brand logo

FDI outlook uncertain: EY survey

01 Oct 2021

Despite the achieved improvement in the adversely affected multinational enterprises (MNEs) due to the pandemic, the outlook for foreign direct investments (FDI) remains uncertain, a survey conducted by EY observed. The aforesaid survey was conducted by the EY during the period between the months of April and May 2021, for the World Bank’s (WB) quarterly pulse survey on foreign investment trends with the participation of senior executives from over 300 MNEs in developing countries. The survey report pointed out six insights that would contribute in identifying the recovery in order to make investment, business, as well as government policy decisions of the developing countries. Accordingly, the long-term outlook for foreign investments in developing countries are still subdued, reported by 92% of companies. The survey illustrated that the foreign parent of the company had no plans to increase or decrease the amount of investment in the host country in the coming one to three years. Thus, only 8% of companies expected investments would go up. Nevertheless, there was minor evidence that the companies expect to reorganise their supply chain. Moreover, uncertainty about the future is the highlighting factor which holds investments back, the survey demonstrated. For instance, 52%, which is more than half of the respondents, cited that relaxation of investment constraints would be an optimistic influence in encouraging investments. Therefore, government policies of these developing countries appeared to be a hindrance in attracting additional investments.   The survey observed that 93% MNEs have at least one Covid-19 impact during the first quarter of this year. In spite of such circumstances, in comparison to the demand, output, revenue, as well as profit effects, the impact is lower in average. The demand has been returned to that of Q1 of 2020, but 52% of companies reported higher input costs unlike in Q1 of 2020. The findings further showed that most companies still operate below 75% of the operating capacity of the pre-pandemic capacity while the recovery is gradual in 68% of the companies. Moreover, 52% of enterprises do not expect to return to full capacity till 2022 or even later.  Almost all MNE affiliates have, thus, increased their use of digital technologies in terms of becoming flexible in adhering to remote working, e-commerce, and supply chain management with the support of the foreign parent companies in directly transferring financial guidance and training.   EY is a member firm of Ernst & Young Global Ltd., a global organisation based in the UK.


More News..