Pandemic pushes multinationals to restructure or reshore operations
NEW YORK — Foreign direct investment to developing economies in Asia is projected to decrease between 30% and 45% this year because the region’s status as the world’s factory makes it particularly vulnerable to disruptions from the coronavirus pandemic, the United Nations said in its annual World Investment Report.
“Flows to developing Asia will be severely affected due to their vulnerability to supply chain disruptions, the weight of [global value chain]-intensive FDI in the region and global pressures to diversify production locations,” said the report, published Tuesday by the U.N. Conference on Trade and Development.
Developing Asian economies, defined to also include wealthier Singapore, Hong Kong and South Korea, received almost a third of the world’s FDI inflows in 2019 at $473.9 billion, according to the report.
The region’s greenfield investment — the factories, research centers and offices that a company builds when it enters a foreign country — has already seen a 37% decline from January to March from last year’s quarterly average, according to the report. Cross-border mergers and acquisitions in April, albeit showing a rebound from an apparent trough in March, are 35% below the monthly average of 2019.
China, which accounted for 29% of the region’s investment inflows last year, saw 13% less inbound investment in the first quarter on the year, excluding the financial sector.