One year ago on this page, in fDi Magazine’s December 2008/January 2009 issue, our headline was “Onwards into the unknown”. At that precarious economic time, it did appear as if we were staring into the abyss. “Nobody can say how the global financial crisis will play out, which victims it will fell in its path, and to what extent they will be harmed,” we wrote.
The global economic situation is still mixed and there are always questions and uncertainties, but we know much more now, with the benefit of hindsight, about the effect of the slowdown on foreign direct investment flows. And it was – wait for it – more or less what we expected.
An analysis of FDI trends for 2009 shows a likely contraction of greenfield investment. According to data from our greenfield investment tracking service, fDi Markets, project numbers are on schedule to decline by 17% by the end of the year, and job creation and capex by a third. Our forecast at the start of 2009 was for a 14% to 15% decline in projects.
The impact of the recession was always going to be industry-specific, leaving aside teeth-gnashing about the end of the world as we know it. And as could be expected, and as forecast, retail trade, energy, creative industries, life sciences and environmental technology have been resilient as generators of FDI projects, while sectors such as construction (55% decline) and chemicals (45%) have suffered.
Manufacturing has been hit hard by the recession, with a 35% decline in projects year-to-date. Growing activity areas for greenfield projects have been retail, call centres, electricity and headquarters. R&D, logistics and extraction have also proven resilient.
The impact on sectors and activities varies considerably – so this has a major impact on the FDI performance of countries. Locations specialising in construction and manufacturing-related FDI have had the toughest year. Investment promotion agencies in those countries specialising in strategic services, R&D and environmental technology are more likely to have a happy holiday season.