Global FDI in 2020 fell by 42% to an estimated $859bn, that’s the lowest level since the 1990’s. However, the drops in FDIs has been witnesses even before the pandemics, which was mostly related to geopolitical risks or protectionist policies.
As for 2021, there is significant FDI potential in sectors such as healthcare, pharmaceuticals, ecommerce, cybersecurity, and biotechnology. Those countries that successfully determine these opportunities and adjust their strategies, will likely safeguard more FDI projects.
“One of the most essential factors of a successful Investment Promotion Agencies’ (IPA) work is planning and sector prioritization. As such also the current pandemic is a critical period for countries to position themselves. In very short terms Georgia shall look at what it can realistically offer as a location currently and what it would need to take to improve its ecosystem. Hence a realistic focus and a clear strategy are of vital importance,” Bostjan Skalar, Executive Director and CEO at the World Association of Investment Promotion Agencies (WAIPA) told BM.GE.
Recently Georgia has become a member of WAIPA, through the application of Invest in Georgia. This step is believed to strengthen the agency's investment direction - Invest in Georgia brand. The platform will be used to share experience and best practices in terms of attracting and promoting foreign direct investment into the country.
In his interview with BM.GE, Mr. Skalar talked about the FDI trends on the global market during the pandemic, expectations for 2021 and potential of Georgia as the destination of foreign investments.
Q. In how many percentages has the volume of FDI decreased globally, due to the global pandemic?
Global FDI in 2020 fell by 42% to an estimated $859bn, that’s the lowest level since the 1990’s and even 30% under the 2008-09 financial crisis, according to the Global Investment Trends Monitor from the UN Conference on Trade and Development (UNCTAD).
Q. Pursuant to your statement, a survey WAIPA conducted together with the World Bank clearly proves that there were negative trends and drops in FDIs even before COVID-19 struck us. There have been different factors affecting the economies and the pandemic was the last straw. Could you please tell us in more details, which particular factors were affecting the drops in FDI before the pandemic?
The COVID-19 pandemic accelerated trends or unveiled certain issues. Geopolitical risks or protectionist policies can lead to a decrease and this was one of the main factors affecting the drops in FDI prior of pandemic. Furthermore, decrease of average rates of return on FDI and structural changes in the way international business is conducted additionally contributed to the negative FDI trends in recent years. Nonetheless, FDI remains of the utmost importance in reference to sources for external financing for developing countries according to our colleagues from UNCTAD.
Q. What are your expectations for 2021?
This will partly depend on how quick the recovery can start. Very positively we see many parts of the world vaccinating relatively quickly, which is an enormous logistical achievement. It will likely remain weak, albeit technology and healthcare are exceptions.
Q. Which countries will be the best performers in relation to attracting FDI in 2021 and why?
Although pandemic significantly impacted the flows of FDI, there is still a lot of interest worldwide in pursuing the right FDI opportunities. Technology and healthcare are the industries that are least affected by the pandemic. According to the experts, there is significant FDI potential in sectors such as healthcare, pharmaceuticals, ecommerce, cybersecurity, and biotechnology. Those countries that successfully determine these opportunities and adjust their strategies, will likely safeguard more FDI projects. All in all, there is a momentum currently, while certain regulatory obstacles remain.
Q. Recently, Georgia has become a member of WAIPA. Please, share with us your expectations towards the potential of our country in relation to FDI.
Indeed, we are delighted to have Enterprise Georgia – Invest in Georgia as a member of our WAIPA family. We are certain that our colleagues from Georgia can benefit greatly from experiences from other IPAs, likewise we are convinced that also the insight from Georgia will be most beneficial to us. In the end it is up to our colleagues to implement strategies and best practices, but WAIPA is certainly the ideal place for IPAs so share their ideas and knowledge, to constantly step up their game.
Q. What would you suggest to Georgia, how it can boost its competitive advantages as the destination of FDI?
We believe that IPAs can make a difference, because in the end people make investment decision. So, IPAs are critical partners and support their respective governments and prospective investors alike. At the same time, as we have shown in our most recent global survey with the World Bank Group, one of the most essential factors of a successful IPA’s work is planning and sector prioritization. As such also the current pandemic is a critical period for countries to position themselves. In very short terms: look at what you can realistically offer as a location currently and what it would need to take you to improve your ecosystem. Hence a realistic focus and a clear strategy are of vital importance.
Q. Attracting foreign investors is related to various challenges. Another important factor that has been caused by the pandemic is that countries will be forced to attract them remotely. How realistic it is for you and what is the best practice of attracting foreign investors via online channels?
Indeed, how IPAs find and communicate with their partners, as well as current and potential investors, has changed drastically in recent months. Investment promotion is as some say a contact sport, hence the current period without trade shows and meetings is certainly different. We have installed a COVID-19 platform on our website, with best practices of IPAs, how they tackle the current situation. Also our colleagues from UNCTAD awarded recently IPAs for their innovation in using digital solutions. So, we see many great examples from IPAs around the world and I presume even in a time after COVID many of the technical innovations we embraced in recent months will stay relevant.
Q. What were the top five priority sectors of IPAs before the pandemic and how the list will change after that?
In our global survey together with the World Bank Group, that was surveyed prior to the outbreak of the pandemic, we have seen the following five priority sectors as designated by IPAs: Renewable energy; IT services; Pharmaceuticals, biotechnology, and medical devices; Agriculture, fishing, and forestry; as well as Food products and beverages. It is uncertain how much these sectors will change in the end, if they change at all, but what is important to reiterate is that IPAs should prioritize in accordance with what FDI they want and need to attract. Nevertheless, as I previously mentioned, experts expect FDI increase during and post-pandemic period for sectors such as healthcare, pharmaceuticals, ecommerce, cybersecurity, and biotechnology.
