Daily Times

Financial assistance to the world’s 83 weakest economies fell by 15 percent in 2020, to $35 billion as a direct result of the Covid-19 pandemic, said the UN trade and development body, UNCTAD.

According to UNCTAD’s World Investment Report 2021, total foreign direct investment also dropped by more than a third globally, to $1 trillion (from $1.5 trillion in 2019), threatening progress on sustainable development.

This level was last seen in 2005 and it is an urgent problem because foreign direct investment is vital to promoting sustainable development in the world’s poorest regions, said Isabelle Durant, Acting Secretary General of UNCTAD.

According to the report, foreign direct investment to developing Asia resisted the worst impacts of the pandemic, driven by China, where capital inflows increased by six per cent, to $149 billion. Southeast Asia saw a 25 per cent decline but investment to India increased, driven in part by mergers and acquisitions.

In Pakistan, FDI was down by 6 percent to $2.1 billion, cushioned by continued investments in power generation and telecommunication industries. Inflows in Bangladesh and Sri Lanka contracted by 11 percent and 43 percent, respectively. FDI fell in other South-Asian economies that rely on export-oriented garment manufacturing, as orders from the United States and the European Union dropped substantially in 2020.

The report said that developing countries and transition economies continue to embrace policies to promote or facilitate investment. The drastic decrease in global FDI flows caused by the Covid-19 pandemic triggered a rise in the number of promotion and facilitation measures in numerous developing countries in 2020. At least 27 countries introduced such new policy measures.

According to the report, Pakistan now allows companies to remit disinvestment proceeds to their foreign shareholders without prior approval from the State Bank. Several countries streamlined or simplified administrative procedures for inward investment in 2020. For example Pakistan launched online platforms to help investors establish companies more efficiently.

Isabelle Durant said, “The (Covid-19) crisis has had an immense negative impact on the most productive types of investment, namely, greenfield investment in industrial and infrastructure projects”, she said. “This means that international production, an engine of global economic growth and development, has been seriously affected.”

According to the report, Other developed economies saw an average drop of 20 percent, UNCTAD said, while the African continent saw a 16 percent fall in foreign direct investment – to $40 billion – a level last seen 15 years ago.

“Investment in various sectors relevant for achieving the Sustainable Development Goals (SDGs), especially in food, agriculture, health and education, has been falling”, he said. “SDG-related investment needs to be scaled up in the post-pandemic period.”

According to UNCTAD’s latest report, investment to least developed countries, landlocked developing countries, and small island developing states, accounted for only 3.5 per cent of total foreign direct investment in 2020.