Implications In Global Foreign Investment Trends

By M. Isi Eromosele

As the global economy began to recover in the middle of 2009, global companies began to revisit plans for investment and look to new projects in foreign countries. The return to foreign investment activities in the second half of 2009 indicated a more fundamental change in corporate investment behavior. The early 2000s was characterized by investment focused on expansion to cater to a growing and increasingly integrated global economy, as companies responded to changing market conditions.

A central feature of this market-driven investment growth was the continued geographic widening of investment, as the expansion into emerging markets accelerated. Particularly, China and India saw many foreign owned companies announce investments in their markets, creating hundreds of thousands of new jobs. Countries such as Vietnam, Bulgaria and Romania have ranked highly as investment destinations in recent years, while South American and African countries have also gradually increased their share of investment.

From the latter half of 2009, there has been a further shift in corporate investment behavior toward s a more strategic optimization of global footprints. Encouraged by signs of global economic recovery and improvements in financial conditions, many companies are now seeking to position themselves optimally for the new economic environment. This means the building of global corporate architectures that optimally balance the requirements for markets, resources, talent and cost, while being sufficiently flexible to react to unexpected changes in market conditions. We are now seeing more changes.

These changes have primarily involved a major review of how companies approach their global operations and more fundamentally, their business models. Faced with a more uncertain and complex environment in which to operate, companies are now aiming to capitalize on the global opportunities for operational excellence and cost efficiency, while incorporating sufficient flexibility into their operating models. This entails a shift towards a corporate architecture that is agile rather than just lean, responsive rather than simply standardized and internally and externally optimized rather than centralized.

The New Economic Environment

The changing investment patterns have significant implications for how the overall job creation is distributed among countries and regions around the world. The decline in foreign corporate investment has not been uniform across the regions of the world, with the Asia-Pacific and Europe experiencing particularly large declines while Africa and North America saw an increase in the absolute number of jobs created from foreign investment. Some countries which previously receive large foreign investments prior to the global financial crisis have seen dramatic declines. These countries include China, India, Russia and Romania, with the attendant job declines.

In contrast, some countries that offered a stable and attractive environment for consolidated operations, especially in services, have experienced growth in the overall number of jobs created as a result of foreign investment. It is clear that the metropolitan areas of emerging countries are becoming ever more important destinations for investment.

Sources Of Investment

The decline in investment activity has primarily being among companies from the more mature source markets, such as the United States, European Union and Japan. Corporate investors from emerging economies, notably China and India, have largely maintained their levels of overseas investment, during and despite the global financial crisis, and thus increased their overall share as sources of investment. The growing role of emerging economies in the global market for foreign investment is indicative of a more fundamental shift in the global economic landscape that has been accelerated as a result of the global economic crisis and its aftermath.

M. Isi Eromosele is the President | Chief Executive Officer | Executive Creative Director of Oseme Group - Oseme Creative | Oseme Consulting | Oseme Finance

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