Q: Do you expect the coronavirus pandemic to accelerate the ongoing trend of growing regulation to FDI?
A: That is absolutely right. We are witnessing a continuing trend of growing regulation relating to FDI, particularly in industries such as health, food and strategic infrastructure. Governments want to ensure that these goods and services will be accessible and affordable... Regulation to FDI will continue to grow further with the introduction of new measures [to limit foreign investment in specific sectors], as well as with a more effective implementation of those measures than that that already exists.
Q: Do you see any difference related to this issue between developed and developing economies?
A: Interestingly, in the past few years most of the regulation measures were put in place in advanced economies. The investment regime of advanced economies has been pretty open in the past few decades, but they have realised they need protection – that is, regulation at the entry level of FDI. For developing economies, their starting point was a [less open] regime, which they have been gradually liberalising.
Both sides are converging towards a middle ground. On the one hand, developing countries need FDI because of their low levels of domestic savings, and they need foreign technology and knowhow. On the other hand, developed countries don’t want to lose strategic assets. A lot of strategic assets are in distress so they want to protect them by either tightening screening or discouraging foreign takeovers, as well as providing state aid.
Q: What is your assessment of the reaction of investment promotion agencies [IPAs] to the coronavirus crisis?
A: China was the first country to introduce special investment aftercare measures in light of the development from epidemic to pandemic. It did it in late February/early March, when it saw that foreign investors were struggling. In order to retain investment, China put in place measures to facilitate foreign investors with things such as registration, simplified procedures and tax exemptions processes.
As the virus spreads, more countries are putting in place such measures. InvestIndia set up a ‘business immunity’ platform to share information with its foreign investors. In Brazil, trade and investment promotion agency Apex set up a similar platform. We expect more IPAs to do so. In fact, our recent survey among IPAs shows that close to 50% are trying to put in place different measures to help foreign investors.
Q: What do you think is the mission of IPAs in these challenging times?
A: In the short term, they have to focus on investment retention and aftercare services – this is the time when investors need them. They need to provide information about the measures [being taken by] local governments and the local development of the pandemic, and facilitate them in accessing any government support available. Second, they have to continue their advocacy activity, gather information regarding the needs of investors and present it to the government, while suggesting solutions and support.
Also, it is really a time for IPAs to think about the strategy of their country when it comes to promoting foreign investment in a post-coronavirus world. There will be changes, the coronavirus is a game-changer. It is important for IPAs to come up with a new message and position themselves well before the crisis is over.
Q: What do you believe will be the long-term impact of the coronavirus crisis?
A: There will be quite a few: global value chains will be shorter, digital economies will be booming, ICT will continue to develop, and many countries will have to adjust their industrial policies. Investment attraction thus needs to be adjusted in line with these new industrial policies, both in developing and developed countries.
This article first appeared in the April-June edition of fDi Magazine. The full digital version of the magazine is available here.