Coronavirus (COVID-19) and the changing nature of global production

Coronavirus (COVID-19) and the changing nature of global production

The United Nations Conference on Trade and Development (UNCTAD) has published its World Investment Report 2020, which highlights that coronavirus (COVID-19) will likely change the nature of global production. The report concluded that coronavirus will amplify existing challenges within the global production market including the new industrial revolution, growing economic nationalism, and focus on sustainability. The outcome is likely to play out differently across countries and regions, resulting in four outcomes: reshoring, diversification, regionalisation and replication.

Technology

Global production will be shaped by three technology trends:

• robotics-enabled automation

• enhanced supply chain digitalisation

• additive manufacturing

The pace of adopting new technologies will depend on the policy environment for trade and investment, which has been characterised in recent years by interventionism, protectionism and a shift towards regional and bilateral frameworks.

Policy

The post-pandemic years are likely to bring both challenges and opportunities for investment and development policymakers. The main challenges include increased divestment, relocations, investment diversion and a shrinking pool of efficiency-seeking investment. There will be tougher competition for foreign direct investment and multinational enterprises in developing countries are likely to be negatively affected. However, new opportunities are expected to arise due to investors looking to diversify supply bases to enhance production resilience. Supply chain resilience is crucial for the development of low-income and vulnerable countries as it encourages economic growth and job creation.

Sustainability

Sustainability concerns will likely have an impact on global production, with challenges such as different emissions targets between countries and even regions; environmental, social and governance standards and supply chain resilience measures. UNCTAD’s director of investment and enterprise, James Zhan believes ‘The new scenario is also likely to involve refocusing development strategies towards attracting investment in building productive infrastructure and fostering services, as well as investing in the green and blue economies.’

Read the full World Investment Report 2020 here.

Source: COVID-19 will likely transform global production, says UN report

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