Multinational enterprises (MNEs) are generally larger, more research and development (R&D)-intensive, and more productive than purely domestic firms. For example, the primary and manufacturing sectors, which account for a larger share of FDI in many of these economies than in most developed economies, have been particularly hard hit by the pandemic (see forthcoming OECD note on implications of the COVID-19 public health and economic crisis on development finance).Ĭontributions to the recovery from FDI can go beyond financing. Unfortunately, it appears that the impacts of the pandemic on FDI flows to these economies may be particularly severe. FDI could be particularly important for emerging and developing economies given that other sources of international financing, including portfolio investment, have fled these economies (see OECD Investment policy responses to COVID-19). Alfaro and Chen, 2012 Desai et al., 2008). Evidence from past crises has shown that foreign-owned affiliates, including small and medium enterprises, can show greater resilience during crises thanks to their linkages with, and access to the financial resources of, their parent companies (e.g. The eventual impact on FDI flows will depend on the success of both these public health and economic policy responses.įDI could play an important role in supporting economies during the economic recovery following the pandemic. Governments have also taken significant economic policy actions to forestall, or cushion, the economic consequences of the public health crisis. These public health measures have caused severe economic disruptions that impact the foreign direct investment (FDI) decisions of firms. Many governments have taken stringent public health measures to limit the spread of the COVID-19 pandemic.
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