In times of Covid-19, the priority is to preserve FDI
As 2020 is an atypical year, it takes a lot of ingenuity and creativity on the part of the countries to maintain a flow of Foreign Direct Investment (FDI) more or less similar to that of recent years. The present pandemic has not ended, but last June UNCTAD projected that FDI flows will decrease by 40% this year.
Hence, the goal of “maintaining” stable FDI amounts is set as the main objective of many countries. To be successful, public policies that make it cheaper, simpler and more favorable to leave investment in the country rather than to withdraw it, must be promoted. It must be borne in mind that foreign investment requires time, resources, and that it may take years to produce dividends.
The measures can be implemented as part of a package, thereby magnifying the impact on the FDI anchorage. Thus, the reduction of excessive bureaucracy for investment installation can be combined with after-care services for foreign investors. The pandemic has also provided the opportunity for the post-installation or after-care services that are provided to foreign investors to finally be digitized, facilitating the convenience of remaining doing business in the country.
In this sense, it is very important that countries strengthen the capacities of the Investment Promotion Agencies (API). The digitization of the processes and services of thes Agencies must be approached with a long-term vision, not merely a circumstantial one. The good practices of the most successful countries in attracting and containing FDI shows us the positive dividends of having been early to virtualize processes and services to facilitate investments.
The Covid-19 threat has caused us to re-evaluate our priorities. Just as at a macro level, countries have arranged that the most important thing at the moment is to preserve people’s lives and health, in terms of FDI, the main thing at this juncture is to maintain the investment they already have, while finding ways to attract new flows.
On this last point, there are certain opportunities for us to take advantage of the recomposition of global value chains. However, we must remember that the countries and regions where these investments that we want to capture are located are also taking their own measures to retain them. The most successful countries in capturing these new investments will be those that improve the environment for those who come, but also for those who are already in the country.