Trade Horizons’ Market Entry Blog

Supply chain issues caused by the pandemic touched every area of business and personal lives. GlobalData created the supply chain vulnerability index map showing US as most vulnerable and Germany as least vulnerable. GlobalData is headquartered in the United Kingdom so that should clear up any doubts about independence. The UK is apparently somewhere towards the lower end of vulnerability. Since the pandemic we have seen nations wholesale decoupling their supply chain from China to avoid overreliance on it and a repeat of the troubles during COVID.

A new study has shown that projects that mention Environment, Social & Governance are driving FDI at an increasing rate across the globe. Sustainable investing can bring about sustainable development especially in emerging economies. Usually, the result of FDI is a degradation of natural resources or ecosystems. The race to net zero brought about by climate change research resulting in organisations and countries committing to reduce their damage to the atmosphere and environment has accelerated DI as it gives the world a new topic to develop and invest in. GlobalData’s Company Filings Analytics Trends & Signals Q1 2022 report measures mentions of the UN’s Sustainable Development Goals (SDGs) in FDI projects which was 23% higher in 22Q1 that 21Q4.

You may have seen the headlines – Nigeria won $223m FDI in the first 5 months of 2022. The real picture, as usual, is a little more complex. Although this figure is up on the 2021 amount in the same period, it is down almost 30% on the same period in 2020. Now whilst global FDI is declining across the board, in 2021 Africa itself reported $44bn increase in 2021 from 2020. West Africa FDI, where Nigeria is located, increased by $5bn from $9bn to $14bn. Whereas Nigeria reported a decline from 2020 to 2021. Predictions for 2022 are dire due to political instability and rising interest rates leading to a loss of benefit for portfolio investors who use arbitrage when interest rates are low at home, to invest in emerging economies. That opportunity now becomes lost because high interest rates in the home country deletes any benefit.

Investor state arbitration is when a company claims a breach of a state’s obligation to protect the investment it made when the company entered the country. A claim can be made if a bilateral investment treaty exists between the headquarter country and host country, and in some cases if a free trade agreement exists. If you enter a country that has a bilateral or free trade agreement with your home country, you may be able to enact investor state arbitration if the host country does not fulfil its obligations to you which is cheaper faster and less public than litigation.

In June 2022 Pakistan has attracted the highest level of FDI since October 2020 according to a report. The results indicate recovery after the pandemic. Pakistan has had a troubled few years what with the latest development Prime Minister Imran Khan forced out of the position to be replaced by the brother of the Pakistan Muslim League-N (PMLN) candidate accused of corruption and the economic crisis including dwindling foreign currency reserves and higher fiscal and current account deficits.

The Chilean Central Bank has reported record-breaking FDI levels in the first 6 months of 2022 with levels 66% above the same period in 2020. US$13.7 billion is the highest level ever recorded. Most popular sectors are retail, manufacturing and wholesale. Around 65,000 companies in Chile are financed by foreign capital which equates to around 10%. One United Nations report says that the increase is fuelled by several large acquisitions and renewed interest in mining projects.