The trends driving investments in 2022
The financial crisis of 2007/08 and the Covid-19 health and economic crisis of 2020 have had a significant impact on the business landscape. The previous two years have, especially, been transformative for sectors across the spectrum, compelling organisations to strengthen their strategy and restructure for a post-pandemic landscape. For start-ups, however, maintaining relevance to customers and investors was the primary goal of this momentous reboot.
In the aftermath of both these aforementioned watershed moments, a number of changes in the investment landscape have taken place. They have included the increasing importance of services in trade and investment, the growing number of outward cross-border investors, as well as a wider investment in emerging technology.
As the markets and economy slowly begin to recover from the impact of the pandemic, investors have their focus set on 2022. It will be interesting to see how existing and new drivers of change react to, challenge, and intensify these pandemic-induced patterns.
Here are some trends and concerns that will most likely have a significant impact on the investment landscape in 2022:
From product to services
It’s the age of service over product. Over the past decade, international investment in the services sector has grown significantly. The trend is, of course, a result of the expansion of service sectors and the burgeoning global digital economy that have both contributed to the transition from traditional manufacturing towards global trade and investment in services. One-third of global FDI go to financial services, according to UNCTAD, which makes it the largest investment recipient industry by far. In 2020 alone, services accounted for 60% of declared greenfield projects and 71% of confirmed cross-border M&A deals.
The servicification of manufacturing and the internationalisation of service sectors have developed in lockstep with the explosive growth of truly global digital technology firms, driving investors to partake in the progress sooner rather than later.
Greater technology and innovation investment
No doubt, technology has altered our lives. Even something as seemingly fundamental to our lives now as the light tubes in our houses wouldn’t have been possible without the inflow of funds into the sector.
So, in recent years, global investment in technology and innovation has increased due to many factors. These have included the search for efficiency and resilience across value chains, more optimal operation and infrastructural facilities, the emergence of new markets and sources of revenue, and efforts to obtain a market edge through tech.
Numerous emerging technologies have a significant impact on global value chains (GVCs), as well as trade and investment beyond national borders. Cloud computing, digital payments and cybersecurity are now essential technology to enable GVCs. In addition, the Internet of Things (IoT), artificial intelligence (AI) and machine learning (ML), robotics and automation (RA), 3D printing (or additive manufacturing), 5G networks, blockchain solutions, VR and AR, and digital supply chain services will all be enhanced and used in conjunction with these technologies. More and more investments and interest in these technologies are expected in the very near future.
Knowledge Seeking Investments
There is a growing trend of companies looking for new ways to save money and find new markets by investing in knowledge-based businesses. More than one-third of all new greenfield foreign direct investment (FDI) projects in 2020 were in the STEM fields. R&D in these fields has gone global in a way that was previously unheard of. Plus, offshore R&D centres are expanding at a rapid pace, whether through greenfield construction, acquisitions, or joint ventures. It is a phenomenon that will not only not fade away for a long while but will also change the landscape of investment uniformly.
Burgeoning interest in renewable energy and life sciences
Investments in renewable energy and life sciences have risen sharply in recent years and will continue to do so in the current decade also. A record US$87.2 billion in greenfield foreign direct investment (FDI) in renewable energy was made possible by doubling the amount invested in renewable energy since 2010 to US$44.8 billion. Similarly, there was an 88% increase in greenfield investment in the biotechnology industry in 2020, according to fDi Intelligence. These statistics are proof of the continuing interest in green technology, given the intensifying focus on ESG.
Increasing number of foreign investors.
Though the sources and destinations of international investment have shifted dramatically over the last couple of decades, resulting in fundamental shifts in several sectors and industries, the importance of developing economies has remained strong as a source of capital. The year 2020 saw a significant drop in FDI into developing countries, while their share of global FDI inflows rose to a new high of 66%.
In the midst of the COVID-19 pandemic, India, for instance, attracted $81.72 billion in foreign direct investment (FDI) in 2020/21, a 10% increase over the previous financial year, according to a survey of 1200 business leaders released by Deloitte, a growth trajectory which is likely to keep rising in 2022. It truly comes as no surprise that the GlobalData's FDI forecasting model has already predicted greenfield FDI to grow by approximately 6% in 2022 after returning to pre-shock levels in 2021.
The wheels of change were already in motion before Covid-19 appeared, but the pandemic has dramatically altered their course and increased the rate of adjustment. With these trends already on course to change the way we run business, 2022 is all set to be a turning point in the history of the investment world.
In the aftermath of both these aforementioned watershed moments, a number of changes in the investment landscape have taken place. They have included the increasing importance of services in trade and investment, the growing number of outward cross-border investors, as well as a wider investment in emerging technology.
As the markets and economy slowly begin to recover from the impact of the pandemic, investors have their focus set on 2022. It will be interesting to see how existing and new drivers of change react to, challenge, and intensify these pandemic-induced patterns.
Here are some trends and concerns that will most likely have a significant impact on the investment landscape in 2022:
From product to services
It’s the age of service over product. Over the past decade, international investment in the services sector has grown significantly. The trend is, of course, a result of the expansion of service sectors and the burgeoning global digital economy that have both contributed to the transition from traditional manufacturing towards global trade and investment in services. One-third of global FDI go to financial services, according to UNCTAD, which makes it the largest investment recipient industry by far. In 2020 alone, services accounted for 60% of declared greenfield projects and 71% of confirmed cross-border M&A deals.
The servicification of manufacturing and the internationalisation of service sectors have developed in lockstep with the explosive growth of truly global digital technology firms, driving investors to partake in the progress sooner rather than later.
Greater technology and innovation investment
No doubt, technology has altered our lives. Even something as seemingly fundamental to our lives now as the light tubes in our houses wouldn’t have been possible without the inflow of funds into the sector.
So, in recent years, global investment in technology and innovation has increased due to many factors. These have included the search for efficiency and resilience across value chains, more optimal operation and infrastructural facilities, the emergence of new markets and sources of revenue, and efforts to obtain a market edge through tech.
Numerous emerging technologies have a significant impact on global value chains (GVCs), as well as trade and investment beyond national borders. Cloud computing, digital payments and cybersecurity are now essential technology to enable GVCs. In addition, the Internet of Things (IoT), artificial intelligence (AI) and machine learning (ML), robotics and automation (RA), 3D printing (or additive manufacturing), 5G networks, blockchain solutions, VR and AR, and digital supply chain services will all be enhanced and used in conjunction with these technologies. More and more investments and interest in these technologies are expected in the very near future.
Knowledge Seeking Investments
There is a growing trend of companies looking for new ways to save money and find new markets by investing in knowledge-based businesses. More than one-third of all new greenfield foreign direct investment (FDI) projects in 2020 were in the STEM fields. R&D in these fields has gone global in a way that was previously unheard of. Plus, offshore R&D centres are expanding at a rapid pace, whether through greenfield construction, acquisitions, or joint ventures. It is a phenomenon that will not only not fade away for a long while but will also change the landscape of investment uniformly.
Burgeoning interest in renewable energy and life sciences
Investments in renewable energy and life sciences have risen sharply in recent years and will continue to do so in the current decade also. A record US$87.2 billion in greenfield foreign direct investment (FDI) in renewable energy was made possible by doubling the amount invested in renewable energy since 2010 to US$44.8 billion. Similarly, there was an 88% increase in greenfield investment in the biotechnology industry in 2020, according to fDi Intelligence. These statistics are proof of the continuing interest in green technology, given the intensifying focus on ESG.
Increasing number of foreign investors.
Though the sources and destinations of international investment have shifted dramatically over the last couple of decades, resulting in fundamental shifts in several sectors and industries, the importance of developing economies has remained strong as a source of capital. The year 2020 saw a significant drop in FDI into developing countries, while their share of global FDI inflows rose to a new high of 66%.
In the midst of the COVID-19 pandemic, India, for instance, attracted $81.72 billion in foreign direct investment (FDI) in 2020/21, a 10% increase over the previous financial year, according to a survey of 1200 business leaders released by Deloitte, a growth trajectory which is likely to keep rising in 2022. It truly comes as no surprise that the GlobalData's FDI forecasting model has already predicted greenfield FDI to grow by approximately 6% in 2022 after returning to pre-shock levels in 2021.
The wheels of change were already in motion before Covid-19 appeared, but the pandemic has dramatically altered their course and increased the rate of adjustment. With these trends already on course to change the way we run business, 2022 is all set to be a turning point in the history of the investment world.
