Despite registering an improvement in the first-half of this year, foreign direct investments (FDI) to Malawi and other developing countries remain under threat due to the Covid-19 pandemic, a new UN report has shown.
The United Nations Conference on Trade and Development (Unctad) latest Investment Trends Monitor issued on Tuesday says that FDI in-flows—investments made by a company or individual from one country in business interests in another country— face uncertainty due to the duration of the Covid-19 crisis and the pace of vaccinations.
The Investment Trends Monitor says due to this development, economies such as Malawi are expected to experience a fall in FDI because they rely more on investment in global value chain.
In a statement accompanying the report, Unctad director of investment and entreprise James Zhan said despite an optimistic outlook on FDI recovery uncertainties remain abundant.
He said: “Effects of the pandemic on investment are prevalent as investors are likely to remain cautious in committing capital to new overseas productive assets.”
Globally, the report says, in the first-half of 2021, FDIs reached an estimated $852 billion, showing stronger than expected rebound momentum.
This was a recovery from the previous year, as the increase in the first two-quarters recovered was more than 70 percent of the loss induced by the Covid-19 pandemic in 2020.
Meanwhile, data from the Malawi Investment and Trade Centre (Mitc) shows that the country chalked up $154.6 million (about K127.33 billion) in investment deals between June and July this year, amid Covid-19 pandemic.
The figures indicate that out of the $154.6 million investments Mitc recorded, $119.2 million (about K97.52 billion) come from (FDIs while $35.4 million (about K28.99 billion) is from local investments.
The Mitc figures further show that the highest source of the FDI was the United Kingdom, representing 35.16 percent followed by South Africa at 16.55 percent, Australia at 12.93 percent and Canada at 8.06 percent.
Mitc investment promotion manager Modie Chanza, in a response to an e-mailed questionnaire earlier, said despite the global spread of the virus, which has led to a drop in FDI, Mitc continues to woo investments to the country.
She said: “Mitc operates a one-stop-service centre and provides after-care services to investors that want to establish or are operating their businesses in Malawi.
“Mitc is working with the Ministry of Lands in securing land parcels that can be availed to investors.”
In Malawi, most FDI has been directed to the energy sector followed by manufacturing and mining sectors, according to Mitc.
Over the past five years, leading sources FDI have been Australia, China, India, the Republic of Korea, South Africa, the United Arab Emirates, the United Kingdom and Northern Ireland.
Last year, Malawi’s FDI’s registered an 88 percent decline to $98 million (about K7.74 billion), according to the Unctad.
Globally, FDI inflows collapsed in 2020, falling 42 percent from $1.5 trillion in 2019 to an estimated $859 billion.