UNCTAD press conference 22 January 2021

Good morning everyone.

We have, we, we have one more minute before we start.

As I told you during the briefing, you, you all have received the, the document, the analysis and research made that by the Investment division division for the new Global Investment Trans monitor #38 in the series.

I will be able to send you the speaking notes of James Dam after the briefing.

So you have a clear understanding of the presentation and I would like to remind you that the embargo is Sunday 24th of January at 6:00 PM GMT, 1900 Geneva time.

Just a technical message for Astrid.

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From the technical side in Geneva, if you please, can light a little bit, you're a little bit dark if you have a.

Light in front of.

You be much appreciated.

[Other language spoken]

Well, I don't see too much difference.

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Thank you very much.

Well, I think we can start.

So the latest issue of the Global Investment Trans Monitor, I will give the floor to Jensen, Director of the Investment Division and as Chris, Sarah will give you some more details upon your questions.

So without any delay, James, you have the floor today is very busy for for the media today and over to you.

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Media friend Anka is always grateful to you for reporting on our research and policy analysis in the area of global investment.

And today I have myself and also my colleagues Richard Baldwin and Astrid so slow up with me.

We are happy to disposal for questions and answers.

Today I'm just highlighting the global investment trends in 2020 and the prospects in 2021.

This is our annual kind of report at the beginning of the year and it's on the eve, always on the eve of the Davos.

So we feed into the Davos leaders debate with the business of of government.

So now the overall trends, the global foreign direct investment collapsed in 2020.

It's falling by 42% to an estimated 859 billion U.S.

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And please bear in mind that 2019 it was 1.5 trillion U.S.

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So in fact this was the lowest level since the 1990s.

So the decline was concentrated in developed economies where FDI flows fell drastically by 69% and the FDI flows to developed economies as a whole was only 229 billion U.S.

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It was the lowest level over the past 25 years.

Interestingly, the developing economies weather the storm much better with a decline of 12% to an estimated of 660 billion U.S.

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So FDI flows to developing economies now account for 72% of global FDI and this is really the highest share on record.

Regarding the the regional trends, I just pointed out a few.

First European Union FDI fell 2/3 in 2020 to only 110 billion U.S.

dollars and and this was among the 27 EU members, 17 of them have their FDI decline and this includes the major economies like Germany, Italy, Austria and France.

But FDI to to Sweden doubled and to Spain rose by 50% for Latin America.

And this is the region among the developing economies that suffered most in from the the the sharp decline of FDI and FDI for this region declined by 37%.

And this is amidst one of the deepest recession across the developing world.

Investments relate to the oil related industries and market seeking investment recorded a steep decline and among the largest economies interesting in Mexico experienced less decline.

So it's declined less than 10% and so it it looks it's resilient due to the reinvestment of the earnings in Mexico.

For Africa, FDI flows declined by 18% to an estimated of 38 billion U.S.

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Greenfield project announcement fell by 63% from 7077 billion in 2019.

So the the pandemic has really a negative impact on FDI, particularly due to the low oil prices and weak demand for commodities.

Asia is a very interesting region.

The Asian, the the region weathered the storm very well and FDI fell by only 4% to an estimated of 476 billion U.S.

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So this is quite a phenomenal, but FDI to ASEAN 10 countries that used to be kind of enjoying a robust growth in FDI to share large part in this developing Asia contracted by 30% in in 2020 And this is due to the decline of investment in the largest recipients in the sub regions such as Singapore, Indonesia, Vietnam and Malaysia.

The transition economy FDI flows fell sharply by 77% to an estimate of only 13 bidding, US bidding and and this was the lowest level in the flows recorded in the region since 2002.

Now some major economies this you may be interested in.

So FDI flows declined sharply in the UK, Italy, Russia, Germany, Brazil and the United States.

India and the China bucked the trends.

Let me go through these countries one by one.

For China, FDI flows rose by 4% to 163 billion U.S.

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So this is the record level again.

And, and, and this makes the country the world the largest recipient in 2020 in terms of FDI, surpassing the United States.

And in return and in fact why it has a such a kind of phenomena performance, there are several reasons.

One is the return to positive GDP growth.

That is one of the very, very few countries that have a positive growth rate.

The growth was 2.3% of the economy and also due to the government's targeted investment facilitation programmes that help stabilise investment after the earlier lockdown and and and global dependence on the M and ES supply chains located in China during the pandemic also sustained the FDI growth in China.

There's also the factor that the further liberalisation in some sectors that boost new investment.

For example, FDI in **** tech industries was up by 11% in 2020 and the cross-border mergers and acquisitions rose also by 54%.

And this is mostly in ICT and in pharmaceutical industries.

And the kind of successful conclusion of some mega regional agreements like our SIP and EU China agreements also boost the confidence of the investors doing business in the country and the linking to the region.

India FDI rose by 13% to 57 billion.

And as investment in the digital economy continued particularly through the cross-border M and AS M and AS grew by 83%.

That's the large deals in digital economies, infrastructure, energy, and these deals that propped up the investment.

USFDI half is is -49% and to the level of 134 billion U.S.

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And this was a sharp drop in both Greenfield investment across border M and As.

So investment by M and ES from the UK, Germany and Japan declined significantly their investment to the US and the decline also took place in wholesale trade, Financial services, manufacturing and cross-border MLAs fell by 4041% and most of the in the primary sector.

UK is another interesting case.

FDI flows were -1.3 billion U.S.

Dollars it, it fell from 45 billion in 2019 and this was mainly due to a large negative intra company loans and some equity divestment companies are restructuring in light of the Brexit repositioning and however the reinvested earnings turned positive to 27 billion U.S.

dollars from 5 billion in 2019.

Sector wise we see that the value of cross-border MNA sales dropped by 52% in primary sector that mainly extractive industry and by 8% in manufacturing and 6% in services.

So sales of assets in food and the digital economies, digital industries more than tripled in 2020.

So the value the M&A deals in pharmaceuticals declined by 43%, but the number of the deals reached the highest number ever recorded in this industry.

So that is the the interesting phenomena in terms of sectors.

Now the prospects 2021 and beyond.

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You may remember that on that forecast in the World Mass Report 2020 that the that the further decline of five to 10% in 2021 is possible.

And, and I feel that that the decline in global FDI will bottom up, bottom up in 2021 at the best and, and, and the real recovery will only start in 2022.

So the risk relate to the latest the wave of pandemic, the pace of the roll out of the of the vaccine programmes and and economic support packages, fragile macroeconomic situation in major emerging markets and uncertainty about the global policy environment for investment.

All this will continue to affect FDI in 2021.

So investors are likely to remain cautious in committing capital to new overseas productive assets and the data on announcement basis as indicator of of the prospects provides a mixed picture and points to continued downward pressure and all these you can find the numbers in our investment assessment additional monitor.

Overall, the global FDI is likely to follow a kind of AU shape recovery and start in 2022 and this is unlike the global trade and the GDP which have been predicted to be a kind of AV shaped recovery already starting in 2021.

So international investment projects tend to have a kind of long gesture.

And react to crisis with the delay both on the downward slope and recovery.

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Ready for questions?

Thank you very much James for the the overview.

We have already questioned from the floors for those who want to raise question you just click on the raise hand button.

Jamil Shad, you're the first online Jamil, you have the floor.

If we can unmute Jamil over to you can.

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Yes, perfectly.

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Mr Zahn, Happy New Year to you too, my friends.

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We've seen in 2020 this drop of 50%, but we also see, for example, Ford closing down factories in Brazil and we have seen other companies doing the same.

My question, is it only the lack of of privatisation programme that is driving this down or is there a more systematic issue?

And if these investments go down, is there a fear of deindustrialization in the country?

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Over to you.

Thank you very much, Emil.

Happy New Year to you and then also to everyone.

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I think it's not.

This not only applies to, to Brazil, but also to the Latin America and to some other developing countries other than in East Asia and Southeast Asia.

I think so there are both kind of cyclical factors and also structural factors.

The economic downturn, the the shock, the kind of triple shock demand supply and the policy shock triggered by the COVID-19 have have a strong blow to the foreign investment in the region and in particular in Brazil.

And we see the signal downturn and also dynamically related the, the the close down and disruptiveness to the production system is a factor of the decline longer term wise in that region.

As we see it will undergo kind of GBC global value chain restructuring and then that restructuring will affect the investment in the region there.

There, there could be a kind of global value chain, regionalization, diversification, the replication and and for that there could also be some kind of reassuring.

But we, we, we see the possible longer term of the opportunities in the region in a sense that the diversification replication driven by technology, driven by resilience of the restructuring of the corporates will have some opportunities for establishment of regional market seeking investment in the region, including the largest economy like Brazil.

Short term wise, we see the difficulties due to the pandemic and to the global economic meltdown and that may take a bit of longer time for Brazil and Latin America to recover compared with other parts of the world.

For example, that Europe may take the lead for the FDI recovery in the coming.

Let's see maybe towards the end of this this year and the beginning of next year because it's almost bottom up.

And for and for Latin America, if you look at the the data on the on the Greenfield investment announced, the deals, they're still very low.

They are down significantly.

That's the indicator for future investment in Latin America.

There's a drastic decline.

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We now move to Switzerland.

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Over to you, Laurent.

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Oh, very good.

Happy, Happy New Year to to everyone.

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First on China, as you mentioned, James, it seems that China benefited after the initial lockdown of the, the effects of the pandemic in the other countries to, to attract FDI.

Do you see that now that they got to that leading position?

Do you see that as a, as a long term trend where they they will remain at the first rank?

And then secondly, a ****** question that I should have asked you in the previous years because I am struggling every year about that.

I see that the FDI towards Switzerland is again in negative territory.

Could you explain us again what, what does that mean?

How can it be in negative territory?

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Thank you, James Soherty.

Thank you very much, Logan.

Both questions are very smart.

The first question about China, China investment flows into China has been steadily growth.

So the growth is was only 4% and this has been the pattern over the past already a decade is kind of a more of **** level steady growth or remain at a similar level rather than drastic steep increase.

So your question is the whether China will maintain this leading position as the largest recipient in the world for FDI?

It all depends on the US because US has been the largest FDI recipient and the FDI inflows half last year for a number of reasons, as I mentioned.

So, so U investment into the US is likely to recover in the years to come.

If not this year could be next year onward.

So the size of the economy and the openness of the economy will make will enable the investment close to to the US recovered once it's recovered and will recover to the to the level which double of the current level meaning 134 billion double S and it will continue to be the far largest FDI recipient.

And the second question about Switzerland.

Yes, Switzerland has the double characteristics in terms of of of investment.

First, Switzerland is one of the strongest economy in the world.

The the, the competitive advantage is always on the top of the list in in ranking.

It has very solid industrial bases both in services in the manufacturing and it has attracted a huge FDI stock.

That's the fundamentals.

But in terms of flows and, and sometimes Switzerland is a kind of a transit, transit location.

So there are FDI passing by or or that that that affects the the flows of of the numbers, but it doesn't reflect or indicates that the the soundness of the economy and the solid solidity of the of the basis of industry.

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The Spanish agency Antonio Bruto, you have the flu.

Antonio, over to you.

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Once 1 is about Latin America, why the the FDI fall there more than in other developing regions?

Is it related with too much dependency on economies like the United States or too much dependency on some sectors that are more struck by the pandemics than others?

And my second question is on Spain.

Why, why the FDI rose in, in this country despite being one of the of the countries that suffer more in, in Western Europe this pandemic?

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Thank you very much.

Antonio, regarding the Latin America, you know the the economy overall as you rightly point out depend on the on the on the larger market in, in North America that's one factor.

But mostly we see that investment in that America in the extractive industry that is resource seeking and the market seeking, original market seeking in nature.

So when the demand falls both in the in, in commodities and and in manufacturing goods that impact on the FDI flows.

And this hasn't been the, this has been the case not only for 20/20, it was even in 2019 and in 2018.

So that is the major factor.

And regarding Spain, it's because of a couple of major cross-border merchant acquisition deals that boosted the investment flows into the country.

And I can give you the the exact deals later.

We'll come back to you on Kasmira.

Kasmira Jeffordka, Geneva Observer, you have the floor Kasmira.

Hi, James, thank you for taking my question.

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I was wondering whether the new China's new national security screening rules for foreign investments that that just recently came into force, what impact those could have?

If any and.

Also, what kind of, if you could give any more colour around what sectors were potentially, you know, beneficiaries of, of inward investment?

And then on on UK, we saw Nissan today.

Confirm that they would.

Continue with their.

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In the UK, what are your what do you see in terms of prospects for the UK this year, if you could?

Give any more detail around that too please.

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OK, thank you very.

Thank you very much.

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First for China indeed they put in place this national security screening procedures.

My personal analysis is that that that screening and monitoring procedures is a formalisation of what they have been doing.

So the I I haven't observed maybe I need a further study on that, but I haven't seen any kind of additional new screening that that beyond what they have been doing.

So if that is the case and then it won't affect the presumably the level of FDI flows as it has been.

That's what I what I feel, but I I need to to look into it closerly.

Secondly, about the UKI think we need to know on the one hand the investment flows declined and and that's mainly to the inter company loans and some divestment.

This is more our kind of firm companies restructuring their value chains, their regional production network in light of the Brexit and and that's natural, but also we also see some new investment coming in.

You'll see all these announcements in the newspapers, so possibly that this year, but I think it should be surely FDI will recover in, in the UK in one way or another because it couldn't be lower.

It's already kind of net 0 -, 1.1 billion U.S.

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So this year there will be a recovery in of investment in the UK.

And you may also note that the Prime Minister has established a a special office to promote investment into the UK.

And the the UK government has put in place the the, the set of investment strategies in facilitating and targeting investment into the country, including also the investment retention and, and also they announced to establish special economic zones or free ports, free zones in country in if I remember correctly.

And they have announced the 9:00.

So if these measures are in place, that will certainly boost an investment into the UK.

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Gabriela, over to you.

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Nice to see you.

Catherine and James.

Nice to see you.

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My question Mexico is betting everything on oil.

And has not financially supported medium or small, small.

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So the impression over there I, I, I sense that the impression.

Is that the government?

Is caring foreign investment, so I would like to.

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And also if by any chance.

You have the report in Spanish, I would appreciate it.

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Now, Gabriela, we don't have it in Spanish, unfortunately.

Over to you, James.

Just give me one minute to close the window.

Sorry.

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Unfortunately, we don't have the translations of the of this report.

I'm really sorry.

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Some more requests for the French.

Over to you, James.

Yeah, Thank you for for Mexico, I don't have the details at the moment.

The only thing we know is that that the decline is less than 10% and and the this is because of the resilience of reinvestment earnings.

So reinvestment earnings increased and that that dampened the kind of decline of FDI into Mexico.

I think this, the US, Canada and the Mexican agreement also helps and also Mexico's economy is relatively resilient because it's close to, to the to, to, to the North American market, US, Canada.

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Ling, you have the floor.

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Thank you, Xin, over to you.

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Happy New Year to everyone.

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Already.

Touched upon part of.

It in your presentation, could you elaborate maybe more on the compensation of investment?

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In China in 2020, which sectors attract the most of the FBI and.

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Reconstructing the global supply chain and the relocation.

Of some factories.

Initially planted.

In China to other.

Parts of the world for.

Example maybe in the Southeast Asia?

How to?

Explain the reasons behind the increase.

FDI flows to.

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And my second question is to summarise, why do you think the developing countries?

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Used your own words, whether the storm much better than the developed countries in terms.

Of its FDI performance in 2020.

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Thank you, Shane, for the question.

For the for for China in terms of composition, I can give you the details later when I dig out some of the materials.

But overall we know that this is a liberalisation driven and industrial upgrading driven.

So therefore the investment are really into into let's see, services sector including financial services.

I know that some some liberalisation measures that that triggered the investment into the into the country.

And the second is the industrial upgrade upgrading.

Therefore the see the **** tech industries investment in the **** tech industries and particularly in ICT industries and ICT services related industries that was that was C So FDI in **** tech industries was up by 11% in 2020 that that shows the resilience.

Now interestingly you asked a question about the divestment.

Yes there were divestment and divestment was was quite **** in before the pandemic in fact.

And for that is more of low value added efficiency King labour intensively related or the land intensively related manufacturing that moving on China to the neighbouring countries in particular.

But as interestingly as as the absorb the capacity of the neighbouring countries, including Vietnam and and some other countries that that have reached certain limit.

And then that process slowed down and some and the interest can be during the pandemic because of disruptiveness of the rest of the world.

And it is dependent on supply of trade manufacturing goods and also on the and, and because of that and consumer goods and medical equipment because of this.

So there's a more dependent reliance on the supply chain manufacturing in China.

And in fact, quite a lot of orders shifted back to the foreign affiliates in China and some of the foreign affiliates relocated back to China.

So that is the interesting phenomenon we saw.

Whether this is a short term or longer term, it's hard to tell.

But at this stage we see that phenomena happening.

This is regarding the divestment.

The question related to to the developing economies.

I can't remember the exact the exact.

Question why they did better than developed countries?

Yes, why developing countries weather the storm better.

In fact, this is kind of interesting phenomena.

On the one hand, as a whole, developing countries weather the storm much better.

But when you go deeper into the sub regions, we see Southern Latin America stuffed a lot.

It's over 30% and Africa also suffered from the decline.

It's only Asia whether the storm much, much better and, and, and and that's particularly for Eastern Asia because Eastern Asia grow by 12% and that makes the developing countries as a whole resilient in the tracking FDI.

This is 1 factor the set.

The second factor is related to the, the the prospects of of investment, investment, investment flows in the in 2021.

If you look at the numbers in 2020, last year, the announced Greenfield investment, which is a strong indicator for for the investment this year and the next developing countries of prospects for 2021.

In fact, it's a major concern.

So FDI flows in developing economies appears relatively receiving in 2020, but the Greenfield announcement fell by 46% and that is -63% in Africa -51% in Latin America and the Caribbean and the -38% in Asia.

So this year we may see a kind of decline of FBI in in developing economies and which may be bigger.

So this is kind of perhaps time lag.

International project finance is also declined by by 7% and in Africa is 40%.

So these investment types are basically crucial for productive capacity and infrastructure, infrastructure development.

So it is very important for the for developing regions and that has the implication for their sustainable recovery prospects.

Thank you very much.

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I don't see any additional questions from our colleagues, so I think we're going to stop here.

I want to remind you that there's a whole team behind this document who people are experts, FDI experts are ready to answer any interviews you may need.

The embargo is on Sunday 1900 Geneva time, so we are going to just stop now.

Thank you very much.

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Thank you Astrid and all the team and wishing you a very nice weekend.

Thank you Gatim for organising the event and thank you to Media Friends for always covering our stories and we are really grateful and we read your reports very carefully and learn from your reporting because your perspective help us to improve our messaging.

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