The Crucial Role of FDI Attraction in Times of COVID-19

By Jonas Winkler, Economic Development Specialist
April 21, 2020

The spread of the Coronavirus and its impacts have become increasingly visible during the last weeks and affect almost all dimensions of the global economy. Thus, the flow of foreign direct investment (FDI) will not be spared from the repercussions of the COVID-19 pandemic. Recently, the UN Conference on Trade and Development (UNCTAD) published a report stating that COVID-19 “could bring global foreign direct investment flows to their lowest levels since the 2008-2009 financial crisis". The UN trade body predicts that FDI could decline by 5% to 15% worldwide”. This will particularly affect the automotive, aerospace and energy sectors. As a result, site selection and location marketing are likely to see increasing competition for investors in an already highly competitive market. Key success factors will be a concise positioning and strategically planned efforts based on e.g., analyses of existing clusters and supply chains.

Currently, Economic Development Organizations (EDOs) on national, regional and local levels are focusing on supporting companies to handle the situation and to avoid job losses. Attracting new investors becomes inevitably of secondary importance. Notwithstanding this challenging situation, EDOs must not lose sight of the significance of investment attraction to ensure the creation of new jobs and future prosperity.

As soon as the immediate health-related effects of the corona crisis are under control, economic recovery will gain relevance not only for policymakers but also for economic developers. As FDI is widely considered as one of the major drivers of innovation and growth, investment attraction will play a vital role in overcoming the economic downturn caused by COVID-19. Therefore, EDOs should prepare for this in due time to face the increasing competition in that field.

When talking to decision makers during the last couple of weeks, we have experienced a very high level of openness to reconsider their companies’ existing supply chains and to explore strategic expansion plans. The fact that most employees are working from home these days facilitates engagement with CEOs and other members of the management team, as they are less booked with meetings. Although videoconferencing and e-networking platforms cannot replace personal interaction completely, they are well suited for an initial exchange. Prior to the corona outbreak, these tools have only been used selectively in some sectors and markets. Adaptation to the social distancing regulations resulted in the introduction of virtual communication to a much broader audience and we are convinced that it will persist as an additional facet in the mainstream of global business life.

In March and April, we had various fruitful and promising discussions with potential investors. We will continue to foster our existing candidates and to approach new promising contacts in order to pave the way for our clients’ successful regional economic development and growth in the post-corona era. We continuously adapt our business development efforts to the dynamically changing situation. Beyond that, we advise our clients on their strategic positioning and cluster development. By this means, we enable our clients to successfully deal with the COVID-19 challenges and to generate sustainable investments.

Jonas Winkler

Economic Development Specialist