Intra-Commonwealth investment in real estate dips in 2020

Pandemic strains intra-Commonwealth investment

Tuesday, July 13, 2021

Real estate recorded the most notable dollar-value decline in intra-Commonwealth investment activity in 2020 relative to the three-year annual average prior to the COVID-19 pandemic. A newly released review of trade activity among the 54 member states cites a nearly USD $6-billion (CAD $7.5 billion) slide in foreign direct investment originating from within the Commonwealth itself. Metals manufacturing is the next hardest hit sector, with a $1.46-billion drop in investment.

Real estate slumped most in Europe, where intra-Commonwealth foreign investment decreased by about USD $3.4 billion in 2020 compared to the previous three-year annual average. Asian member states attracted USD $2.28 billion fewer investment dollars than the average, while Pacific nations collectively experienced a $230-million drop.

Generally, pandemic-related trade and investment fallout is most evident in the sectors and regions where the most intra-Commonwealth activity had occurred in the 2017-2019 period. “Real estate was the top sector for intra-Commonwealth inflows to European and Asian member countries; whereas this was renewable energy (Pacific), software and IT services (Caribbean and Americas) and communications (Africa) in other Commonwealth regions,” the 2021 Commonwealth Trade Review states.

Looking to other sectors, Canadian investors contributed the largest share of the intra-Commonwealth capital injection into renewable energy during the decade from 2010 to 2019 — approximately USD $11 billion (CAD $13.75 billion) over those 10 years. Collectively, Commonwealth members invested USD $2.9 billion in new renewable energy projects within the Commonwealth in 2019 — a 152 per cent increase from the 2010 level — representing 11 per cent of all intra-Commonwealth greenfield foreign direct investment for the year.

That’s in sync with global trends. “The renewable energy sector was the second largest recipient of greenfield foreign direct investment across the Commonwealth in 2019, with announced inflows growing by 179 per cent since 2010 to reach USD$26 billion. The sector’s share in the Commonwealth’s total greenfield inflows has also expanded in relative terms from 4.4 per cent in 2010 to 14.8 per cent in 2019,” the trade review reports.

Investors in Canada, United Kingdom and India account for more than 70 per cent of investment originating from within the Commonwealth during the 2010-19 period, and it has mostly been directed to Australia (32 per cent), Nigeria (21 per cent), India (19 per cent) and the United Kingdom (11 per cent). Meanwhile, less than 1 per cent of intra-Commonwealth investment has made its way to Canadian renewable energy projects.

For 2020, renewable energy was one of the minority of sectors to enjoy a higher inflow of investment capital than prior to the pandemic. The others include: minerals extraction; transportation and warehousing; communications; business machines and equipment; chemicals; medical devices; operations and maintenance of non-automotive transport; and wood products.

“Many of these sectors were less exposed to the demand, supply and policy shocks affecting other investment sectors. In some of the primary and manufacturing industries, production methods tend to use highly automated assembly lines and employ more industrial robots (compared with the garments industry, for example). They also tend to be more capital-intensive, and some are linked to global value chains originating in the Asian region, which was quick to rebound from the pandemic,” the trade review states.

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