Analysing the megatrends Table 3.3 Impact of COVID-19 on greenfield investments in EU-CEE – Number of announced projects, Pledged capital investment, Number of jobs to be created, by 2019 and 2020, by quarter Quarter 1 Quarter 2 Quarter 3 Quarter 4 Source: fdimarkets.com Project number 2019 2020 383 349 427 235 397 251 456 Capital EUR mn 2019 2020 12,792 13,880 18,369 10,209 26,352 9,865 19,082 2019 75,432 107,752 98,112 106,810 Jobs 2020 74,403 51,017 81,212 (UNCTAD 2020a). Developed economies saw the biggest fall, with a decline of 75 percent compared to 2019. In­flows into Europe were negative and flows to North Amer­ica fell by 56 percent. These changes reflected the disrup­tion of value chains under the pressure of a sudden eco­nomic lockdown. In the same comparison, FDI inflows to EU-CEE declined by 35 percent, a less drastic decrease than the global average. However, it usually takes investors a long time to decide upon cross-border investments, and the actual capital flow may take place later than the start of an investment. It will, therefore, take some time for a clearer picture to emerge. Greenfield investments only experienced a belated and less significant decline(Table 3.3). 28 The number of announced projects was the same in the first quarter of 2020 as a year before. The committed amount of investment and job cre­ation was even higher. The decline came in the second quarter, a 46 percent decrease in terms of the number of projects, 31 percent less capital investment, and 48 per­cent in terms of job creation. The third quarter brought some recovery in comparison with the second in terms of project number and the pledged number of jobs, which in­dicates that the decline has levelled out. In the second half of 2020, governments initially tried to avoid a total lockdown of the economy. However, they grad­ually changed their minds in light of rapidly rising infection and mortality in the autumn. Restrictions in the third and fourth quarters different did not impact production and transport as much; thus, the renewed economic decline mainly hit the services to the population in the fourth quar­ter. Measures introduced to cushion the effects of the pan­demic affected foreign and domestic companies alike. These 28 The data is from the fDi Markets database(a division of Financial Times Ltd. www.fdimarkets.com), and are based on media and com­pany reports of individual investment projects(excluding the finan­cial sector). The database includes data on the number of announced projects, the value of investment commitments, and the number of jobs that are expected to be created. Compared with the balance of payments, which records financial flows in a given period of time, fDi Markets data refer to announced real investment projects that are to be realised over a longer period of time. were much less generous than in Germany, which caused dissatisfaction among investors(tschechien.ahk 2020). Large foreign companies made use of temporary closures and reduced work time on a mass scale, often compensat­ing their workforce more generously than local SMEs. The consequences for local market-oriented FDI projects were more mixed than those that impacted value chain pro­duction in the second quarter. Retail companies specializing in food could maintain sales while those in other segments suffered under depressed demand during the lockdown. Meanwhile, e-commerce boomed. Construction projects were among the more resilient economic activities, while transport, logistics, and value chain production all shrank. As a result of these disruptions, export-oriented investors could seek to shorten the value chain by re- or near-shor­ing some of the activities. Companies will think about in­creasing the resilience of their supply chains(reducing risks of supply chains disturbances) and increasing the degree of self-sufficiency and autonomy in production, which will lead to shorter supply chains and closer geographic loca­tions. It remains to be seen, however, how lasting and how powerful the effects will be. That companies are not under pressure to act fast can be demonstrated by survey results. Only about 8 percent of the German investors faced partial disruption of value chains and another 40 percent faced minor disruption according to a survey carried out in Hun­gary in the second half of September(ahkungarn 2020). German investors see only a minor probability that they will re-shore from Asia. Should they decide to relocate, they think they will most likely move to CEE. The pandemic came on top of significant technological changes that necessitate the restructuring of value chains and changing of several features of FDI in the future. UNC­TAD(2020b) observed a slowdown in international produc­tion and global FDI after 2010 and forecasted it to continue even after recoveries are made from the current slump. In­creasing protectionism and emergent technologies are two causes of this trend. Technological change has started to re­structure the automotive industry(see Chapter 2.3). Never­theless, the EU-CEE locations of subsidiaries seem to be on firm grounds for now. 27