Ismail Ersahin: "There will be more opportunities for regional and international cooperation between different investment agencies and between government entities"

Ismail Ersahin, executive director of the World Association of Investment Promotion Agencies (WAIPA), spoke to Oxford Business Group about adapting investment strategies to the current global environment.

What are your expectations for global investment flows in the coming year and what more can investment agencies do to accelerate economic recovery in the wake of the COVID-19 pandemic? 

It is clear that the pandemic had a significant impact on global investment flows, particularly in greenfield investments. As a result, the vast majority of investment agencies around the world had to adapt and change their plans and strategies, and in some cases cancel projects. In 2021 we saw a recovery in global foreign direct investment (FDI) levels, although the rate of recovery was slower in developing markets. We expect this to gradually improve over the next six to 12 months, with increasing investment activity promoting sustainable growth in emerging economies.

Importantly, most investment agencies did not remain inactive during the peak of the pandemic. They understood that investment promotion had ground to a halt, so they adapted and worked closely with their local business communities to facilitate operations and navigate those challenging months. One way this happened was with the creation of online platforms that give local entities access to all information related to government incentives and financial support. 

Going forward, the types and quality of investments are becoming increasingly sophisticated. Consequently, investment agencies around the world are reviewing their strategies to improve services. Similarly, there will be more opportunities for regional and international cooperation between different investment agencies and between government entities, policy makers and market regulators. Increasing global FDI levels is a goal we all share, and we must work together to improve the international investment climate, increase investor confidence and surpass the peak investment levels of 2007.

How are blockchain and cryptocurrencies affecting global investment flows and to what extent do these technologies represent an area of opportunity for investment agencies moving forward? 

Blockchain and cryptocurrencies are changing the rules of the game, and implementing them correctly can help promote sustainable investment. They represent a significant opportunity to improve the overall ecosystem, and we have seen examples of this in recent years. For example, in 2016, Zug became the first city in the world to accept bitcoin payments for tax purposes, and in the same year the world's first exchange-traded crypto product was launched on SIX Swiss Exchange. This created a thriving ecosystem for investment.

In this context, financial regulators in different countries play a crucial role. The implementation of blockchain technology and cryptocurrencies naturally varies from country to country, but it is nevertheless changing the way we operate in the financial market. Therefore, agencies around the world are adapting to these developments and providing more sophisticated financial services and accurate information. This is how investor confidence is growing.

How do environmental, social and governance (ESG) principles affect global investment levels and investor confidence? 

ESG is a top priority in the decision-making process. It has become imperative for investors to understand and learn how to improve the impact of their investments to address some of the most pressing environmental and social challenges.

Investors are increasingly looking for responsible business practices, the promotion of diversity in the workplace and on company boards, improvements in social welfare for staff and surrounding communities, and protection of the environment. At the same time, they realise that ESG is an important mechanism for reducing risk and increasing return on investment.
In the future, we have identified the need to standardise concepts and definitions around ESG practices. Different rating agencies use different indicators. This is another area where greater collaboration across the international community is needed to arrive at a homogenous understanding of ESG standards.

Where do you identify opportunities for investment agencies to further improve services in a global macroeconomic environment characterised by rising interest rates and inflation?

In these difficult times, the most important asset for any institution is its human capital. This is even more the case for investment agencies, as the need to provide high quality services has become more relevant. In the same spirit, many firms are collaborating, directly or indirectly, with their local investment agency, sharing extensive knowledge of the daily challenges faced by firms and the best means to overcome them.

There is more that needs to be done to promote the services and activities of investment agencies, and this is part of our efforts at WAIPA. We want to raise awareness of the work our members do globally, bridging the gap between investors and governments, building trust and boosting investor confidence.