Kearney, an international consulting firm, announced the results of its 2021 Foreign Direct Investment Trust Index, which it prepared by meeting with executives of companies with a global turnover of more than $ 500 million.
Kearney predicted that global foreign direct investment, which has slowed due to the pandemic, could return to its historic peak in 2016 only in 2028. “Coming out of the shadow of the pandemic will be a marathon, not a short distance,” the report said, adding that if the recovery in the global economy continues more slowly than expected, there will be a return. The 2016 summit will last 10 years.
Only 57 percent of global company executives surveyed said they were optimistic about the global economy in the next three years. Before the pandemic, this rate was 72 percent.
Despite the negative effects of the pandemic, global company leaders continue to see foreign direct investment as one of the key ways to increase profitability. Eighty-one percent of global leaders who answered Kearney’s questions said so. This ratio was 84 percent last year.
The report also predicted that the world economy would grow by 5.6 percent in 2021 and that global production levels would rise in the second half of the year before the pandemic.
The importance of digital infrastructure is growing
The increasing use of digital technology due to the pandemic increases the importance of information-related rules. 65 percent of the companies participating in the study, 11-30 percent of the turnover, they said they obtained through data.
The report noted that in recent years, many countries, from the European Union to Turkey, have adopted new laws on the use of information, noting that the new legislation increases investment costs. Forty-one percent of global companies listed data protection laws, and 40 percent rated the operating costs required to protect data as key determinants of investment decisions. In particular, companies have suffered from the harsh rules of China’s cyber security law, which came into force two years ago.
Compliance with national data regulations results in an additional cost of $ 1 million or more in 46 percent of companies. 41 percent of companies expect data costs to increase in the next three years and 37 percent to decrease.
Commodity prices on the radar
According to the report, another factor influencing the investment decisions of global companies in 2021 is the rise in commodity prices. Expectations of a rapid recovery in the world economy due to vaccinations have led to a rapid rise in commodity prices in recent months. Thirty-two percent of global company executives surveyed by Kearney estimated that commodity prices would continue to rise this year. The rise in prices leads to an increase in risk perception, especially for countries that import goods.
Taxes are at their peak again
One of the most important factors affecting foreign direct investment was taxes in 2021, as in previous years. In second place, as in the previous year, is technology and innovation infrastructure.
R&D opportunities have taken four steps this year, rising to third place among the elements that attract investors the most.
Kearney’s Turkish Management Partner Onur Okutur said the increase in the weight of R&D and information-related regulations was due to the growing role of technology in shaping the global economy.
Okutur said, “The strong R&D support provided in Turkey under the leadership of TUBITAK in recent years increases the attractiveness of our country to global investors. We believe that the simplification and simplification of R&D support will further improve the investment climate. ” The reader stressed that easy-to-apply and cheap information-related financial rules will also increase the interest of foreign investors in Turkey.
According to the Kearney Foreign Investment Confidence Index 2021, the factors that most directly affect foreign direct investment are:
1. Tax rates and ease of tax payments: 16%
2. Technology and innovation capacity: 15%
3. R&D capabilities: 13%
4. Efficiency of legal processes: 13%
5. Forecasting of legal legislation, absence of corruption: 13%
6. Protection of investors and property rights: 12%
7. Government incentives for investors: 12%
8. Labor cost: 11%
9. Freedom and ease of investment: 11%
10. General safety environment: 11%
11. Market size: 10%
12. Quality of digital infrastructure: 10%
13. Participation of the country in trade agreements: 9%
14. Availability of financial capital in the domestic market: 8%
15. Skill level of the workforce 8%
16. Quality of physical infrastructure: 8%
17. Domestic economic indicators: 8%
18. Availability of raw materials and other inputs: 6%
19. Availability of land / property: 6%