Western multinational companies are changing their emerging-market focus of the past few years, preferring instead to invest closer to home as global economic conditions worsen while outward FDI from emerging economies is on the increase.
According to biannual research carried out by the Z/Yen Group, ratings for all global financial centres fell for the first time and the decreases were particularly severe in emerging-economy centres, compared with more established centres.
Although the data relates specifically to the financial services sector, the report’s author, Mark Yeandle, says the results reflect a trend across all sectors. “Volatility in the results is evidence of great uncertainty about the global economy which seems to have led to a ‘flight to safety’ with greater faith placed in established centres,” he said.
While Western multinationals retreat from emerging markets, figures from greenfield investment monitor fDi Markets show outward investment from emerging-economy companies does not demonstrate the same trend for caution as in the West; all but one of the 20 fastest-growing countries for outward investment in 2008 were developing economies.
And chief economist and head of global research at Standard Bank, Gerard Lyons, says though the natural tendency for Western multinationals at present may be for retrenchment, short-term needs must be differentiated from the longer-term aims of many global companies. “If anything, big multinationals will be thinking the last place they want to be investing long into the future are the lower-growth economies of the West,” he said.