Presentation by Dr Henry Loewendahl, CEO Wavteq

Coronavirus Impact on Global FDI

March 2020

WEBINAR

2

Table of contents

1: Current conditions 32: Impact on the FDI market 153: Recommendations 394: How the FDI market will change 47Question and Answer 50

1. Current conditionsView from our in-market FDI teams

Snapshot of as of mid-March 2020

“ Most manufacturing businesses are starting production again by mid-March. All exhibitions and conferences have been cancelled or postponed. External visitors are not allowed to visit companies. Meanwhile we are doing LG conferencing calls with the clients which seems quite effective and welcomed. Companies still maintain the same level of FDI interest but international travels are cut back so there is a delay in Landing projects. If the situation does improve, we might be able to receive roadshows from July. Meanwhile, I don’t advise any client to travel to China for business.

Tingmei Deng, Managing Director

China

5

EDO perspective on China (March 18, 2020) IMPACT OF CORONAVIRUS ON FDI

”In the short term for 3 months, most FDI activities will be postponed and stopped for the time being. I carefully assume the situation will start getting better situation from May, as the number of daily infected in Korea declines. Interestingly, Korean exports increased by 4.5% in February, even though exports to China fell by 6.6%

Young Ho Seo, Managing Director

Korea

”

The Japanese government considers March to be a turning point for the coronavirus to calm down and is taking many countermeasures such as stopping events, closing schools, and flight controls. On the FDI side, exhibitions and seminars in March are all cancelled and 70% of Japanese companies listed in the stock market, except for service industries, have already started work at home or will start it from second week in March

Masao Kumori, Managing Director

Japan

”

These are unprecedented times in our industry. The only comparable situation is the aftermath of 2008 financial crisis. There are short term risks in attracting FDI from the US with many trade shows and roadshows being cancelled. Having said this, outbound FDI from the US remains strong and we are further strengthening our social media interaction with companies and organizing conference calls with our government clients as an effective alternative to trade shows and road shows

Bruce Takefman, President

USA

”For the European market, most meetings and FDI events have been cancelled. We recommend our clients move towards a conference call lead generation model over the next few months, which works very well most countries in Europe, until the situation is back to normal in the longer term

Aofie Clarke, Senior Manager

Europe

”

The Indian market has been less impacted that other countries. While some global companies have instigated WFM most companies are still operating as normal. Companies are also receptive to virtual engagement. While the situation is likely to deteriorate as the virus spreads, we don’t see the outbound FDI market declining dramatically and indeed many Indian companies are looking to expand as the crisis is leading to increased demand for tech

Kavan Bhandary, Managing Director

India

”

Here in the Gulf, the situation is changing fast; we already see school-closures, prohibition of pilgrimage, interrupted airline connections, and the first cancellations of FDI related events. The strongest signals for recovery will be if Expo2020 stays on track to be opened on in October 2020 and if travel-bans are being retracted. We currently expect the situation to get worst in the short term and in the medium term for lead generation activities to resume in the Gulf

Ralf Dagenhardt, General Manager

Gulf

12

AUDIENCE POLLHow has the coronavirus impacted

your FDI activities?

13

Audience Poll Results: How has the coronavirus impacted your FDI activities?IMPACT OF CORONAVIRUS ON FDI

What has been the impact on your organization for travelling overseas to meet potential investors?

What has been the impact on your organization for attending overseas shows/exhibitions

1%

27%

72%

0% 20% 40% 60% 80%

No change in some trips

Cancelled some trips

Cancelled ALL trips

Source: Wavteq Webinar Poll, 12 March 2020 (186 EDO/IPAs respondents)

2%

28%

70%

0% 20% 40% 60% 80%

No change in attending

Cancelled some

Cancelled attending ALL

Source: Wavteq Webinar Poll, 12 March 2020 (188 EDO/IPAs respondents)

14

Impact on activities to attract FDI from 10 major source marketsIMPACT OF CORONAVIRUS ON FDI

USA

Chi

na

Japa

n

Ger

man

y

UK

Fran

ce

Italy

Indi

a

Kor

ea

Gul

f3 month forecast

Many events, exhibitions, and F2F meetings cancelledMost events exhibitions, & F2F meetings taking place

No events, exhibitions, or F2F meetings

6 month forecast

Source: Wavteq

2. Impact on the FDI market

16

AUDIENCE POLLThe number of FDI enquiries you

have received in 2020 to date

17

Audience Poll Results: The number of FDI enquiries you have received in 2020 to dateIMPACT OF CORONAVIRUS ON FDI

20%

33%

41%

6%

0% 5% 10% 15% 20% 25% 30% 35% 40% 45%

Declined by over 25%

Declined by 10-25%

Minimal Change

Increased

Source: Wavteq Webinar Poll, 12 March 2020 (178 EDO/IPAs respondents)

18

Global FDI trendsIMPACT OF CORONAVIRUS ON FDI

0

500

1,000

1,500

2,000

2,500

3,000

3,500

Jan-Feb 2018 Jan-Feb 2019 Jan-Feb 2020

# O

F PR

OJE

CTS

-15%

Greenfield FDI projects globally

Source: Wavteq estimates based on preliminary fDi Markets data for Jan-Feb 2020. Note does not include all FDI projects but includes most major investments and is a key barometer for the global FDI market

19

Impact on each region of the worldIMPACT OF CORONAVIRUS ON FDI

0

100

200

300

400

500

600

Africa Asia-Pacific EmergingEurope

Latin America &Caribbean

Middle East North America Western Europe

# O

F PR

OJE

CTS

Feb 2019 Feb 2020

Inward greenfield FDI projects by world region

-18%

-26%

-26%

-10%-12% -18%

-14%

Source: Wavteq estimates (for Feb. 2020), based on fDi Markets preliminary data. Note does not include all FDI projects but includes most major investments and is a key barometer for the global FDI market

20

Impact on 3 countries hit by the coronavirus IMPACT OF CORONAVIRUS ON FDI

0

10

20

30

40

50

60

China Italy South Korea

# O

F PR

OJE

CTS

Feb 2019 Feb 2020

Inward greenfield FDI projects by country

-69%

-64%

-40%

Source: Wavteq estimates (for Feb. 2020), based on fDi Markets preliminary data. Note does not include all FDI projects but includes most major investments and is a key barometer for the global FDI market

21

Future FDI plans of companies IMPACT OF CORONAVIRUS ON FDI

050

100150200250300350400450500

H2 2019 (av/mth) January 2020 February 2020

# O

F FD

I LEA

DS

-25%

Number of FDI leads tracked per month (companies with greenfield FDI plans)

Source: Corporate Expansion Monitor (Wavteq CIU – Corporate Intelligence Unit) and fDi Markets Investor Signals (Financial Times)

22

Impact of the coronavirus on company plansIMPACT OF CORONAVIRUS ON FDI

35%

25% 24%22%

18%

11%8% 6%

0%

5%

10%

15%

20%

25%

30%

35%

40%

Global Asia-Pacific WesternEurope

NorthAmerica

EmergingEurope

Africa Middle East LAC

% S

HA

RE

% of Companies looking at each world region for future FDI (Jan-Feb 2020)

Source: Wavteq based on fDi Markets (investor signals)

23

Sector risk assessment of coronavirus – short termIMPACT OF CORONAVIRUS ON FDI

Major decline in FDI • Tourism• Entertainment• Retail • Luxury goods• Aviation • Real estate • Coal, Oil & Gas

Minimal decline FDI• Agri-business• Consumer goods• IT• Automotive • Logistics• Pharmaceuticals• Medical Devices• Financial services

Growth in FDI• eCommerce• Digital technology• Cybersecurity • Biotechnology • Healthcare• Mobility • R&D• Renewable energy

24

Biotech - vaccinesIMPACT OF CORONAVIRUS ON FDI

Gilead Sciences

25

Healthcare - eHealthIMPACT OF CORONAVIRUS ON FDI

Teladoc Health

26

Food & beverage – basic productsIMPACT OF CORONAVIRUS ON FDI

27

Mobility and R&DIMPACT OF CORONAVIRUS ON FDI

In separate announcements this week Toyota, Nissan Motor Co and Honda Motor Co said they would temporarily halt North American factories to protect worker health and amid an expected hit to demand.

They also suspended production at several plants in Europe, with Honda closing its facility at Swindon in Britain until at least 5 April.

The virus outbreak is not expected to hit spending on research into advanced technologies, such as autonomous driving and electric cars.

Source: FT (March 19, 2020)

28

Digital technologies – edtechIMPACT OF CORONAVIRUS ON FDI

Chinese Nasdaq listed e-education firm

29

Digital technologies – eCommerceIMPACT OF CORONAVIRUS ON FDI

In California alone, tech companies were looking to fill 15,852 jobs in the second week of March — down only slightly from the week before and nearly three times the level from a year ago, ZipRecruiter data show (Source: FT, March 19, 2020)

30

Digital technologies – video conferencing IMPACT OF CORONAVIRUS ON FDI

Zoom – doubled in value to $35 billion – worth more than FiatChrysler

31

AUDIENCE POLLHow do you expect FDI in your

location to change in 2020?

32

Audience Poll Results: How do you expect FDI in your location to change in 2020?IMPACT OF CORONAVIRUS ON FDI

20%

52%

23%

5%

0% 10% 20% 30% 40% 50% 60%

Decline by over 25%

Decline by 10-25%

Minimal Change

Increase

Source: Wavteq Webinar Poll, 12 March 2020 (199 EDO/IPAs respondents)

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Impact of coronavirus on trade, FDI, and M&AIMPACT OF CORONAVIRUS ON FDI

• World exports forecast to decline $1.28 trillion in 2020 a more than 5% decline (Allianz)

• Greenfield FDI is estimated to be down by 15% in 2020 YTD (Wavteq/FT)

• Cross-border M&A <$10 billion in February from normal monthly values of $40-50 billion (UNCTAD)

34

Scenarios for impact of coronavirus on greenfield FDI in 2020IMPACT OF CORONAVIRUS ON FDI

15,550 15,85416,602

18,385 18,278 18,44417510

16203

14622

2015 2016 2017 2018 2019 IMF, Pre-Coronavirus

By Summercrisis over

By Fall crisisover

GlobalRecession

+0.9%

-4.2%

-11.4%

-20%

+18.2%

Source: Wavteq. Number of FDI projects pre-2020 sourced from fDi Markets, Financial Times. Note does not include all FDI projects but includes most major investments and is a key barometer for the global FDI market

2020 2020 2020 2020

# greenfield FDI projects

35

Scenarios for impact of coronavirus on overall FDI flows in 2020IMPACT OF CORONAVIRUS ON FDI

Source: UNCTAD, March 2020

Strong impact on reinvested earnings and M&A bringing

down FDI flowsIn the US, federal regulators have moved to accepting electronic filings instead of hard copies as their staff work from home, with the Department of Justice requesting a 30-day extension on some merger review deadlines and the Federal Trade Commission saying companies will not be fast-tracked even for deals that pose no issues.

Competition regulators in Brussels have recently suspended in-depth investigations of a number of proposed deals and have also asked companies looking to complete mergers to delay starting the official process (Source: FT, March 19, 2020)

36

How quickly will economies recover? Evidence from SARSIMPACT OF CORONAVIRUS ON FDI

Source: BCG

37

A lot depends on China’s recovery – watch China carefullyIMPACT OF CORONAVIRUS ON FDI

Source: BCG

38

Sector risk assessment if coronavirus triggers a global recessionIMPACT OF CORONAVIRUS ON FDI

High risk•Real Estate•Mining •Building Materials•Metals•Hotels & Tourism•Auto Components•Electronic Components•Transportation•Aerospace

Medium risk•Industrial Equipment•Financial Services•Software & IT•Business Services•Chemicals•Coal, Oil, Natural Gas•Consumer Products•Automotive OEM

Low risk•Pharma•Medical Devices•Telecom•Food & Beverages•R&D•Leisure/Entertainment•Textiles•Renewable Energy

• Wavteq assessed the last 2 global recessions (2001-02 and 2008-09) to understand the impact on sectors.

• We classified sectors into:1. High risk = 20%+ decline

in FDI job creation2. Medium risk = 5-20%

decline in FDI job creation3. Low risk = growth or

minimal decline in FDI job creation

15-20% decline in capital investment and job creation from FDI if a global recession

Source: Wavteq

3. Recommendations

40

1. Capacity buildingRECOMMENDATIONS FOR EDOS AND IPAS

• Perfect time to focus on professional development and ensure all your team are fully up-to-date and trained in FDI and investment promotion and internal processes and systems

• New learning management systems (LMS) enable your team to get trained even while working at home

• As an example, Wavteq Institute has launched an “E-Learning and FDI Certification Platform" providing training and certification across 11 main courses and access to industry trends and market insights

https://www.wavteq.com/wavteq-institute/elearning/

https://www.youtube.com/watch?v=kden77DOq-I

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2. Investment promotion strategy (IPS)RECOMMENDATIONS FOR EDOS AND IPAS

Update your IPS• Market strategy – target highest potential markets

and not be over-dependent on one major source• Sector strategy – adapt target sectors to global

market conditions and outlook• Aftercare/BRE – 61% FDI flows in developed

markets is reinvestment and 40% in developing • Go-to-market strategy – strengthen virtual LG and

virtual reps & reduce dependence on shows/events• Financing - Government support for outbound FDI in

EMs is growing rapidly as are donor funds for FDI

Download Online: https://www.wavteq.com/publications/special-reports/#publication

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3. Digital promotion RECOMMENDATIONS FOR EDOS AND IPAS

• The website is the most powerful marketing tool to promote a location

• New technologies like GIS Mapping and VR allow for virtual site selection

• Innovative locations are offering online company registration

• Social media and video conferencing can be used to engage with companies

• Implementing a fit-for-purpose CRM can increase FDI performance

GIS Planning

Golden Shovel

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How other EDOs/IPAs are respondingRECOMMENDATIONS FOR EDOS AND IPAS

“Despite the continued global spread of COVID-19, business has continued to move forward in Dubai. With reduced business travel and face to face meetings, digital and electronic forms of communication enables us to continue to operate and deliver our work. At DAFZA, we have created Smart Services that allow companies to engage with us online, as well as complete applications and registrations from anywhere in the world. As such, setting up business in Dubai through DAFZA continues to be an efficient and streamlined process. We look forward to continuing our work with customers and partners from all around the world” Naveed Noor Ahmed, Outreach and Demand Generation, DAFZA, Dubai

44

4. Corporate intelligence – stronger focus on strategic targeting RECOMMENDATIONS FOR EDOS AND IPAS

Over 300 million companies 1,000 of companies Strategically identified companies with best location

fit and potential for FDI

Use the time to identify actual decision makers and

engage digitally

45

4. Corporate intelligence – how to strategically identify target firmsRECOMMENDATIONS FOR EDOS AND IPAS

Hot LeadCurrent FDI strategy or

expansion plan FDI SignalsNew financing for international expansion

Value ChainsGlobal Footprint analysis of operations

Combat IndicatorsSize, growth, financing, and R&D spending of the company

Import SubstitutionExports to the country or region

Aftercare/BREExisting investment in the location

Impact investmentStrong CSR, standards, and

focus on sustainable FDI

Seminars/Events

F2F Meetings

Trade shows

Familiarization tours

Meeting-based

Surveys

Direct-calling

Social Media

E-campaigns

Desk-based

46

Each major FDI source market will recover at different times so EDOs and IPAs need to be ready with a flexible approach to put resources back into

the right market at the right time. We expect that starting 3 months from now in-market FDI attraction

activities can resume in some countries

Key recommendation for EDOs and IPAs

4. How the FDI market will change

48

Impact on FDI longer termHOW THE FDI MARKET WILL CHANGE

Shift to regional rather than global strategies for sourcing and value chains

Samsung will shift its domestic phone production to Vietnam due to Covid-19,

disrupting production of its premium phones

Around 1% of textile orders are shifting from China to Turkey, adding around $2

billion to textiles exports from Turkey

Relocation out of China to accelerate, a trend that was already happening due to rising relative Chinese costs and the US trade war. Also more FDI from Korea and Japan.

The trend for site selection to become more virtual will accelerate

Companies will re-evaluate where they source products and where they locate each part of their value chain; regional strategies will lower risk and will be encouraged by governments

Keep healthy Keep safe

Keep on attracting FDI

THANK YOU FOR YOUR TIME – NOW Q&A

Q&A

51

Questions & Answers from attendees HOW THE FDI MARKET WILL CHANGE

IPA/EDO question: What could be the impact on FDI of the recent decision of President Trump to stop European people traveling to US.

Wavteq answer: The policy is not surprising in our view given the spread of the virus from Europe and the US is not the only country nor the first; other countries like Vietnam and Argentina have put in place restrictions on European visitors. The impact will mainly be seen on the airline and tourism and related industries and will further reduce FDI in these sectors in the short term. For major European companies with subsidiaries in the US we don’t see much impact on FDI as companies can use digital technologies for meetings – and already were doing this and traveling far less anyway; many major companies had already banned all travel. For companies without operations in the US, it is for sure more challenging now to scope out FDI opportunities, conduct due diligence on the ground, and make the necessary deals and transactions to implement a project. In the presentation, we stated that virtual site selection will become much more important and the role of the site selection community and EDOs/IPAs in providing digital and “smart” services to companies will be essential to facilitate investments. As we outlined in the presentation, EDOs/IPA should not only strengthen digital markets and engagement with potential investors but also embrace new technologies and really strengthen their value proposition materials so investors can make decisions.

52

Questions & Answers from attendees HOW THE FDI MARKET WILL CHANGE

IPA/EDO question: Can you navigate us more through sector specific impact of Corona virus on African IPAs?

Wavteq answer: Africa had not been directly impacted by the Coronavirus to the extent of Asia, Europe, and North America. This has enabled business to continue operating as near as possible to normal, creating stronger economic growth dynamics compared to most of the rest of the world. This should drive FDI into Africa across all sectors that are primarily serving the African market. However, Asia, Europe, and North America are the major source of FDI and major export markets for Africa. Declining demand from these regions, especially with a global recession which seems increasingly likely, will impact sectors in Africa which are primarily exporting to these regions and therefore FDI in these sectors. Travel restrictions and the crisis situation in many major source markets will also reduce FDI into Africa in the short term. The positive trend is that the situation in China appears to be improving significantly and China is the biggest source of FDI to Africa and a major export market. As we outlined in the presentation, we would recommend an agile approach to attracting FDI and if China recovers first then we would recommend putting more efforts on China. We would recommend focusing on sectors serving the African market, growth sectors in your country and in Africa, and export sectors serving countries recovering fast from the coronavirus.

53

Questions & Answers from attendees HOW THE FDI MARKET WILL CHANGEIPA/EDO question: MENA region and especially North Africa has not seen a very big Corona cases compared to China Europe and so on are we expecting an increase of FDI to this region especially taking into consideration what's happening in ChinaWavteq answer: We agree that the MENA region is in quite a special position right now – and I would also certainly add Turkey to this as well. Not only has the impact of the coronavirus been much lower to date than most of the rest of the world but FDI was already gravitating to this region, which offers large and growing markets and labour force, good quality of education, skills, and infrastructure, relatively low labour costs with high productivity levels and, critically, nearshore access to the European market. Brexit was also already leading many of the major manufacturing companies in the UK (Japanese investors in particular) to look at the MENA/Turkey/Eastern Europe region as an alternative production base. We have recently worked on behalf of IPAs from the region with some of the largest manufacturing companies in China and Japan to invest in MENA with some very large investment successes and certainly Chinese and Asian companies are increasingly aware of the location advantages of being based in this region. As we expect, based on current data, that China will recover first from the Coronavirus crisis followed by Japan we do see substantial FDI growth potential for the region and that the Coronavirus will actually lead to increased FDI. In the short to medium term this does depend on the ability of governments in MENA to contain the Coronavirus so its business as usual as much as possible for foreign investors. In the longer term, when vaccines come in, FDI will continue to grow in the MENA/Turkey/Eastern Europe region.

54

Questions & Answers from attendees HOW THE FDI MARKET WILL CHANGE

IPA/EDO question : For small island economies depending on FDI for job creation and technology transfer as well as having Europe as the main market, what are the key investment strategies for investment attractionWavteq answer: We have substantial experience attracting FDI to small island economies from across the Caribbean and Central America, in AsiaPacific, and in Europe. Each island economy is different and has different opportunities but generally tourism is a critical industry in most small island economies and has a major spill-over impact on related and supporting industries. The impact of the Coronavirus on the tourism sector is unprecedented and will be impacting all economies dependent on tourism. For small island economies – and large-scale tourism destinations like Thailand and Tukey – it’s a very difficult trade off policy makers are having to make between protecting the country from Coronavirus vs. critical importance of the tourism sector. Its actually more likely to be the policy decisions made by small island economies rather than a decline in demand from Europe and other markets will which impact the industry and FDI. Of course, this is all short to medium term - next year there will be vaccines. In terms of general FDI levels and technology transfer, we do see opportunities for small Island economies to attract more FDI in the longer term as a result of the Coronavirus as companies look to balance risks map out their value chains in each region rather than globally. The whole area of sustainable FDI is also an opportunity for small island economies to attract FDI and technology transfer. Companies are ultimately driven by market opportunities, return on investment, and risk management and small Island economies can still attract FDI, including from Europe, if they offer this potential.

55

Questions & Answers from attendees HOW THE FDI MARKET WILL CHANGE

IPA/EDO question: How do you think Coronovirus will impact credit risk analysis and loans to FDI projects?

Wavteq answer: We mentioned in the presentation that there is growing home country government support for financing FDI in developing countries led by China’s Belt and Road and then followed by the Japanese and UK governments and most recently the US with a huge $60 billion fund provided by the International Development Finance Corporation. Other countries like Germany and as well as IFIs are also providing loads. We actually see the opportunities for developing countries to attract FDI to developing countries as better than ever before. In terms of the impact of the Coronavirus on credit risk analysis and loans we don’t see any significant impact as next year vaccines will come in. The world’s major Central Banks are also likely to pump trillions of dollars in the markets, which will enable banks to keep lending. If the last 2008-09 financial crisis is a guide, this actually led to a boom of investment into emerging market which offered strong growth potential.

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Questions & Answers from attendees HOW THE FDI MARKET WILL CHANGE

IPA/EDO question : What sort of incentives have you seen by developed country governments to attract reshoring?

Wavteq answer: Wavteq actually developed the world’s only global database of incentives packages offered to companies globally and related incentives policy. Our IncentivesFlow databases tracks daily incentive deals for greenfield investment projects and expansions. We therefore have unique insights into the incentives programs around the world – and which ones are actually bringing in investment. On the Wavteq Institute page, you can download several of our publications on incentives for free. We also have worked directly with major MNCs conducting incentives assessments globally as well as with EDOs and IPAs promoting new incentives programs. Generally, from all the data we have collected and from real life experience, incentives do not make a company reshore their operation but they might tip the balance between reshoring to your location vs. competing locations. The incentives need to tip the balance will depend on the sector and type of operation as well as on your location’s competitiveness for the project vs. competitors. In some cases, we have been able to attract strategic investment projects from Fortune 1000 companies using a new incentives package as the carrot. These cases are generally when a location offers an exceptional incentives package which none of its competitors offer and its of a scale which companies just cannot ignore.

57

Questions & Answers from attendees HOW THE FDI MARKET WILL CHANGE

IPA/EDO question : As a French IPA we have seen a significant decline of our FDI projects from the due to Brexit and now adding the Covid19. When do you think things would get back to normal in the UK?Wavteq answer : Brexit encouraged significant outbound UK FDI and relocations from the UK to Europe but this FDI was highly concentrated in major financial hubs and Ireland and Netherlands. Brexit is done but the trade deal is not, and this is what is holding back general FDI from the UK to Europe, which your location seems to have been impacted by. We expect the trade deal and Covid19 to both be sorted out around the same time and outbound FDI from UK will really grow. As we are talking only about end of this year/early next year we would recommend generally that EDOs and IPAs prepare now for the big upswing in UK outbound FDI expected; and in quite a few sectors the UK is one of the world’s top 3 outward investors. We would also recommend that you do deep dive corporate intelligence now on the UK, which certainly is possible for your main target sectors and sub-sectors where there is a close alignment between your location strengths and opportunities and UK foreign investors but in terms of the full impact of Brexit on UK FDI in Europe we still do not know; this depends on the trade deal. As the trade deal becomes clearer, alI IPAs in Europe need to be ready to act on the FDI opportunities this will create from both UK firms and foreign companies in the UK who will relocate/expand into Europe.

58

Questions & Answers from attendees HOW THE FDI MARKET WILL CHANGEIPA/EDO question : How do you see UK being impacted (over next 3 years) as a combination of Brexit and Coronavirus?Wavteq answer : As per the previous response on UK outbound FDI, on the inbound FDI side unfortunately it is still near impossible to say forsure until the trade deal between the UK and EU (most of all) and the UK and major third countries (i.e. G20 countries) is clear. But we can make some assumptions. We published the first paper on the impact of Brexit on FDI into the UK shortly after the Brexit vote. Many of our scenarios and recommendations we still think apply today – especially as we still don’t know what the final deal will look like. You can download our report for free from the Wavteq Institute webpage. In theory, leaving the EU with only a basic trade deal will lead to reduced FDI as companies cannot serve the huge EU market so easily from the UK, end of free movement of people from EU to UK will reduce talent pools and reduce FDI, and the relocation of key European institutions from the UK will also reduce FDI. On the other hand, if companies based in Europe have less easy access to the UK market they will have to set-up shop in the UK – this will be import-substitution rather then export-oriented FDI. The overall impact is certainly negative on FDI in the UK but then this also depends on what policies the UK government puts in place regarding strengthening the supply-side competitive advantages of the UK and enabling more talent to come to the UK from anywhere in the world – and how effectively these policies are actually implemented. We also believe for the last decade the UK has had seriously weakened institutional capacity for FDI attraction outside Scotland and NI and especially in England, which has contributed to concentration of activity in London and the SE and also perhaps the Brexit vote outcome. We would recommend the re-establishment of Regional Development Agencies which have real resources and capabilities to attract FDI and can make an impact in the market. The UK stands out with its lack of regional institutional capacity to attract FDI compared to other major countries and this impacts not only FDI attraction but other vital economic development services. UK IPAs cannot compete against its larger and better funded competitors in Europe and its peers in US, Canada, and Australia and is over-dependent on DIT and the territorial agencies. We also think the UK government has an opportunity for a total overhaul of business incentives away from the EU policy, which is an outdated model from the last Century. The Coronavirus impact is impact is short to medium term and the UK policy – as with Germany, Australia, and US – seems to be damage limitation and let business continue. We don’t know yet if this policy will work but we do know that vaccines will be available at some point next year so the impact on FDI is short-lived unless we are tipped into a global recession in which case our presentation outlines the likely impact on FDI and different sectors. The UK may, however, miss out on relocation of value chains to Europe as companies reduce dependence on Asia as most likely they will want to be in the EU.

59

Questions & Answers from attendees HOW THE FDI MARKET WILL CHANGE

IPA/EDO question : How to attract FDI through the social mediaWavteq answer : Social media is growing in importance faster than any other marketing technique for promoting a location. Social media allows you to: • Instantly communicate the most reliable, up-to-date information

to potential investors.• Reach audiences who have self-selected into groups based on

topics of interest.• Dramatically expand your reach (messages go global within

seconds)• Engage with investors in organic and direct ways impossible with

legacy marketing media• Interact with people on their mobile phones for improved targeting

and tracking. • There are many social media platforms and you need to

decide which social media platforms to use in each targeted country and how to provide content in local languages.

Facebook Twitter LinkedIn

YouTube

WeChat Weibo

Major social media channels include:

Pinterest

Instagram

Snapchat

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Questions & Answers from attendees HOW THE FDI MARKET WILL CHANGE

IPA/EDO question : Regarding the Tourism industry: Do you foresee growth in smaller "mediated" tourism vs. mass tourism like Cruise ships etc.?

Wavteq answer: Right now are unprecedented times for the tourism sector, impacting both small and mass tourism in terms of visitor numbers. But, in terms of investment companies making FDI decisions based on the long term, and it takes a year or more to build a new hotel so by the time new hotels are operational the tourism industry should have recovered from the Coronavirus travel restrictions although investment will be impacted if there is a global recession. We still see larger tourism investments being announced in Italy this week, as an indication that FDI is still taking place. In terms of the type of tourism, Wavteq is doing extensive work on tourism investment attraction and there are many trends taking place which will influence the type of demand and therefore the type of investments needed to meet the evolving demand. Generally, an ageing population is leading to strong growth in the cruise sector, while the younger population are demanding more sustainable tourism.

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Questions & Answers from attendees HOW THE FDI MARKET WILL CHANGE

IPA/EDO question : in the long run, do you expect this covid-19 emergency to strengthen the argument behind protectionist policies and push governments across the globe to strengthen local supply chains and promote reshoring -possibly on the ground of national security?Wavteq answer : We expect Covid-19 to lead to companies to re-evaluate their supply chains and value chains and at the same time governments to place stronger focus on local supply chains and reshoring, with national security concerns driving this. Protectionism maybe used by large countries which have the economies of scale for local production but in practice not many countries can do this and regional trade agreements and WTO rules will also limit what’s possible. Our view is that companies will adopt more regional strategies equalizing their value chains in each region with the size of each region’s market, which will lead to some significant global shifts in FDI, and which will reassure governments. Protectionism is maybe a higher risk if a crisis hits your country and all other countries are protectionist. Regional strategies and regional coordination between countries we see as the most likely scenario.

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Questions & Answers from attendees HOW THE FDI MARKET WILL CHANGEIPA/EDO question: How should Economic Developer's think about/evaluate the information being provided by various nation's governments? EFG USA and UK report relatively few cases but also are lax in testing, vs. Italy/China do extensive testing and report high case rate? Should a higher risk % be assigned to USA/UK?Wavteq answer: This is not our domain expertise, but we do have FDI teams in 12 countries globally so have many different perspectives on this! What is clear is that different countries are taking different approaches, which one might expect given the very different circumstances of each country. The UK maybe more lax but the UK is an island country so doesn’t face the same challenges as continental Europe, has the world’s largest health service, and is home to the world’s largest vaccine company and, generally, people listen to government policies e.g. self isolation etc. The UK is more confident in can handle Covid-19 through damage limitation rather than containment. The situation in Italy, for example, is quite different with the second oldest population in the world and a much more family and communal culture so is much more vulnerable. And Northern Italy is at the crossroads of Europe. The actions of China, most of all, and also Italy and Korea have undoubtedly reduced the spread of Covid-19, whereas other countries like UK and USA are later in the infection cycle and expect they can manage the pandemic. Developing countries generally have much higher risks if there is rapid growth in contagion in their countries and they are taking more drastic action. This can also benefit them economically if their businesses remain open and export orders and investment shifts to them. We have seen this very clearly in the case of Turkey, which is focused on containment and has led foreign companies to relocate $ billions in export orders to Turkey. For developed economies and cash rich emerging markets, they can access capital markets far easier to fund monetary and fiscal stimulation (as seen this week in the US and UK on a very large scale) to keep the economies going despite spread of the Coronavirus.

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Questions & Answers from attendees HOW THE FDI MARKET WILL CHANGE

IPA/EDO question: Do you see a rise in "near shoring" and "Onshoring" in the North America and non-China Asia/Pacifc etc?

Wavteq answer: Yes we do, and this trend was already happening with the US trade war with China and rising relative costs in China. What we think has changed with the current crisis is that near shoring / onshoring will also accelerate from other countries like Japan and Korea. Also, what was happening before Coronavirus was that FDI was relocating to other countries in Asia (especially Vietnam) not so much North America and Europe, and we presented papers on this recently at both UNESCAP and IEDC (available to download from Wavteq Institute publications). Now, we think many companies will consider the concentration of all production in Asia as a risk and will regionalize parts of their value chain. Asia still has enormous competitive advantages for medium and high-tech production - and comprises the world’s largest, most populous, and fastest growing market - so this will not be an exodus of investment but there will be more opportunities.

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Questions & Answers from attendees HOW THE FDI MARKET WILL CHANGE

IPA/EDO question: Because of the limitations from travel, prospecting, and slowing of external deals, do you think that IPAs and EDOs will focus more support on their existing businesses and industries that will also be impacted by coronavirus?Wavteq answer: Absolutely, this is FDI 101; aftercare/BRE is always very important but in a downturn is even more important. Our presentation showed some startling facts on how important existing investors are for FDI. However, many EDOs and IPAs do not have an aftercare/BRE team or have a team but are more reactive and are focused on problem solving. The challenge – and opportunity – for EDOs and IPAs is to develop a proactive Investor Development Program. Such a Program can make a critical difference between whether or not your location wins or loses investment in a crisis and we cannot underestimate the importance of it. In terms of where your EDO or IPA puts your resource right now, I would be saying on average you could be looking at 50% aftercare/BRE and 50% new business (in a non-crisis situation we would typically advocate 30:70). As new business development has to be primarily virtual at this time, this does free up considerable resources for existing investor development. But the resource allocation does depend on the size of your existing investor base – the bigger it is the more resources are needed.

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Thank you!WAVTEQ CONTACTS

HENRY LOEWENDAHL Founder & CEO WAVTEQ

henry.loewendahl@wavteq.com+44 (0) 7557 965 393LinkedIn: Henry Loewendahl

+44 7557 965393info@wavteq.com@wavteq/company/wavteq

Watch Live Recording of Webinar from 12th March 2020