Covid-19 and recalibration of FDI regimes: convergence or divergence?

Abstract

The Covid-19 pandemic has affected every aspect of business and society including foreign direct investment (FDI) activities. According to an UNCTAD estimate, global FDI flows may fall by 40% in 2020–21. The fall will be more severe in developing countries. Looming large are fears of disruption to supply chains, deceleration of international trade, and concerns over likely takeovers by large multinational corporations (MNCs) and state-owned enterprises to take advantage of the weakened economic situation of companies in many countries. Consequently, the governments of many countries have revised guidelines for FDI screening (e.g. Australia, Canada, France, India, Italy, and Spain) so as to protect companies and critical assets that are of strategic importance such as security, medical products, and protective equipment. This article examines the nature and extent of these changes to determine whether there is convergence or divergence in their responses. The findings provide some support to the convergence hypothesis.

Keywords:

• Foreign direct investment
• multinational corporations
• supply chain
• screening mechanism
• convergence hypothesis

Disclosure statement

No potential conflict of interest was reported by the author(s).

Additional information

Notes on contributors

Basu Sharma

Basu Sharma is professor in the Faculty of Management at the University of New Brunswick in Canada. He earned his PHD from the University of Illinois at Urbana-Champaign. He has published over fifty articles in scholarly internationally referred journals and has contributed chapters to more than a dozen edited volumes.