Rising foreign investments fail to translate to an increase in manufacturing: WSJ
By Yashasvini on Oct 19, 2021 | 04:39 AM IST
-- Businesses made new overseas investments valued at $852 billion from January to June, increasing by $373 billion, last year
-- Despite that manufacturing has failed to keep up with the rising demand
-- Greenfield investments were down 11% from 2020 over the first nine months of 2021
The first six months of 2021 witnessed a surge in foreign investment by businesses as economies around the world reopened. Despite that manufacturing couldn’t keep pace with the surge in demand.
The Wall Street Journal reported that the United Nations on Monday said businesses made new overseas investments valued at $852 billion in the first half of this year, an increase of $373 billion from the same period a year earlier.
The report noted that the growth was inequitable with foreign investment in rich countries doubling as compared with the first half of 2020, while the poor countries saw cuts in investments. Investment in the U.S. went up by 88%, while businesses ended their new commitments in the world’s poorest countries by 9%, as was stated at the U.N. Conference on Trade and Development.
UNCTAD expects the flow of foreign investment to exceed pre-pandemic levels this year itself, as opposed to its previous forecast of that happening in 2022 or later.
WSJ’s report stated that most of the rapid rebound was driven by businesses buying or merging with overseas rivals that don’t increase the world’s overall capacity to supply goods and services.
The report further elaborated the reason for the growth in manufacturing to greenfield investments which were down 11% from 2020 over the first nine months of 2021. Automotive, electronic, and chemicals sectors recorded the highest falls.
Conclusively, businesses aren’t expanding their capacities to meet the surge in demand that has resulted in inflation, although businesses have termed this shortfall as temporary.
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