UNCTAD, WAIPA Global Investment Promotion Conference 2020

The future of investment promotion and trade facilitation landscape after the COVID-19 pandemic has been the topic at the center of the conference on global investment promotion, organized by the United Nation Conference on Trade and Development (UNCTAD), in partnership with the World Association of Investment Promotion Agencies (WAIPA).

The event was divided into two parts. The first segment was dedicated to the debate related to the strategic reorientation in investment promotion during and beyond the pandemic. The second segment, on the other hand, hosted the executive dialogue on investment facilitation and advocacy. 

During the conference, institutional and private sector representatives discussed the redefinition of investment promotion strategies, the role of Investment Promotion Agencies (IPAs) in dealing with the current economic shock, as well as how the public and private sectors can interact to consolidate the resilience of the global economy in a context strongly affected by the pandemic.

Day One: Investment Promotion amid the COVID-19 challenge

The externalities produced by the COVID-19 pandemic on the global economy have transformed the context in which IPAs used to operate, forcing them to redefine their priorities. In fact, IPAs have had to focus their work no longer on traditional investment facilitation measures, but on crisis management policies.

Although the response of IPAs to the problems caused by the pandemic has been rapid in several countries, the impact of COVID-19 has been profound and will probably be long-term. As illustrated by James Zhan, UNCTAD Director, Investment and Enterprise, the pandemic is set to cause a dramatic decrease in foreign direct investment (FDI). 

Global investment prospects are bleak as the projections show that global FDI will likely decrease by 40% compared to 2019 (cfr. table 1)

Table 1

 

There’s the need of a new framework for investment attraction to answer the transformation of global value chains – James Zahn

According to James Zhan, it is possible to conceive the pandemic as a triple shock, which affect supply, demand and policy sectors. Among the key implications of this transformation, UNCTAD foresees:

  1. shorter and less fragmented value chains
  2. a shift from global to regional and sub-regional value chains
  3. more regional market-seeking FDI
  4. resilience and national security concerns as key drivers of global value chains diversification

This analytical framework has been the basis on which to build the discussion on how IPAs and private companies can support investment promotion at a time when several countries are in the middle of a second wave, and lay the groundwork for a proper economic recovery in the near future. 

Overall, there was a consensus among speakers on the need to adopt capacity-building measures, strengthen the role of IPAs as points of contact between institutions and the private sector, and develop an ecosystem conducive to international trade. In this regard, as pointed out in the keynote intervention by Mia Mottley, Prime Minister of Barbados, “no country trades with itself”. 

The question of the interaction between the private sector and public institutions has emerged as instrumental for the post-pandemic economic recovery. 

According to Karin M. Finkelston, Vice President of the World Bank’s group International Finance Corporation (IFC), investment challenges are intersected with development challenges. Her intervention, consequently, focused on the ways in which the private sector and governments interact in order to stimulate investments and channel finances towards sustainable development. 

We have actually seen that about 10% of global money could actually be moved into impact-related investment to support SDGs – Karin M. Finkelston

During the pandemic, IFC’s priority has shifted towards adopting strategies that will help governments of developing and fragile countries to attract private companies. The overall aim is to create “markets and bankable projects where they’re needed the most” by attracting investment in those sectors that would have the highest impact in terms of jobs and growth. 

The interaction between the public and private sectors is therefore conceived with a view to promoting impact investment into emerging economies. Actually, IFC is working towards providing liquidity into the markets of those countries whose governments do not have the capacity to provide the liquidity necessary to smaller businesses.

Peter M. Robinson, President of the US Council of International Business, addressed the issue of public-private interaction. He also analyzed what the business community expects from governments in terms of economic-relief policies. 

Mr. Robinson’s intervention focused on the role that investment and the private sector can play in reviving economic growth. Therefore, he argued that governments’ priority should be “to maintain an enabling environment for investments”. 

Conducive to the realization of this objective would be, in Mr. Robinson’s view, the collaboration between governments, civil society and businesses, plus a strengthened role of organizations such as UNCTAD and WAIPA as mediator between these different actors. 

But what, exactly, characterizes an investment-friendly environment? Essentially, according to Mr. Robinson, a political environment based on respect for the rule of law and open to multilateral collaboration. 

In fact, the international political balance emerged during the debate as a decisive element for economic recovery. As pointed out by James Zhan, the escalation of geopolitics worldwide would impact the balance of global value chains.

At the same time, Andrew Wilson, Head of Global Policy at the International Chamber of Commerce (ICC) advocated for a “sound and strengthened economic cooperation” within the G20. Wilson argued that cooperation and multilateralism are an imperative not only to bring the pandemic to an orderly conclusion but also to stabilize the economic foundations at the international level.

Openess is a pathway to resilience – Andrew Wilson

Day one ended with the United Nations Investment Promotion Awards 2020 Ceremony. Investment Promotion Agencies from India, Estonia and Rwanda have been awarded by the United Nations for excellence in their response to COVID-19 outbreak. 

Day Two: Debating sustainability, digitalization and partnerships

The second day aimed to gather the experiences of IPAs, Special Economic Zones (SEZs) and multinationals in dealing with the uncertain global investment climate. The meeting was divided into three segments, each dedicated to a specific topic.

Segment One: Sustainability

The first panel’s key question was how to ensure room for a robust sustainability agenda given the economic hardship caused by COVID-19 crisis. 

Ms. Alexandra Brand, Chief Sustainability Officer at Syngenta Group, shared Syngenta’s perspective on how sound agricultural practices ensure a safe food supply. Ms. Brand argued that the pandemic demonstrated the possible fragility of food production.

Syngenta has worked to integrate food security protection with environmental compliance, as climate change and biodiversity loss are a major risk to food production. 

Among the sustainability measures taken by Syngenta there is the reduction of its carbon footprint by 50% by 2030. Another goal is to adopt decarbonized energy resources across all Syngenta operations and supply chains. 

While in countries such as the UK and Switzerland it is currently possible to use low environmental impact methods, the same is not possible in China where operations still depend on carbon-based energy sources. 

According to Pierre Voges, Acting CEO of Atlantis SEZ, integrating Sustainable Development Goals from the earliest stages of product conception is necessary to improve a company’s environmental performance. Voges argued that the whole manufacturing process should be sustainable, not only the final product. The adoption of a set of criteria to ensure a green manufacturing process is one of the measures adopted by Atlantis Greentech SEZ in order to reduce its environmental impact. 

Tessa Jacques, President of the Caribbean Association of Investment Promotion Agencies, illustrated the challenges for the Caribbean region in promoting sustainable development during the COVID-19 economic crisis, which had a severe impact especially on the tourism and outsourcing sectors. 

In this context, many companies have stated the need for economic support to ensure business continuity. Therefore, the priority for Caribbean IPAs has become to focus on business climate and supporting access to financial resources. 

On the other hand, investing in projects capable of reducing the socio-economic impact of COVID-19 has been recognized as a key measure for the recovery, and it is in this area that the SDGs must play a role as a point of departure. 

According to Ms. Jacques, the pandemic has strengthened the role of IPAs as facilitators of change. Therefore, the focus of IPAs in the Caribbean region is to combine investment attraction with community development.

The focus is on investments that create decent economic growth, reduce poverty and hunger and promote education – Tessa Jacques

The relation between sustainability and socio-economic inclusivity also emerged in Yewande Sadiku’s intervention. Ms. Sadiku is CEO at Nigerian Investment Promotion Commission. According to Ms. Sadiku “what is relevant now is how well jobs are spread”. 

Therefore, it is important to have a job and community building perspective when looking at investment attraction. 

Segment Two: Digitalization

Investigating the digitalization of investment promotion and the impact of digitalization on the role of IPAs and SEZs have been the key topics of the second panel. 

Mr. John Frank, Vice-President, UN Affairs, Microsoft Corporation invited to critically analyze the digital transformation process. In fact, although the pandemic has caused a significant switch to digital services, it is important not to overestimate the capillarity of this phenomenon. Mr. Frank argued that it is necessary to be aware of the digital divide that exists. 

The pandemic has made it clear that large segments of the world’s population do not have access to digital infrastructure. This is a problem that affects not only emerging economies, but also developed economies. As it seems, an economic giant such as the US shows the presence of digital divide in both rural and urban areas.

In analyzing how the private sector can support digitization in developing countries, Mr. Frank argued that creating broadband is key in infrastructure development. Moreover, it is important to invest in technologies that are affordable and accessible to all.

If you create infrastructures, people should be able to use them – John Frank

The second part of the panel compared the experiences of IPAs in dealing with digitization. The dematerialization of procedures and communications has represented a real game changer for the work of IPAs. 

It is interesting to note how the relationship between IPAs and digitization processes has been influenced by specific geographic and demographic conditions.

Thus, Deepak Bagla, CEO at Invest India, stated that “for us digitalization is not a choice, it is an imperative”. Considering the territorial extension of India and the complex political-territorial organization that derives from it, according to Mr. Bagla, without digital infrastructures, India would have been completely blocked during the pandemic. 

Moreover, in such a large society, digitization can have strong political implications. As Mr. Bagla pointed out, “digitalization creates a sense of democratization”, as digital frameworks enable to reach a wider audience. 

Robert Hermann, CEO at Germany Trade and Invest, offered a slightly different take on digitalization, as he underlined that there are elements of investment promotion activities that cannot be replaced by technology. 

Mr. Hermann then stressed the interpersonal dimension as necessary in the work of IPAs. “Our business is getting in touch. You can’t finalize a deal without a meeting” said Mr. Hermann. 

The issues raised by digitization, moreover, have to do not only with a change in mindset, but also with obstacles arising from the existing legal framework. In this regard, Mr. Hermann emphasized the need his organization encountered in defining digital customer contact strategies that complied with GDPR. 

The cultural shift towards digitalization certainly is considered an opportunity to increase cooperation and knowledge-sharing among companies according to Ms. Camila Moreno, Executive Director, Free Trade Zone Association of the Americas. 

Ms. Moreno recounted how COVID-19 has prompted several companies to use the digital platform Relocate Latam, sharing information they were previously reluctant to make public for fear of favoring competitors.

Segment Three: Partnership in Investment Promotion

Partnership has emerged as a key concept in a post-COVID-19 global economy. The creation of partnerships among IPAs is, according to Ahmed Bennis, Secretary General, Africa Economic Zones Organization, necessary for these kinds of organizations to stay relevant. 

Moreover, in a framework that seems destined to be increasingly characterized by a regionalisation of investment flows, partnerships at the local and regional level are necessary to foster IPAs value proposition. 

As a consequence, according to Mr. Benni, IPAs in Africa are improving inter-African trade and regional value chains. African IPAs are currently experimenting collaboration within the same industries as well as across different sectors. 

Innovative partnerships are critical for recovery – Ahmed Benni

The regionalization of global value chains has emerged as one of the trends of the post-pandemic global economy. However, the idea of a strengthened coordination at the supranational level was judged by the panelists to be in need of development. 

Bostjan Skalar, CEO at WAIPA illustrated the critical role that IPAs have played in providing a quick reaction to the economic externalities of the COVID-19 crisis and stated that strengthening partnerships and cooperation has become a strategic need for reminding the global FDI community how important IPAs are. 

According to Mr. Skalar, “partnerships are more important than ever and advocacy comes into the forefront”, at a time in which some IPAs are facing budget cuts and administrative difficulties. 

He also had the occasion to stress the role played by WAIPA in working as a global umbrella organization, whose objective during the COVID-19 pandemic has been to provide knowledge-sharing opportunities to the IPAs community. 

In this regard, WAIPA assembled a digital platform for information sharing and carried out extensive research to find out the impact of the pandemic on the IPAs community, as well as to find the most damaged sectors and the ones that have emerged as a response to the pandemic threat. 

Benedetta Giuliani
19.12.2020
von Benedetta Giuliani