 1 | December 2020

Core Content

This report provides an overview of global and regional trends in foreign direct investment (FDI) flows, investor sentiment, and policy developments in the first half of 2020, with a focus on the impact of the COVID-19 pandemic.

Key Messages

• FDI Flows:
  Global FDI inflows fell significantly in Q2 2020, down 61% year-on-year (YoY) from the same period in 2019. Inflows to developing countries also dropped, with a 35% YoY decline.

  • East Asia and Pacific: 15% YoY decline in Q2, less severe than other regions.
  • Latin America and the Caribbean: 49% YoY decline in Q2.
  • Middle East and North Africa: 52% YoY decline in Q2.
  • Sub-Saharan Africa: Experiencing net disinvestment.

• Greenfield FDI:
  Greenfield FDI announcements declined sharply in Q2 (77% in developing countries), but showed slight recovery in Q3.

  • Global greenfield FDI in Q3: down 73% YoY to around US$29 billion.
  • Sector-specific impacts:
    • Extractive industries: 96% YoY decline.
    • IT-enabled services (BPO and customer support): smaller declines (19% and 24%, respectively).
    • Finance and real estate: 16% YoY decline.
    • Manufacturing of pharmaceutical, medical, and chemical products: 24% YoY decline.
    • Manufacturing of fuels: slight increase due to a few large outlier deals.

• Cross-border Mergers and Acquisitions (M&A):

  • Global M&A value fell 24% YoY in Q2 (US$213 billion) and rebounded to a 3% YoY decline in Q3 (US$211 billion).
  • Developing countries: M&A value dropped 48% YoY in Q2 (US$27 billion), but increased 3% YoY in Q3 (US$21.1 billion).
  • In the East Asia and Pacific region, M&A rebounded sharply in Q3, reaching US$21.1 billion.

• Investor Sentiment:

  • MNE affiliates in developing countries reported widespread negative impacts from the pandemic in Q3.
  • Over 90% of surveyed affiliates in developing countries experienced adverse effects.
  • Expectations for improvement in Q4 were limited, with most firms planning to decrease or maintain investment levels.
  • In the East Asia and Pacific region, over 60% of MNE affiliates reported reduced demand, output, and employment.
  • Expectations for reduced investment eased somewhat in Q4.

• Policy Changes in FDI Entry and Screening:

  • Most new FDI restrictions were introduced in developed countries, particularly in OECD nations, focusing on national security and health care sectors.
  • In developing countries, policy activity was limited, with a mix of liberalizing and restricting measures.
  • In the East Asia and Pacific region, Vietnam and Myanmar introduced pending measures related to FDI screening and foreign worker permits.
  • In Europe and Central Asia, Russia and Ukraine introduced new or pending screening mechanisms for strategic sectors.

FDI Industry Dynamics

A special section of the report analyzed the impact of the pandemic and other megatrends on FDI flows to developing countries. Key findings include:

• Short-term FDI Opportunities (1-2 years):

  • Resilient sectors: Medical supplies manufacturing, IT-enabled services, financial services, food processing, and horticulture.
  • Most negatively affected: Hotels, automotive component manufacturing, and electronic components assembly.

• Long-term FDI Opportunities (+5 years):

  • Promising sectors: Logistics, hotels and tourism, garments and textiles, financial services, and medical supplies manufacturing.
  • Declining opportunities: Metal products manufacturing, wood products manufacturing, and horticulture.

• Transformation Drivers Influencing FDI:

  • Key factors: Digitalization, artificial intelligence, environmental sustainability, global supply chain adjustments, and technological advancements.
  • These drivers are reshaping international production and investment patterns.

Regional Highlights

East Asia and Pacific

• Total FDI inflows: 15% YoY decline in Q2, with a slight improvement in Q3.
• Greenfield FDI: 72% YoY decline in Q3, with China showing a smaller drop (46% YoY) compared to other countries.
• Notable sectors: Business services (8% YoY decline), finance and real estate (150% YoY increase).
• M&A: Sharp rebound in Q3, with China and other developing countries in the region seeing increased activity.

Europe and Central Asia

• Total FDI inflows: 7% YoY growth in Q2, recovering from an 86% YoY decline in Q1.
• Greenfield FDI: 82% YoY decline in Q3, with major declines in extractive industries (99% YoY) and automotive manufacturing (72% YoY).
• M&A: Continued decline, with Russia as a key target.
• Policy changes: Russia introduced new screening mechanisms, while Ukraine proposed pending measures for defense and telecommunications sectors.

Latin America and the Caribbean

• Total FDI inflows: 49% YoY decline in Q2, with large drops in Colombia, Mexico, and Brazil.
• Greenfield FDI: 70% YoY decline in Q3, with some smaller economies showing improvement.
• Sectors: Extractives, utilities, and auto manufacturing experienced significant declines.

Middle East and North Africa

• FDI inflows: 52% YoY decline in Q2, with a sharp drop in the region.
• Greenfield FDI: 73% YoY decline in Q3.
• M&A: No significant rebound observed.

South Asia

• FDI inflows: 23% YoY decline in Q1, with further deterioration in Q2.
• Greenfield FDI: 73% YoY decline in Q3.
• Policy changes: Limited new measures, with a mix of liberalizing and restricting actions.

Sub-Saharan Africa

• FDI inflows: Experiencing net disinvestment in Q2.
• Greenfield FDI: Sharp decline, with limited recovery observed.
• M&A: Continued decline, with no significant rebound.

Conclusion

The report underscores the significant impact of the pandemic on FDI flows and highlights the importance of adapting FDI strategies to the changing global economic landscape. While some regions showed resilience and signs of recovery, others continued to face severe challenges. The analysis also emphasizes the need for governments to align their policies with emerging trends and investor priorities to promote sustainable FDI growth in developing countries.