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The Future of Foreign Direct Investment | Strategic Dialogue

Jeff Haidet, Chairman, Dentons US
Edward Marshall, Global Dead of the Dentons Family Office and High Net Worth (DFO) sector
Carl Manlan, Vice President, Social Impact for Central and Eastern Europe, Middle East, and Africa, VISA
Ayesha Khanna, Managing Director, CARE Enterprises Inc.
Deepak Mishra, President, Americas Region, Philip Morris International Inc.
Lynda Aphing-Kouassi, Founder and Director, Kaizene
J. Welby Leaman, Senior Director of Government Affairs, Walmart

Western-based direct investment in developing and emerging economies can be better connected to local opportunities and therefore used as tools toward global, social, and economic progress. Launching the discussion, Jeff Haidet noted that foreign direct investment in the developing world was down in 2020 but some markers indicate that earnings growth in emerging markets will outpace the U.S. in years to come. 

Deepak Mishra noted that Philip Morris International is shifting its business model away from cigarettes to products scientifically proven to be better for consumers. In that transformation, the company has invested in research & development, manufacturing, and intellectual property and patents in OECD markets to change the lives of smokers around the world.

Small- and medium-sized enterprises (SMEs) will play a big role, said Carl Manlan. If we strengthen the skills of SMEs and connect them to financial services to improve the way they sell, they can begin to track the flows of their businesses. Strengthening these businesses, particularly those led by women, can lead to improved resiliency across markets. Focusing more closely on women-owned businesses, Ayesha Khanna explained that despite the challenges of the pandemic, many are nimble, tech-enabled, resilient, and ready to take on capital for growth. There is a great opportunity but the challenge is moving capital funds to them.

Adaptability and nimbleness make emerging markets more resilient, Haidet said. Welby Leaman added that willing stakeholders and committed governments are attractive to businesses. Policymakers need to demonstrate commitment to anti-corruption and rule of law, and an understanding and appetite for these among all stakeholders. Lynda Aphing-Kouassi echoed that political will has an essential part to play. Without root concern for the development of citizens, major investment won’t make a difference in the lives of citizens. The will to re-center citizens make emerging markets attractive.

To investors, the rule of law matters to accomplishing the Sustainable Development Goals (SDGs), as does the ability to develop public-private partnerships. Family offices and allocators are well-suited for investments in emerging markets although they face increasing scrutiny for their commitment to the SDGs, said Edward Marshall. Khanna highlighted the scale of the challenge—a $1.5 trillion annual capital gap to achieve the SDGs by 2030. Aid won’t get us there, she said, so the markets need to act. The pandemic has disrupted the traditional way due diligence has been performed, so there needs to be new kinds of partnerships. Aphing-Kouassi agreed about the need for new models to accelerate resiliency, while Leaman added that environment, sustainability, and corporate governance goals need to be understood in the context of development. Haidet asked the panelists to explore best practices when it comes to the adaptability of developed markets to identify and invest in scalable opportunities in developing and emerging markets. Manlan highlighted the delivery of funds to communities across different countries to support lives and livelihoods. This has helped transform digitization as an enabler of equity and inclusion. 

Khanna noted that CARE has recognized the opportunity to build on the relationships where they have advocated for new policies, built non-profit coalitions, and worked with large companies. Aphing-Kouassi explained how funds available to companies and SMEs led her organization to develop training tools to build resiliency and understand the utilization of funds allocated to them. 

Mishra noted that when developing economies go through leapfrog transitions, such as digital banking, stakeholders can gather quickly. The process not only replaces what needs to change, it adds capacity. Closing the panel, Haidet underscored that the transition of businesses is not a one-off, civic engagement undertaking but a fundamental part of how to operate.

The optimism will come from making sure that SMBs across developing markets actually rebound.”

Carl Manlan

We believe in focusing on women’s empowerment as an economic engine.

Ayesha Khanna 

Policymakers need to understand, with business, that the full political geography matters. You can’t have foreign direct investment if the only thing that’s improved is a subset of federal government agencies, and all the subnational level hasn’t changed.

J. Welby Leaman 

From an investor’s perspective, there are clear risk factors in entering into or continuing to invest in these markets.

Jeff Haidet

One area we’re also seeing is the move away from shareholder profit maximization as a status.

Edward Marshall

When a developing country actually brings in renewable power, they’re not just replacing what was less good, they’re actually adding capacity.

Deepak Mishra

We are more likely to lend to a microfinance who will then obviously assist the market and lend, in return, to any SMEs.

Lynda Aphing-Kouassi

Key takeaways & next steps:

  • Connecting direct investment more closely with local communities can be an effective way to effect systemic change socially and economically.
  • Small- and medium-sized businesses are at the core of the economy in most emerging countries. Strengthening these through better access to finance and skills training can build more resiliency in markets. 
  • Women-led businesses, specifically, need increased access to capital. Many are ready for investment but lack access to financing.
  • Governments must recenter their commitments to the rule of law and business-friendly regulatory environments. Without demonstrating a willingness to cooperate with businesses and the social sectors, institutional risk will remain a limiting factor and investment will lag.