More than a year into the pandemic, investment promotion agencies (IPAs) around the world are expressing heightened optimism with regards to foreign direct investment (FDI) prospects in their own countries, and betting on China over the US as the world’s leading source of foreign investment. 

Despite the challenges of a ‘post-pandemic’ investment landscape, the survey of executive and senior officers from 100 IPAs in more than 70 countries found that 53% of respondents expect FDI inflows into their territories to increase in 2021, with an additional 15% anticipating the boost to be ‘significant’, according to Unctad’s World Investment Report 2021. 

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Conversely, a mere 18% foresee a decrease in inward FDI at home, with just 4% forecasting a significant decrease. This optimism signals a considerable change of heart since April 2020, when 44% of IPAs predicted a decrease in domestic FDI inflows for 2020. 

Although IPA sentiment appears to have taken a turn on a domestic level, agency estimations err on the side of prudence in their projections for global investment. According to the report, only 49% of participating IPAs foresee an increase in global FDI inflows in 2021 — an indication that, despite increasing domestic confidence, agencies remain cognizant of “the challenges in attracting FDI in the current climate”. 

Betting on China

In addition to IPA expectations for national and global FDI levels in 2021, the survey gathers agencies’ hypotheses for the largest investment-source economies. Whereas China and the US tied for the top spot in the 2019 survey before the pandemic, IPAs placed their bets overwhelmingly on China as 2021’s victor, with nearly three-quarters of respondents anticipating the country to be a leading source of FDI this year. 

“This is due to the rising importance of China as an investor home country, including in infrastructure financing, especially in developing countries,” the report explains. 

After China, IPAs expect the US, Germany, the UK and Japan to be among the next major global source markets for FDI, marking another slight change since the 2020 survey, when France placed fifth. 

High hopes for agriculture and food 

A look at the IPA expectations for the most important investment industries in 2021 reveals clear pandemic consideration. Although agriculture and food makes a sweeping win, with 80% of agencies anticipating the industry’s FDI dominance, ICT and pharmaceuticals have secured second and third place, signalling a new post-pandemic outlook. 

“Natural resource processing is seen as a key entry point for foreign investment, especially in developing and transition economies where nearly all survey respondents selected agriculture and food as one of the key investment industries,” the report reads. 

According to the report, 39% of respondents deem ICT a top industry for FDI in 2021, reflecting “the acceleration of digitisation in response to the pandemic”, while 33% of them highlighted the prospects of investment in the pharma industry.  

The high hopes for pharmaceuticals also point to a potential pandemic-induced shift. In 2019, the industry failed to make an appearance on the top-five list; however, in 2021, one-third of IPAs foresee pharma playing a dominant role in foreign investment. The report remarks upon this transition, citing the “importance of diversification and building resilience in the industry,” which the pandemic has emphasised.  

Moreover, the majority of IPAs surveyed expect healthcare to play an increasingly vital role in foreign investment, with 54% suspecting that the industry will become ‘significantly’ more pressing post-pandemic. “Already,” the report concludes, “some countries have reported significant investment decisions in the healthcare sector.”