As the world acknowledges the real threat of global recession, where and how a company should invest has never been more challenging. General counsel hold the keys to unlocking opportunity, and more than ever are relied upon for sound advice. There are many positives, but market knowledge is paramount in an insecure world. Putro Harnowo sheds light by turning to key trends
Following a significant rebound last year with booming M&A markets and rapid growth in international project finance, the UN Conference on Trade and Development’s (UNCTAD) World Investment Report 2022 highlighted that the war in Ukraine and the lingering effects of the pandemic have caused a triple crisis regarding food, fuel and finance in many countries. The June report expected global foreign direct investment (FDI) flows in 2022 to move on a downward trajectory or remain flat at best, while signalling an increasing trend in FDI screening among developed countries.
The UNCTAD report notes that the recovery brought growth in all regions last year, mostly caused by M&A transactions and high levels of retained earnings of multinational enterprises. In 2021, multinationals from developed economies more than doubled their investments abroad to USD1.3 trillion from USD408 billion the previous year.
For in-house counsel at companies either investing or considering investment abroad, there are trends to be both welcomed and wary of. Evolutions of regulation to accompany policies surrounding sovereignty and security need constant vigilance from legal teams, and trends outbound and inbound reflect these vigilant times.
“Companies recognise they must make their supply chains resilient, and to do so will require investment abroad,” says Steven Okun, founder and CEO of APAC Advisors and chair of AmChams of Asia-Pacific in Singapore.
Okun says trade agreements provide great flexibility in the region to diversify their supply chains – of which companies are just starting to take advantage. The US-led, 14-nation Indo-Pacific Economic Framework (IPEF) is committed to making supply chains more resilient, robust and integrated, which could include creating an information sharing and crisis response mechanism, strengthening supply chain logistics and transparency, and investing in training and development to ensure enough skilled workers.
“These actions, if taken, will further increase the appetite for Asian companies to invest abroad,” says Okun.