世界发展银行-The-Impact-of-COVID-19-on-Foreign-Investors---Evidence-from-the-Quarterly-Global-Multinational-Enterprise-Pulse-Survey-for-the-First-Quarter-of-2021_20页_574kb

Summary of the Impact of COVID-19 on Foreign Investors: Evidence from the First Quarter of 2021

Core Content

This report presents findings from the Quarterly Global Multinational Enterprise (MNE) Pulse Survey conducted in the first quarter of 2021, focusing on the impact of the COVID-19 pandemic on foreign investors in developing countries. It highlights the ongoing effects of the pandemic, the gradual recovery of MNEs, and the factors influencing their investment and operational decisions.

Main Findings

• Continued Adverse Impact: In Q1 2021, 93% of MNE affiliates experienced at least one adverse impact, though the magnitude of these impacts had eased compared to Q4 2020.
• Improvement in Demand and Output: Demand and output improved significantly, with firms reporting a 1% and 2% increase respectively in Q1 2021 compared to Q1 2020. However, adverse effects on demand and output were still reported by over 30% of firms.
• Input Costs and Productivity: Input costs rose sharply, with 52% of firms reporting elevated costs in Q1 2021. Worker productivity improved, with only 13% of firms reporting adverse effects, compared to 67% in Q4 2020.
• Investment and Capacity Utilization: Despite improved economic conditions, most firms were still operating below pre-pandemic capacity. Only 1% of firms were operating at full capacity in Q1 2021, and 52% of firms expected to return to full capacity in 2022 or later.
• Sector and Size Differences: Manufacturing firms were more affected than services firms, and smaller firms were more impacted than larger ones. Export-oriented firms were also more likely to report adverse effects than domestic market-oriented firms.
• Technology and Sustainability Adoption: Nearly all MNE affiliates increased their adoption of digital technologies for remote working, e-commerce, and supply chain management. Additionally, 50% of firms increased their focus on sustainability and decarbonization, driven by both government policies and pressure from foreign parent companies.
• Investment Plans: 92% of firms expected no change in their parent company's investment levels in the host country over the next 1–3 years. Only 8% expected an increase, indicating a subdued outlook for FDI.
• Key Investment Constraints: Uncertainty about future demand and policy and regulatory restrictions were the main factors holding back investment. Over half of all respondents cited the relaxation of investment restrictions as a top priority for encouraging further investment.
• Supply Chain Adjustments: There was limited evidence of significant reorganization of supply chains. Only 15% of firms reported that nearshoring or reshoring was influencing investment plans, and 2% were changing their input sourcing countries.

Key Information

• Survey Scope: The survey included 300 MNE affiliates across 36 developing countries, evenly distributed across six regions and two sectors (manufacturing and services).
• Timing: Conducted from April 14th to May 14th, 2021.
• Recovery Trends: The recovery in demand and output was uneven, with some firms showing better resilience than others.
• Role of Parent Companies: Foreign parent companies played a crucial role in technology adoption and sustainability initiatives, providing financial support, guidance, and training to their affiliates.
• Regional Variations: The Middle East and North Africa (MENA) experienced the most adverse effects, likely due to reliance on oil prices. East Asia and South Asia also reported more challenges, possibly due to late surges in COVID-19 cases.
• Policy Influence: Government policies were a key driver of both technology adoption and sustainability measures. Policymakers are urged to consider adjusting investment policies and reducing operational restrictions to support future FDI inflows.

Main Viewpoints

• The pandemic's effects on MNEs in developing countries are still present but are gradually easing.
• The recovery in demand and output is showing positive signs, but full capacity utilization remains a distant goal for most firms.
• Technology adoption and sustainability efforts are increasing, supported by both internal and external factors.
• Investment plans remain largely unchanged, with uncertainty and regulatory constraints as major barriers.
• The pandemic has accelerated existing trends such as digitization and sustainability, which are likely to continue shaping MNE operations in developing countries.

Conclusion

The survey underscores that while the pandemic has had a significant impact on MNEs, there are signs of recovery in demand and output. However, the path to full capacity utilization and increased investment remains uncertain and is influenced by both macroeconomic conditions and policy environments. Governments and policymakers are encouraged to support investment through strategic reforms and reduced restrictions to foster economic recovery and growth in developing countries.