The coronavirus pandemic has rained havoc across the world, in both the health and the economies of countries. FDI is no exception. Global value chains have been massively disrupted, industries that have been shoring up global FDI for years are now facing a daunting revenue-zero scenario – notably tourism – while demand for digital services is rocketing, as billions of people are forced to remain at home.

Governments everywhere have had to reset and reboot their societies to address the health emergency caused by the coronavirus, and have been trying to do so without wiping out their economies in the process. IPAs and economic development organisations (EDOs) have been instrumental in this effort. 

“We have to adjust to the new shut-in economy, where that way of doing business based on personal relations will not be there any more,” Giovanni da Pozzo, the chairman of Promos, Italy’s agency for export promotion and investment attraction, told fDi three weeks into Italy’s nationwide lockdown announced on March 10. “We are focusing on innovative projects to encourage companies to develop innovation and digital platforms that will put them in a position to do business in a world where physical contact is more complicated.” 

Production shift

While agencies such as Promos have been focusing on assisting the domestic and international SMEs that make up the core of the Italian economy, other agencies around the world have been busy on the frontline of the health emergency. 

“Our mission at the moment is to make business immune to Covid-19,” says Deepak Bagla, CEO of Invest India, as the agency launches a ‘business immunity’ portal to promote knowledge and experience sharing, as well as to match the national need for medical and protective equipment with what is available in the market. India declared a nationwide lockdown on March 24.

“We are helping with existing business operations and shifting production lines to create the products the country needs at this moment. Steps have to be taken in a rapid manner,” adds Mr Bagla. “In times like these, measures and execution have to happen at a much faster pace than normal. How do we ramp up existing capacity to meet the demand of things such as face masks, hand wipes or intensive care unit ventilators? Again, we have to think out of the box.

“We are currently reaching out to the automotive industry to see whether it is in a position to produce ventilators, or to towel producers for face masks. We have some 50 million SMEs in the country, and a large part of them are in the medical supply chain. The challenge here is multiple. We need them to ramp up production, but they are facing financial constraints in these circumstances. Besides, we have to find ways to move their production across a country in lockdown.” 

Amid plummeting levels of production activity, foreign investors have been answering the call, in India as elsewhere. Among others, Maruti Suzuki, the Indian subsidiary of Japanese car and bikes manufacturer Suzuki, announced on April 1 it would start producing ventilators for intensive care units (ICUs). In Serbia, Canadian automotive supplier Magna asked its trim team to work on producing face masks, rather than car seats, for some days at the end of March. 

Swift adjustments

EDOs in the US and IPAs in Europe have also called their contacts in China and south-east Asia to source the crucial equipment needed elsewhere. “A few weeks ago, one of the US state EDOs we work with approached us, enquiring if we could help them source protection and medical equipment in the region,” says John Evans, founding partner and managing director of Tractus, an Asia-focused strategy and operations management consulting firm. “We were already under contract with them for FDI and trade promotion services, and they asked us to shift some hours to this new mandate.” 

Agencies around the world have been rapidly adjusting their mandates, while also facing the internal challenge of managing a workforce widely stuck at home. This has put the spotlight on those countries that have focused on digital infrastructure as a main pillar of their investment proposition. 

“I think this crisis gives very good insight into [whether] you are really ready for a digital environment. As a manager, I was a bit cautious that maybe not everything is ready for a digital environment, but it looks like a lot of things are already working,” says Mantas Katinas, general manager of Invest Lithuania. 

If Baltic countries are often early adopters when it comes to digital development, countries with a lower digital profile are also currently standing out. 

“We have been able to implement remote work in all the agency’s critical functions, doing so quickly and efficiently,” says Cristián Rodríguez, director of national IPA InvestChile. “This has allowed practically our entire team, and especially executives who are in direct contact with overseas companies, to carry on working without interruption. From a technological standpoint and in terms of skills, we were well prepared for such a crisis, which speaks highly of the InvestChile team – we are a public agency and remote work is, or was, not common in Chile’s public sector.”

Medium-term outlook

If the short-term challenges are clear, it is still unknown what lies ahead in the medium to long term. Much will hinge on the way the health emergency triggered by the coronavirus unfolds, and how quickly economies can recover.

Stephen Phillips, director-general of Invest Hong Kong, believes agencies should keep a strategic eye on the mid-term. “There are many people in business that are looking beyond the immediate. We have to deal with short-term issues, but not exclusively,” he says. “We still need to look at what we need to do so that we can hit the ground running whenever possible. We need to keep our heads clear strategically.”

The coronavirus is testing the ability of IPAs and EDOs to adjust to the short-term emergency while keeping a strategic eye on the medium and longer term. Those that prepare themselves to hit the ground running once the pandemic is over are likely to find themselves the forefront of the economic recovery.

This article first appeared in the April-June edition of fDi Magazine.