UNCTAD- United Nations Conference on Trade and Development (UNCTAD) was established in 1964 with an aim to promote the integration of developing countries into the world economy. Headquartered at Geneva in Switzerland, it is a permanent intergovernmental body.
Some of the reports published by UNCTAD are- Trade and Development Report, World Investment Report, The Least Developed Countries Report, Information and Economy Report, Technology and Innovation Report and Commodities and Development Report.
The World Investment Report 2020 was prepared by a team led by James X. Zhan (Director of Investment and Enterprise- UNCTAD). Every year the report provides the following information-
Key points of World Investment Report 2020
Transformation of Global Production
The World Investment Report 2020 states that COVID-19 is likely to transform global production, with the pandemic amplifying existing challenges. Reshoring, diversification and regionalization and replication will drive restructuring of global value chains. The impact of these elements of trajectories on international production are-
Region wise FDI Analysis
ASIA-
Foreign direct investment (FDI) to developing economies in Asia will be hit the hardest due to the economic downturn caused by the pandemic. It is projected to decline by up to 45% in 2020. The number of greenfield investments in the first quarter of 2020 dropped by almost 37% and mergers and acquisitions (M&As) dropped by 35% in April 2020.
East Asia– FDI inflows declined by 13% to $233 billion in 2019. Despite numerous trade tensions, inflows to China increased to an all-time high of $141 billion.
South-East Asia– FDI rose by 5% to $156 billion, making South-East Asia the region’s growth engine in 2019. Growth was driven by strong investments in the countries- Singapore, Indonesia and Vietnam, which received more than 80% of inflows in South-East Asia in 2019.
South Asia– FDI flows increased by 10% to $57 billion. The rise was largely driven by a 20% increase in investment in India, the largest South Asian FDI recipient. India comes under the top 10 world’s largest FDI recipients as its position jumped from 12th in 2018 to 9th in 2019.
West Asia– FDI declined by 7% to $28 billion. Turkey, United Arab Emirates and Saudi Arabia accounted for the majority of inflows in 2019, UAE being the largest FDI recipient in West Asia.
AFRICA-
The pandemic and low commodity prices, especially oil, will exacerbate the declining FDI trend in Africa in 2020. FDI flows are forecasted to fall between 25% and 40% based on GDP growth projections and a range of investment specific factors. Services industries including aviation, hospitality, tourism and leisure are likely to suffer the most. Manufacturing industries intensive in global value chains will be severely affected as well. Therefore, concerted efforts to promote economic diversification and industrialization will be needed in the coming years.
Factors offering hope for the recovery of investment flows to Africa are-
Way Forward
Countries will have to strategically deal with the COVID-19 pandemic. They will have to put efforts to increase investments and attract FDI. More emphasis shall be given to the reforms and policies affecting the demand side, which will lead to a rise in investments and production. The current crisis could be a catalyst for structural transformation of international production. The economies will have to take advantage of the new industrial revolution and overcome the growing economic nationalism. It is high time that due focus needs to be given to sustainable development with cooperation between countries to ensure a better future for the coming generations.
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