The whole world is trying to grasp the magnitude of the damage produced by the coronavirus crisis while dealing with the health emergency it brings along. Economic development organisations (EDOs) and investment promotions agencies (IPAs) are no exception. These are the 10 major impacts they will have to deal with and adjust to in the short term.
1. Vulnerable people and businesses are at the greatest risk
Devastating impacts to families from a short gap in income must be emphasised. This is not a small segment of society. According to the 2019 American Payroll Association survey, over 74% of US employees would experience difficulty meeting their current financial obligations if their paychecks were delayed for a week.
2. Corporate site selection visits decline or disappear
Like everyone else, corporate real estate, executives, and site selection consultants must minimise their travel and exposure, which is increasingly preventing them from visiting communities to evaluate locations for expansions and relocations. This will slow the timing of projects happening or delay the start of new corporate real estate expansions.
3. Local business is the highest priority
Local business expansions and startups create more net new jobs than businesses recruited from outside. They are what makes the local economy survive and thrive. Yet local entrepreneurs and businesses also want to minimise risk of contracting coronavirus through physical contact and meetings with EDOs. This means that EDOs need online business assistance services that reduce or eliminate physical interaction.
4. Finding prospects through trade shows is no longer viable
One of the first signs of the escalating coronavirus pandemic was the postponement or cancellation of the major industry conferences that economic developers rely on to fill their pipeline of contacts for potential investments in their community.
5. Onshoring and nearshoring become more important
The novel coronavirus pandemic is causing global supply chain chaos and delays as businesses and consumers cannot reliably receive shipments from international vendors. This puts your local businesses at risk because they may not be able to build or sell items necessary for them to do business or stay in business. If their supply chain was more diversified and available from locations outside of highly infected regions, their business would have less risk.
6. Technology becomes a greater competitive advantage
A recurring trend in positioning an EDO to be successful in an era of the current novel coronavirus pandemic and future infectious diseases is that technology offers a powerful alternative and competitive advantage to facilitate economic development. It is an advantage whether it is the only option or if it is a complement to in-person strategies.
7. Foreign direct investment becomes more difficult
Global foreign direct investment (FDI) projects declined overall in 2019, fDi Markets figures show, and the impact of coronavirus has accelerated this decline in 2020, with greenfield FDI estimated to fall by up to 40% in 2020 and 2021. EDOs and IPAs are confronted with fewer leads as the number of current companies with FDI plans has declined by 25% compared to the last half of 2019. Tourism, entertainment, retail, luxury goods, aviation, real estate, and coal/oil/gas sectors have all seen significant declines in FDI.
8. Travel and tourism impact is magnified
Many EDOs don’t make tourism a focus of their efforts. The coronavirus pandemic will shine a light on just how important tourism is for many communities’ economies. Travel and tourism account for 10.4% of global GDP ($8.8T USD), 1 out of every 10 jobs (319M), and 1 out of every 5 jobs created from 2014-2019, according to the World Travel and Tourism Council. Airlines and travel-related hospitality have been punished the fastest among industries as airline travel has plummeted.
9. Capital still needs to be invested
There is significant global capital that companies and individuals need to invest. The impact on financial markets is that it is shrinking the amount of that capital and it may cause a pause in investments. However, there are going to be opportunistic investors. As the saying goes, “When there is blood in the streets, buy real estate.” Identifying these investors and how they can benefit your local economic development can be your opportunity in a crisis. Also, some companies and market segments are making so much extra money so quickly that they have no choice but to continue to invest their capital.
10. Non-physical contact is essential
The novel coronavirus pandemic is impacting relationships differently depending on where you live, but in metro areas people are already starting to alter their interpersonal behaviour. As the virus becomes more prevalent, non-physical contact is going to be the norm.
To find out more on how EDOs or IPAs can address these challenges, download the full report here.
Anatalio Ubalde is the managing director and co-founder of GIS Planning.