The COVID-19 pandemic has proven to be a destructive force, with devastating effects on livelihoods, employment, and investor confidence. Two thirds of multinational investors in developing countries are reporting disruptions in supply chains, declines in revenues, and falls in production within months of the outbreak. Global foreign direct investment (FDI) flows are predicted to decline by more than 40 percent this year.
The Global Investment Competitiveness Report finds that more predictable trade and investment policies could help emerging market governments attract more investment flows needed to support financial stability and economic recovery from the effects of the COVID-19 pandemic.
Governments can leverage Foreign Direct Investment (FDI) for a more robust economic rebound by avoiding protectionist policies, seizing new opportunities from changing FDI and supply chain trends, and fostering global cooperation.
Findings of the Global Investment Competitiveness Report 2019-2020 are based on surveys—a large survey of over 2,400 global business executives in ten large middle-income countries conducted in the second half of 2019 and a smaller “pulse” survey in March and April 2020. Results of the surveys, as well as the report’s new global database of regulatory risk, highlight the critical role of government actions in reducing investor risk and increasing policy predictability for rebuilding investor confidence.
The surveys showed that even before the crisis, most foreign investors were delaying investment decisions due to a heightened level of uncertainty around trade and investment policies. Foreign investors cited supportive political environments, stable macroeconomic conditions, and conducive regulatory regimes as their top three investment decision factors—even more important than low taxes, low labor and input costs, or access to natural resources.
Chapter 4: Regulatory Risk and FDI (PDF)