UNCTAD Press conference: Global Investment Trends

We are now waiting for James San to be connected and we will start the this press conference.

You have all received the Global Investment Trends Monitor.

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Thank you.

Mercy, good afternoon everyone.

We now have our speakers connected Jensen, Director of the Division on Investment and Enterprises Online.

Good afternoon, James, and asterisks star over the Chief of the Investment Trends and Data section from the same division is also with us.

Without any delay, I'm going to give the floor to James for the first highlights of this new global investment trends.

Monitor the 36 issue of this report and we will open the floor for question immediately after.

Over to you, James.

Now you now have the floor.

Please open the mic for Mr.

James Zan.

Over to you, James.

Yeah, just to figure out the mic.

Thank you very much, Kathleen, and thank you very much to the journalists, friends, media friends coming to this event.

This was a short notice, but we're lucky to have you and thank you very much for that.

In fact, we've been working very hard, Colleagues in the division working very hard in order to come up with the data.

We had it only last Friday that completed the picture.

Now the key message I wish to convene here is that for global FDI flows for the first half of this year, it went down to close half by half.

So the decline was quite drastic.

This is compared to the same period of time of last year and it's more drastic than we expected for the whole year.

So the declines about 49% drastic precisely.

And this is due to the lockdowns around the world, which is slows existing investment projects and the prospects for deeper recession that led the multinationals to reassess new projects.

And, and, and that's the current mood of of the investors.

They, they try to to be very conservative at this stage in terms of a mode of entry.

The decline cuts across all major forms of FDI and that includes the new Greenfield investment projects.

That announcement of the projects drafted by 37%.

The cross-border merger acquisitions also fell, it fell by 15% and the new newly announced cross-border project finance deals.

This is an important source of investment in infrastructure and also declined and declined by 35%.

In terms of region, all regions have suffered significantly from the decline, but interestingly, developed the economies saw the biggest fall with FDI reaching an estimate of 98 billion U.S.

dollars for the first half of this year and that decline is of 75% compared to the same period of last year.

For developing economies, interestingly, it's weathered the storm relatively better.

FDI flows to developing economies decreased by 16% and the flows were 28% lower in Africa 21st, 25% in Latin America and the Caribbeans, and only 12% of decline in Asia for the first half of the year.

For the first half of the of this year, developing economies accounted for more than half of the global FDI inflows.

So the FDI flows to transition economies were down by 81%.

This is due to the strong decline in the Russian Federation.

For prospects for the full year that remains in line with our earlier projection in June.

The projection for the whole year is roughly 30 to 40% of decrease, up to 40% so to speak.

The rate of decline in developed developed economies is likely to flatten as some investment activities appear to be picking up in quarter 3.

Flows to developing economies are expected to stabilise with East Asia showing signs of an impending recovery.

But having said that, the outlook remains highly uncertain, depending on the duration of the health crisis and on the effectiveness, the effectiveness of policy response to the to mitigate the economic effect effects of the pandemic.

Geographical risks, geopolitical risks also continue to add to the uncertainty.

Having said that, I would emphasise that international production system will continue to play an important role in economic growth and development despite the drastic decline in global FDI flows during the crisis.

The FDI flows will continue to add to the existing FDI stock which stood at 36 trillion U.S.

dollars at the end of 2019.

So that is the existing investment all over the world including the factories, establishments for services and that is equivalent to 42% of the global GDP.

And FDI also remains the most important source of external financing for developing economies.

It is still the largest among the other among the overall external financial flows that includes the remittance bank lendings, OD as So FDI stock stands for developing countries at 11 trillion U.S.

dollars.

So that's equivalent to 73% of the global GDP.

So this is the rough idea of the picture of the first half of the year and we expect the situation will not drastically change for this year and global FDI will continue its decline, but moderately in 2000.

21, that is up to 10%, about 5 to 10%.

Thank you.

Thank.

You James, we have already questions, so you know how to raise your hand.

You use the the button on your screen.

I have first Christopher, the AFP.

Can we unmute Christopher, please?

Hello.

Oh, maybe you.

You can hear me, I can see that.

OK.

Hi, thanks for taking my question.

I was just wondering if there if there is anything in the data that you've seen up to the in the first six months and and maybe the the first data that you get for the rest of the year on relocation of supply chains.

Do you see any, any sign that that those are moving from, I mean there was there was talk about move from China to other countries mainly in Southeast Asia.

Do you have anything on that?

This is a very interesting question and we observed that closely.

This is a we expect this to happen over a longer period of time short term wise.

At this stage, I think companies are really focusing on response to the crisis, crisis management rather than kind of longer term restructuring of their global value chains.

So that is 1 important factor.

Because of that, this reassuring restructuring is not happening massively at the moment.

Secondly, at this stage we see the kind of East and Southeast Asia leading the recovery of the global economy because situation there stabilise the first and at the early stage.

So the world still depends on the global value chain that the mainly located in the East and Southeast Asia at this stage as the rest of the world still heavily in this pandemic.

Therefore it's not realistic for companies now relocating to other parts of the world where they're heavily in in crisis.

So that is the the second factor.

The third factor as I said, companies at this stage still considering as you see the FDIA flows in some in some areas going back to their home countries.

So multinationals would like to have cash with their close range reach at this stage.

So therefore instead of expansion, all diversification, all restructuring massively, they still stay input at the stage.

And the fourth factor is that East and Southeast Asia still attractive location, not only because absolute manufacturing bench for the world, but also the market itself is large, dynamic and and that create a lot of opportunities for manufacturing there for the markets over there.

So the market is seeking, seeking investment will remain in the country and in the region.

That same applies to China.

Thank you, James.

Peter Kinney.

Can we unmute Peter please?

Good afternoon and James, thank you for taking my question.

I would just like to ask you to comment a little bit more specifically on the case of South Africa, where in fact FDI flows increased by 24%.

And you said in your report that this was mainly due to intercompany transfers.

Can this flow of cash, as it were, have any impact on Greenfield investment projects in a place like South Africa, which has faced the toughest COVID-19 virus impact in the continent?

Thank you.

Thank.

You, Peter James.

Please.

Yes, thank you, Peter.

For this specific case in South Africa, I must say that we don't know much more on that, but we, my colleagues, will look into into the case, in particular South Africa and get back to you.

OK, we'll come back to you, Peter, on the on this specific country.

Yeah, I now have Du Young from Chinua.

Can we unmute?

OK, yes.

Over to you.

Yeah, we can hear you.

OK.

Thank you for taking my question.

According to the Trans Monitor, FDI in East Asia remained stable at 125 billion U.S.

dollars and the FDI flows to China are group relatively resilient.

Could you elaborate more on what reasons are behind this and what industries or projects have contributed to that?

Thank you.

Yeah, you're absolutely right that among the the kind of drastic declines in so many countries are particularly big FDI recipient countries.

China is back in the trends and we see the the difference there and FDI flows remains relatively stable.

And for the first half of the year the the, the decline was really modest.

And in fact, according to the latest, latest data that the for the first nine months altogether of this year, FDI into China increased by 2.5%.

So that's in the non financials, so to speak.

But overall investment flows into China remains at **** level.

And this is partly because China was one of the very few countries that that were among the first to to control the pandemic and also resumed is a production system in the country.

In the meantime, the Chinese government put in place effective measures to retain investment to service the operations of the multinationals operating the country and also putting in new put in place new measures to track investment.

And looking at the structure of the of the investment into the country for the for the first half of this year, it's mainly in **** tech services sector and the debt sector attracted double digit of investment flows that includes electronic commerce services, specialised services, specialised technology services, R&D services and, and all in these type of **** tech, **** value added service sectors that investment increased to significantly.

And in addition to that, there were also some investment from large manufacturing companies like BMW, Daimler, Siemens, Toyota, Bosiv.

There are quite a few multinational companies expanded their investment and the production in the country that boost the investment and as a result of of the increase in these sectors.

So FDI into China remains relatively stable and and that contributes to the the to the to the inflows into Asia.

So because of that, you'll see that the investment flows into developing Asia was declined much less than that of other regions.

Thank you, James.

Now I have Jamil Shad.

Jamil, if you can be muted, you have the floor.

You can you hear?

Me, Catherine.

Yes, perfectly.

Good.

Misses Zan.

Hello, Astrid.

Hello.

Question on Brazil, the, the, the fall is quite steep and at the same time you mentioned that developing countries suffered less.

What made Brazil so much different from the other emerging countries?

Yeah, thank you, Chairman.

In the case of Brazil, as you said, indeed that inflows almost 1/2 to 18 billion U.S.

dollars, but this is by the way 18 billion U.S.

dollars is, is quite a **** level of inflows.

If we look at the overall the historical data and inflows into Brazil, I think to a certain extent the privatisation programme in in Brazil that launched the last year stalled a bit and, and, and we see.

We expect kind of possible recovery modestly perhaps by the second-half of this year.

As I said, the sales resume and the new infrastructure plan is to roll out soon.

But having said that, the the the pandemic's the situation that due to the pandemic is still very, very challenging for tracking investment massively into Brazil.

Thank you.

James and I have Robin Millard from AFP.

Robin.

Yeah.

Can we unmute Robin?

Hi, good afternoon.

Good.

Afternoon James.

If, if you could summarise in a nutshell for us, what's the, the global outlook for the second-half of 2020 and beyond?

If you could just summarise that up for us.

And and secondly, do you think the pandemic will have any permanent impact on the way that FDI operates?

Thank you.

Yeah, very good question, Robin.

The first, the second-half of the year, the outlook remains highly, highly uncertain.

That's what I can say.

Perhaps the the decline will be less than the first half of the year.

But having said that, we know that Europe is now entering into a kind of second wave of the pandemic that may may get situation worse worsen.

The reason I said the second-half of the year could be less decline than the first half of the year, it's because for the first half of the year, there were a kind of movement of some multinationals trying to to remit back the the the capital through the intercompany loans back home back to the parent company.

So that happened in in countries like like the Netherland, Switzerland and and these are kind of condoing locations withholding companies.

So there's some cash movement and that kind of holding cash closer to home that impact significantly on the overall flows to develop the economies and that could slow down in the second-half of the year.

So discounting all these conduing FDI and then in fact in in Europe or in EU, for example, the investment flows are not declining that drastically.

Thank you.

I see follow.

Up that is, that is what I see the the prospect.

Now Robin has the second question.

Longer term wise, longer term wise as we see that there will be a kind of if we talk about the recovery starting 20/22, the recovery will be driven by a kind of crop restructuring.

That is that that will be crop restructuring oriented more of resilience driven type of investment.

So it's more of restructuring rather than massive new investment.

Regarding the more new investment is probably more related to the replenishment of the capital stock in the existing operations of of multinational companies and or their affiliates for for for production.

Longer term wise, we we we see the possibility of the transformation of global value chain that will change the landscape for global trade and global investment.

And that transformation will be driven by 4 megatrends.

The mega driven by 4 megatrends 1 is the new industrial revolution.

The second is sustainable development imperative.

The third is the growing economic nationalism, including protectionism, geopolitical tension and and also the possible systemic competition competition, trade investment, technology competition that may possibly lead type of economical Cold War type of scenario.

So these are the three.

On top of that and due to the pandemic, there is a drive for companies to go for resilience and that will lead to the kind of near shoring, diversification, regionalization and the replication.

So that we'll see the type of four tragic trees driven by the four megatrends lead to the transformation of global value chain to make the chain shorter, less fragmented and more concentrated and value added.

That could be a kind of a less export in intermediary goods at a global level, but increase in final products and there could also be kind of reduction of of export oriented FDI while in favour of regional sub regional market seeking FDI.

So there are a number of implications.

Sustainability longer term wise will drive the investment into the blue and gluey blue-green and the blue economies.

So that's another trend we can see and into the infrastructure related to public services.

Thank you.

Jamie, you have a follow up question, Jamie Shade?

Yes, very quickly, Catherine, Mr San, you mentioned the that the second quarter second-half for Brazil could be a little bit less steep the fall.

Do you have a projection, Do you have a projection for the year for Brazil?

Thank you.

We don't have that, Jamie.

We don't have the projection for Brazil precisely because FDI by nature is also lumpy and we are in a period with **** volatility, **** uncertainty, **** ambiguity and, and, and, and in, in such a kind of situation, it's difficult to to forecast on individual countries and we haven't done that honestly for Brazil.

Peter, Peter Kenny as another question.

Peter, over to you.

OK.

Well, I'm not sure if you might be able to answer this one, James, but looking at another regional area, Middle Eastern area, you noted that Saudi Arabia and Jordan had good increases in FDI, whereas a country like Turkey declined by 32%.

Do you have any information on why there are such discrepancies and or on these specific countries considering that Turkey is also quite a big regional player?

Thank you.

Yeah, the three countries Peter, you mentioned are the largest recipient in that region.

And, and indeed that investment flows to Saudi Arabia and Jordan defied broader trend with investment increasing by 12% and by 17% respectively.

I don't know the specific reason that the state I can give you further information.

But one thing for sure for these two countries, Saudi Arabia and Jordan, the government and their investment promotion agencies have quick response to, to the, to the, to the pandemic and, and the intensified their investment of retention and facilitation measures during the crisis, put in place various measures to facilitate those projects in the pipelines to continue investing in the country that we've that we've been in touch with them over the past few months and that's what we learnt that they are doing regarding to the specific investment projects in the sector.

I will give you the information.

I think my colleague US St will look into it and we will get back to you.

Turkey's indeed the inflows to Turkey declined by 32% to 2.9 trillion U.S.

dollars.

Sorry, is that trillion or billion bidding 2.9 billion U.S.

dollars, OK.

I think it's still, it's still relatively relatively **** level by the way for Turkey and recently investment in Turkey has been at a very **** level.

So we can see and longer term wise I can see still very challenging because we're in the middle of the crisis.

But these are three countries eventually longer term wise they may they may benefit more from the transformation of global value chain, the diversification of of of global value chains.

So there could be new productive bases set in those countries due to the the due to the resilience of diversification effect.

Thank you very much.

I don't see any other questions so I think everything is clear.

Katini, if I may ask, Chit, regarding the question of South Africa, Turkey, do you have anything to add?

Can we unmute a street please?

Thank you.

Over to you.

Yeah, thank you.

Note, Unfortunately for South Africa, we don't have the other components, but basically inter company loans.

There is a, there is a rise in inter company loans.

But I would say that even the rise of inter company loans might play a role in Greenfield investment because we have more capital coming and we don't know exactly what is your destination, but we can say that they they might be a possibility of rising Greenfield investment for South Africa.

So SS Saudi Arabia and UAEI Will and Jordan, I will give you I will look more into details how I will come back, Peter, regarding, regarding South Africa, I know that the the government has has intensified its efforts to attract foreign investment, including setting up the new special economic zones to host foreign investment.

And the president himself has been hands on in promoting investment.

So the South African government and the investment promotion agencies are very active in this area.

You have the.

Yeah, thanks for elaborating on my question on South Africa.

I just wanted to ask Astrid if he if he had any further information on Turkey.

Thank you.

Thank you, Astrid.

Yes.

Can we unmute Astrid please?

Can we unmute?

Yes.

Yes, I still for for Turkey, I will look at the components into details because I don't even have a heart, you know what is, but I will look at the components and I will come back to you to be frank because I don't have specific information for the moment.

Thank you very much, dear.

Thank you for your time.

I think we are going to close now this press conference embargo tomorrow morning at 7:00 AM.

We changed the the slot, it's in the morning now.

Should you have any question, the whole team is available to help you in the coverage of this new global investment trends Monitor.

Thank you very much.

Thank you, James Astray, thank you very much.

Thank.

You have a nice afternoon.

Thank you, colleagues.

Really appreciate your cooperation over the years and reporting on our research results.

Thank you.

Good afternoon to all of you.

Bye bye.