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Global Greenfield FDI Flows – II

19/06/2021 at 6:00 AM

In 2020, the global coal, oil & gas sector lost the global top spot for capital investment; renewable energyreplaced it. The biotechnology sector experienced the highest increase in capital investment in 2020.

Sectoral Position

  • The biotechnology sector experienced the biggest increase in capital investment during 2020, a jump of 88% from a year earlier.
  • The semiconductors sector saw a large increase in capital investment in 2020, with a rise of 70% from 2019.
  • The consumer products sector witnessed a rise in capital investment in 2020, with an overall increase of 13% from 2019.
  • The software & IT services sector attracted the most projects in 2020, with the 2,226 investments secured representing a market share of 20%. Despite this, there was a 28% decrease in projects from 2019.
  • In 2020, the global coal, oil & gas sector lost the global top spot for capital investment, being replaced by renewable energy. The sector experienced a 62% drop from a year earlier. The renewable energy sector also saw a drop of about 13% in the period, but it still mobilised USD 101billion in FDI in 2020, more than any other sector.
  • The number of FDI projects into the healthcare sector dropped by 79% in 2020 from 2019. Capital expenditure also fell by 68%.
  • The aerospace sector, measured by project activity, experienced its worst year since 2004. The automotive OEM, automotive components, and non-automotive transport OEM all experienced similar project declines, while also experiencing drops in capital investment.
  • In 2020, the global hotels and tourism sector experienced a 67% decline in FDI project numbers.
  • Capital investment into the global textiles sector dropped by 56% in 2020 from a year earlier.
  • The consumer electronics sector underwent a sharp decline. Globally, project activity dropped by 54% in 2020 from a year earlier.

Outward FDI

In terms of number of projects, Europe and North America, in that order,accounted for 77% of the total outward FDI. The top three countries/States in these two regions were: UK,Germany and France (Europe), and California, New York and Washington (North America).In terms of investments,EuropeandAsia-Pacific, in that order, constituted73% of the total outward FDI. The top three countries in these two regions were: France, Germany and UK (Europe)and China, Japan and Taiwan(Asia-Pacific).

Concluding Remarks

One of the main prerequisites for attracting FDI to a country is availability of good infrastructure – both physical and financial. Both are receiving increased attention in the recent times.

It is necessary to develop a skill ecosystem which should not only create high-end skills but also retain the manpower so skilled to serve the industries grounded in a country. This has implications not only for the education system but also for the R&D system. Countries have to modernize their legal systems especially those related to labour. Low-end skills are not less important.

Finally, one just cannot ignore the social and health environment because, simply put, foreigner entrepreneurs would like to stay in or visit a country frequently if they want to see their industries prosper.

Growth is necessary to attract FDI, but not sufficient, as the qualitative environment perhaps matters more than the quantitative numbers.

(Concluded)

About the Author:

Dr. Manas R. Das is a former senior economist of State Bank of India. He has over 30 years of experience as an economist in two large commercial banks. Academically, he is a gold medalist in Bachelor of Arts with Economics Honours from Utkal University, followed by Master’s in Economics from Delhi School of Economics and Doctorate in Economics from Gokhale Institute of Politics and Economics. He is also a Certified Associate of the Indian Institute of Bankers. He has won several awards, besides being a prolific writer.

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