FDI: Embracing the Opportunity!


FDI: Embracing the Opportunity!

Large scale Foreign Direct Investment is a relatively new phenomenon – less than 25 years ago the stock of FDI was just 8% of what it was by 2013. But with this rapid expansion of FDI flows comes a natural evolution: for example we can no longer afford to think of FDI – outward included – as largely only the domain of the developed countries plus the BRICS or another such acronym.

In fact, UNCTAD’s 2013 World Investment Report showed that flows of FDI to developing countries were greater than to developed countries for the first time. However it’s perhaps even more notable that UNCTAD has since reported that in 2014 developing Asia has for the first time become the world's largest outward investor region with US$440 billion, more than both North America and Europe. This is not all greenfield investment of the type that IPAs / EDOs normally place much of their focus, but nevertheless is a signpost to the future.

In this context, there must be some natural concern when countries appear to come from a starting point of suspicion towards a potential investment from certain locations. To use an example, an annual poll from the Asia Pacific Foundation recently found that many Canadians were nervous about foreign direct investment from China, with 49% saying they did not support investment from the world's second largest economy, while there was less concern about investment from the the US and Japan[1]. It’s this type of story that plays out regularly in numerous countries across the world, and the issue remains at the political level too, as borne out by the line of questioning towards US Secretary of Commerce Penny Pritzker at the recent SelectUSA conference[2]. For economic developers with an international focus at all levels, ensuring trust and developing relationships must remain a key part of the job, just as Pritzker herself seeks to do in her answers during that interview.

Of course, a similar issue can be seen repeatedly in all sorts of situations less related to FDI. Perhaps one of the less discussed but equally disheartening aspects of the recent Fifa headlines concerned this very same point. There appears to be an innate distrust between countries and regions (arguably developed vs developing) that has been a factor in reaching where we are today. For soccer in the future to move in the direction that everyone desires, no matter what country they come from, solutions need to be found that enable countries and regions to work together for the same goal.

If the problems of Fifa have shown us one thing, it’s that non-cooperation and continuous suspicion between diverse parties is ultimately good for no one. Returning to FDI, there will always be legitimate concerns on certain investments, but in general those locations that do not embrace the broader spectrum of opportunities will eventually be left behind. This process of building and solidifying relationships is unavoidably a gradual one, but for the benefits of FDI (and trade) to continue to grow, it’s one that cannot be ignored.

[1]https://www.biv.com/article/2015/6/canadians-still-nervous-about-investment-china-pol/

[2] http://knowledge.ckgsb.edu.cn/2015/06/08/finance-and-investment/us-secretary-of-commerce-penny-pritzker-on-us-china-trade/

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