The COVID-19 global virus outbreak has caused many developments that have deeply affected, and continue to affect, as many as 5 billion people and over 300 million businesses. The current picture has triggered a review of supply mechanisms, trade links and cycles to address needs for various countries. This seems to have made the “circular economy” popular once more. The essence of a circular economy is the “principle of circularity,” by prioritizing the environment and climate change, which we can see has some serious effects on the world economy.
The term covers all the solution processes for production and service delivery of all the goods produced to meet public needs and is not only limited to the design phase, i.e. materials and products. The basic principle of the circular economy is to extend the life cycles of the economy and create a foundation based on the principle of “zero waste” by obtaining the raw materials from within the economic cycle through recycling methods, instead of continuously extracting and over-consuming the raw materials and resources required for production from the natural environment.
This issue is also vital for the “green order” that the European Union has made the number one item on its agenda. After such global crises as those we have experienced, as part of a process that focuses on further strengthening the immune system of the Turkish economy, second- and third-generation reforms are being discussed that put the circular economy in focus once more to radically decrease Turkey’s dependence on imports and increase the sustainability of our exports.
The circular economy, as a paradigm shift, is an approach that increases the effectiveness and efficiency of processes in the value chain and reduces unnecessary consumption. The subsequent decrease in the need for natural resources that this allows also reduces the environmental impact of daily activities. The recent global virus outbreak has once again demonstrated the necessity of this. Maintaining our existence on the planet requires a paradigm shift in this direction and a realignment of all aspects of life and production toward reusability within a sharing economy.
Firstly, this requires that all cities and neighborhoods be equipped with smart life, smart city technologies and that production and life processes are designed in a similarly intertwined way. Based on the concern that the world’s limited resources will run out following our formerly held approach and considering the cost of space mining when compared to the opportunities and possibilities that the circular economy will bring, reason and logic require humankind to let go of false hope.
Pause in direct investments
The COVID-19 outbreak will cause a serious decline in foreign direct investment this year due to the uncertainties it has caused in the world economy and will possibly bring about new changes in the global supply chain. While the investments of U.S. companies in China in the early 2000s were only $13 billion, this has come to an excess of over $150 billion over the last 19 years, since China joined the World Trade Organization in 2001. The Japanese have also contributed another $150 billion to investments in China. However, at this point, will countries continue to invest in China? This would seem not so easy since the global virus outbreak.
The 2020 issue of the World Investment Report published by the United Nations Conference on Trade and Development (UNCTAD) points out that global foreign direct investment, which reached up to $1.54 trillion in 2019, will fall below $1 trillion for the first time since 2005, declining by 40%. Interestingly, the UNCTAD foresees that the decline in global foreign direct investment will suffer another 5%-10% contraction in 2021, again due to the ongoing effect of the global virus epidemic. However, they predict that a recovery will begin as of 2022.
It seems that global capital would prefer to undo the carnage wrought on the world economy and global trade but to fully clarify where and in which countries and companies it ought to invest in will only be clear according to economies who emerge from a potential second wave having sustained the least amount of damage. Those who can stay afloat in the face of these processes will likely become new capital hubs. This is why a 50% shrinkage is expected for greenfield, i.e. direct investments made in terms of starting factories or facilities from scratch in any given country.
In other words, even though foreign direct investment toward purchasing or partnering existing companies, factories and plants – what we call brownfield – will also shrink, however, it will not be as much as that of greenfield investments. Although investments in developed regions of the world economy such as Europe and North America increased by 5% to $800 billion in 2019, it is expected that direct investments in the European market will shrink between 30%-45% and between 20%-35% in the North American market this year. Meanwhile, direct investments in Africa, which reached $45 billion in 2019 with an increase of 10%, are expected to contract by 25%-40% this year.
In a year where so many political, supply and demand shocks have hit direct investments, similar to our 4.5% growth in the first quarter, the fact Turkish gaming company Peak was subject to a direct investment of $1.8 billion reaffirms that Turkey will have a very different, strong and significant story post-COVID-19. Let’s monitor Turkey’s powerful story as it unfolds between 2021 and 2022, as the country becomes an increasingly reliable port country in the global supply system.
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