World Investment Report 2021 | UPSC

      HEADLINES:

World Investment Report 2021: Global FDI down 35% due to COVID-19: UNCTAD

      WHY IN NEWS:

The pandemic caused collapse in investment flows to sectors relevant for Sustainable Development Goals in developing countries, flags report

SYLLABUS COVERED: GS 3: Investment : Reports

      ISSUE: 

WORLD INVESTMENT REPORT 2021

  • Global flows of foreign direct investment have been severely hit by the COVID-19 pandemic.

“The coronavirus pandemic has amplified the fragilities of the structurally weak economies. Investment in various sectors relevant for achieving the SDGs, especially in food, agriculture, health and education has been falling.”

  • In 2020, they fell by one third to $1 trillion, well below the low point reached after the global financial crisis a decade ago.
  • Greenfield investments in industry and new infrastructure investment projects in developing countries were hit especially hard.

World Investment Report 2021 | UPSC IAS

SOURCES : UNCTAD

  • Lockdowns caused by the novel coronavirus disease (COVID-19) pandemic around the world slowed down existing investment projects.
  • In developing countries, the number of newly announced greenfield projects fell by 42 per cent and international project finance deals which are important for infrastructure declined by 14 per cent.

World Investment Report 2021

SOURCES : UNCTAD

PUBLISHED BY

United Nations Conference on Trade and Development (UNCTAD)

  • The report, titled World Investment Report 2021, reviewed investment in the United Nations-mandated Sustainable Development Goals (SDG), stating that the pandemic caused a collapse in investment flows to sectors relevant for SDGs in developing countries.

World Investment Report 2021 | UPSC

SOURCES : UNCTAD

  • The COVID-19 pandemic is exacerbating the SDG investment gap, particularly in the least developed countries and other structurally weak economies.

SDG-relevant greenfield investment in developing regions is now 33 per cent lower than before the pandemic and international project finance is down by 42 per cent.

  • This decline is much larger in developing countries than in developed countries.
  • Gains in investment in renewable energy and digital infrastructure in developed economies reflect the asymmetric effect that public support packages will have on global SDG investment trends.
  • The drop in foreign investment may reverse the progress achieved in promoting SDG investment in recent years, posing a risk to delivering the 2030 agenda for sustainable development and to sustained post-pandemic recovery.
  • The value of international project finance announcements was 26 per cent lower in infrastructure, including energy, telecommunication and transport and 14 per cent lower in renewable energy, compared to 2019.

KEY POINTS FROM THE REPORT

  • Moreover, the FDI recovery will be uneven. Developed economies are expected to drive global growth in FDI.
  • Current projections suggest that FDI will increase a further 15–20 per cent in 2022, up to $1.4 trillion.

  • Despite falling revenues and earnings, MNEs managed to maintain constant cash from operations. They also secured additional financing, mostly in the form of debt. 
  • Cross-border initial public offerings (IPOs) are reaching record numbers. They present advantages for both foreign companies and local investors.

India and World Investment

SOURCES : UNCTAD

  • Except for a few cases in emerging Asian economies (China, Hong Kong (China) and Singapore) all equity injections took place in developed economies, and in particular in Europe.
  • The COVID-19 crisis slowed down ongoing privatization programmes owing to elevated uncertainty and lower market demand.
  • The momentum for regional FDI is expected to grow over the coming years.The growth of intraregional investment is also relatively slow.

  • FDI flowing from developing countries to LDCs continues to play an important role in bringing in jobs, technology and finance.
  • Scaling up transportation through both greenfield projects and project finance deals will be essential to ensure a sustainable recovery from the pandemic.

HOW TO ATTRACT FDI ?

(i) Invest in skills development and technological capacity

(ii) Share technologies to enable affordable mass production

(iii) Improve access to finance and tap into impact investment

(iv) Build partnerships to initiate “lighthouse” projects

(v) Provide investment incentives to improve local firms’ sustainability

(vi) Upgrade and streamline regulations and administration

(vii) Invest in infrastructure

(viii) Emphasize a regional approach to reduce cost

(ix) Seek funding from official development assistance

(x) Ensure sustainability of efforts despite an unpredictable market

      IASbhai WINDUP: 

  • The World Investment Report supports policymakers by monitoring global and regional investment trends and national and international policy developments.

  • A concerted global effort is needed to increase SDG investment leading up to 2030.
  • The package of recommendations put forward by UNCTAD for promoting investment in sustainable recovery provides an important tool for policymakers and the international development community.
     SOURCES:    DownToEarth  | World Investment Report 2021 | UPSC

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