Tracking Greenfield FDI During the COVID-19 Pandemic: Analysis by Sectors

AuthorFilip De Beule,Nadia Doytch,Ketan Reddy,Nishant Yonzan
Publication Date01 November 2021
Date01 November 2021
Tracking Greenfield FDI
During the COVID-19
Pandemic: Analysis by
Nadia Doytch1,2,3 , Nishant Yonzan2,4,
Ketan Reddy5 and Filip De Beule6
We study the trends and fluctuations in greenfield foreign direct investment
(GFDI) during the first wave of the COVID-19 pandemic crisis on a global scale.
We analyse the data of a data set of GFDI provided by fDi Markets (Financial
Times) to understand the contraction of GFDI during the first three quarters of
the year 2020, taking into account the sector of the investment and the host and
home country. We analyse both the long-run trends and the quarter-over-quarter
changes in GFDI to capture its fluctuations before and during the first wave of
the COVID-19 crisis and the 2008 global financial crisis. Our findings cast light
on which countries’ and industries’ GFDIs were most affected by the pandemic
crisis and draw a comparison to the global financial crisis. To our surprise, many
services industries have shown unexpected resilience of GFDI due to the flex-
ibility for remote work. On the contrary, GFDI in the manufacturing industries,
as well as the extractives and the utility industries, has shown a dramatic decline
during the pandemic. These contractions raise questions of stability and resilience
of the global supply chains these industries are a part of.
1 Brooklyn College, Koppelman School of Business, City University of New York, Brooklyn, NY, USA.
2 Graduate Center, Program in Economics, City University of New York, Brooklyn, NY, USA.
3 School of Government, Ateneo de Manila University, Quezon City, Philippines.
4 The World Bank, Washington D.C., USA.
5 Department of Economics, Christ (Deemed to be University), BGR Campus, Bangalore, India.
6 Department of Management, Strategy and Innovation, Faculty of Economics and Business, KU
Leuven, Belgium.
Corresponding author:
Nadia Doytch, Department of Economics, Koppelman School of Business, Brooklyn College, City
University of New York, 217 Whitehead Hall, 2900 Bedford Avenue, Brooklyn, NY 11210, USA.
Foreign Trade Review
56(4) 454–475, 2021
© 2021 Indian Institute of
Foreign Trade
Reprints and permissions:
DOI: 10.1177/00157325211031317
Doytch et al. 455
JEL Codes: F21
Greenfield foreign direct investment (GFDI), foreign direct investment (FDI),
COVID-19 crisis, global financial crisis, GFDI industries, GFDI countries
Economic historians distinguish two ‘waves of globalization’ in the past two
centuries: the late nineteenth century to the First World War and a resurgence in
global economic integration after the Second World War, which continues to the
present. The waves of globalisation are characterised by surges in international
trade, foreign investment, as well as a certain degree of business cycle synchro-
nisation. The factors attributed to the rise of globalisation include international
political stability, infrastructure development and falling costs of transport and
communication. However, this greater interconnectedness of the world also means
greater interdependence, which can lead to disruptions in times of crisis. A recent
disruption in international trade and investment preceding the COVID-19 crisis was
the 2008 global nancial crisis. From the current perspective, the global nancial
crisis may turn out to be a short-lived disruption in comparison to the slowdown
in international (and domestic) activity caused by the COVID-19 crisis. Today, the
world is even more interconnected through global production value chains, inter-
national trade in parts and components, travel and tourism, as well as Internet and
telecommunication technologies, which are the basis of new services industries.
The beginning of the COVID-19 pandemic crisis caused a dramatic economic
shock that rippled across all economic sectors and geographical regions throughout
the year 2020. At the very beginning of the crisis, the global foreign direct investment
(FDI) flows were forecast to suffer a drastic decline, up to 40% in 2020 from their
2019 level of US$1.54 trillion (UNCTAD, 2020). Such a decline, the World
Investment Report (WIR) (2020) argues, would bring FDI below the US$1 trillion
mark for the first time since 2005 and will bring FDI further down in 2021 and 2022
(UNCTAD, 2020). Both GFDI and cross-border mergers and acquisitions (M&As)
dropped by more than 50% year over year in the starting months of 2020 (UNCTAD,
2020). Further, based on FDI information sourced from United Nations Conference
on Trade and Development (UNCTAD) Global Investment Trends Monitor, the first
6 months of the pandemic witnessed a 37% fall in global greenfield project
announcements and a 15% fall in cross-border M&As. Further, the FDI index of the
fDI markets database stood at 703 points in October 2020, 34.4% lower compared
to October 2019 capturing the impact of the COVID-19 outbreak on the sentiments
of foreign investors. In addition to the impact of COVID-19 on FDI, the pandemic
also affected other aspects of trade and the global economy. The imposed lock-
downs and social distancing measures affected the tourism and travel industry
adversely. There was also a worldwide production shock. The policy response to the
pandemic varied widely across countries. With massive supply chain disruptions,

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