Investment promotion agencies (IPAs) are facing a tough global environment as they work to match national priorities to worldwide trends. Global FDI flows fell 23% in 2017, according to the UN Conference on Trade and Development.
Now IPAs are being hit by the trade war between the US and China, said participants at the World Association of Investment Promotion Agencies’ World Investment Forum in Xiamen, China. With another $200bn in Chinese goods becoming subject to US tariffs in the coming weeks – and the Chinese likely to retaliate in kind – global trade and investment flows are in flux.
There was optimism in some quarters for opportunities as the trade and investment patterns of the world’s two biggest economies shift. “Technically, I think this will only be a benefit to the Czech Republic and the rest of Europe,” said Jan Zapetal, director for China and south-east Asia at Czechinvest. “Chinese companies are having to look for different bases, so I think it’s only natural that they would be keener to talk with the Czech Republic and rest of Europe.”
The government of India, the world’s fastest growing large economy, believes certain national industries such as pharmaceuticals could benefit from the trade tensions.
“We’re also looking at some import substitution. We’ve got some good investments from China already but we are enticing more and more Chinese companies to come and set up their bases in India,” said Dushyant Thakor, vice president of Invest India. However, he conceded: “These are tough times for everybody.”
Zimbabwe, meanwhile, hopes its unconventional monetary policies can offer certain benefits to investors from China. “The reminbi is one of our basket of official currencies, [so] that definitely presents an advantage,” said Zimbabwe Investment Authority chief executive Richard Mbaiwa.
But while the desire to attract Chinese investment was evident, most IPAs need to balance relationships on both sides of the trade imbroglio. Fahad Al Gergawi, CEO of Dubai FDI, said while the UAE would “inevitably” continue to have a strong relationship with China, “last year’s results show that the number one investor in Dubai was still the US, at 36%”.
For large countries including the US, China and India, the need to co-ordinate subnational IPAs was also an urgent issue. In India, for example, the country’s 18 regional IPAs often compete with each other. “All the subnational IPAs in India should not be in competition with each other but rather competing with other subnationals globally,” said Mr Thakor.
Co-ordination and skills disparities can be an issue because some regional IPAs have more than 50 staff, some only three, he added.
For lower-income countries, meanwhile, getting the business environment right remains the top priority. In Bangladesh, that means developing a co-ordinated, digital platform for foreign investors. “We are very focused on improving investor services and developing a one-stop shop [and] we are taking the World Bank’s ease of doing business rank as a benchmark,” said Kazi Aminul Islam, executive chairman of the Bangladesh Investment Development Authority.