Which sectors retain potential for FDI amid the current global crisis

We are all affected by the implications of COVID-19 pandemic. Business operations are disrupted with not much clarity about what next. However this period of profound transformation may well be a huge opportunity for some industry sectors.

In an interview for fDi Magazine, Henry Loewendahl, founder and CEO of foreign investment advisory firm Wavteq, talks about those sectors that are expected to shore up global flows of FDI, which will inevitably take a hit, and remain a possible target for investment promotion agencies (IPAs) and economic development organisations (EDOs). 

Th following five sectors are leading the list:

1. E-commerce 

“E-commerce is an easy guess because people now have to shop online,” says Mr Loewendahl. “Amazon has just announced 100,000 new jobs in the US, that’s a huge expansion, which will feed throughout the whole value chain.” The company also announced an investment of $350m to raise pay across its existing workforce in the US, Canada and Europe.

2. Digital technologies 

“The  coronavirus emergency will force people to work from home on a scale that is unprecedented,” says Mr Loewendahl, with companies active in remote teleconferencing and ICT services standing out as clear winners, as well as online content providers such as Netflix. 

Overall, companies providing software and IT services have produced more than half of the investment signal tracked by foreign investment monitor fDi Markets in the first two weeks of March. 

3. Cybersecurity 

“Cybersecurity was already the hottest sub-sector of FDI even before the crisis started, and suffers from the biggest skills gap in the whole market,” explains Mr Loewendahl. 

The demand for cybersecurity solutions will spike up at corporate and government level, as well as individual level as countries like Israel are following in the footsteps of Taiwan in allowing the tracking of smartphones of people suspected of being infected with coronavirus. 

4. Healthcare and biotechnology 

“Everybody is searching for a vaccine and healthcare services at the moment,” Mr Loewendahl says. 

The coronavirus crisis has put an unprecedented strain on healthcare systems across the globe and governments will crowd in any available resource from public and private healthcare service providers to deal with it.  

Biotech is the hottest industry at the moment. The global rush to find a vaccine is pumping hundreds of millions of dollars into companies in the sector. There are 35 biotech firms and academic institutions trying to develop a vaccine against Covid-19. Boston-based Moderna has already started human trials in Seattle, whereas German BioNTech announced a partnership with Pfizer that pushed its share price up more than 70% in US trading on March 17. 

5. Renewable energies 

“Global warming and environmental risks have not gone away, they are just more difficult to find in the press,” says Mr Loewendahl. 

Sector-wise, renewable energy was the sixth largest recipient of FDI in terms of number of announced projects and the second largest for capital expenditure in January, according to figures from fDi Markets.  

These sectors provide some guidance for IPAs and EDOs currently trying to navigate today’s troubled waters. However, the typical long-term approach of foreign investors leaves the door open for IPAs to promote investment in sectors that are currently the hardest hit.

“In the short-term it’s about survival. In two to three years time we will have a vaccine and things will be back to normal,” Mr Loewendahl concludes.