Opinion Piece: Private Foreign Direct Investment in the Blue Pacific

Opinion piece by Glynis Miller, Trade Commissioner, Pacific Trade Invest New Zealand - "In a post-pandemic world, Foreign direct investment is a business practise the Blue Pacific private sector could further leverage, given some added commitment in building credible project pipelines."

Opinion piece by Glynis Miller, Trade Commissioner, Pacific Trade Invest New Zealand (PTI NZ)

Foreign direct investment (FDI) plays a critical role in supporting economic growth for developing and emerging markets all around the globe. In a post-pandemic world, it is a business practise the Blue Pacific private sector could further leverage, given some added commitment in building credible project pipelines.

FDI is the purchase of interests in a local company by a foreign company, individual or investor. FDI deals often extend beyond financial investments and can include the provision of equipment or technology.

While the gains of FDI do not automatically and equally amass across all countries, industries, and communities, they have been shown to be an integral part of an effective international economic system and act as a major catalyst to progress.

In 2017 the World Bank Group’s International Finance Corporation (IFC) and the Trade & Competitiveness Global Practice (T&C), released the Global Investment Competitiveness Report, concluding that on balance, FDI spurs shared prosperity, poverty alleviation, and other benefits laid out in the Sustainable Development Goals (SDGs). The report also demonstrates that FDI brings in technical know-how, an enhanced work force, and better-paying jobs to industries.

As the year comes to close and the COVID recovery period begins, businesses across the Blue Pacific can help enact transformational change within their own local economies by being accessible, open, and responsive to FDI.

Some PICs, such as Papua New Guinea, have seen significant FDI throughout the years. However, both external and internal factors, including macroeconomic policies, governance, and political stability, result in large variations across the region.

For example, Vanuatu economy’s growth from FDI has been and remains significant. While tourism has been a high contributor to the Vanuatu economy, the past 21 months has highlighted the vulnerabilities countries leave themselves open to when they rely too heavily on any one sector. As such, according to Invest Vanuatu, private sector investment is now viewed as the primary engine to sustain higher levels of growth.

Furthermore, Fiji has taken action with a new proactive Investment Act passed by their Parliament in June this year. The new Act will increase the country’s ability to attract FDI across key sectors, with the aim of generating foreign exchange, knowledge and technology-intensive jobs, and helping with the long-term recovery of the Fijian economy in the wake of COVID-19 impacts.

The Pacific Trade Invest (PTI) Network continues to focus on engaging with investors who understand both the sensitivities and risks, as well as huge opportunities for both return and impact, when deploying capital for investment into the Blue Pacific region. The PTI Network concentrates their efforts on facilitating investor connections with those who embody the values of the Pacific coupled with the willingness to support sustainable projects, such climate-resilient initiatives, gender-inclusive businesses, and community-driven innovations.

The tight border restrictions of the past 21 months have made face-to-face relationship-building difficult, but not impossible, and PTI NZ has spent the last year building the foundation for small and medium enterprises (SMEs) to become better versed in how to be prepared with the right information that will attract private investment into the Pacific. During this time, PTI NZ has also engaged with industry-focused funds, such as Camco Clean Energy, to educate them on the opportunities available in PICs and has helped identify and build tangible project pipelines. PTI NZ is pleased to announce that Camco is raising capital for renewable energy now, for deployment in 2022, and other climate-change-related initiatives. This, we hope, will be the first of many private sector funds to put a focus on PICs.

In addition to finding the right investor for projects, a critical factor to attracting investors into the Pacific is to have a credible collection of project pipelines ready to go. This relies on the businesses and industries themselves to provide a tracked portfolio of projects that are prepared and viable to receive investment.

The steps required to collect the critical information in building project pipelines, demonstrates a commitment on the part of Blue Pacific nations to be primed and vigilant, showing investors there are tangible investment opportunities to be realised. Having well-informed project pipelines goes a long way in offsetting the hesitancy of some foreign investors, based on a perception the Pacific Islands ill preparedness to receive tangible or substantial foreign investment.

With borders set to reopen within 2022, the ability to take potential investors to the Pacific Islands to visit potential sites and meet business partners and government officials will be a great boon. But first, project pipelines and innovation play a crucial part in attracting and retaining foreign investment interest. The rise of responsible FDI across the region could in turn, contribute to rebuilding our economies and making them more resilient against future crises.