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Effective investment facilitation and sustainable development WAIPA and ILO Multinational Enterprises unit (May 4 2016)

Presentation on Theories of Investment Facilitation Dr Henry Loewendahl, CEO WAVTEQ Group

Strictly Confidential . All material is proprietary and is for workshop participants only. Cannot be made publicly available or provided to any other organization or used by any other organization for training

Agenda

1. Framework for investment promotion2. Best practices in investment facilitation3. Most effective techniques to attract FDI

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About WAVTEQ• Specialist FDI consulting firm established in 2010• Offices in China, India, Korea, Japan, Ireland, and UK and teams in Germany, Hong Kong, Spain and US

• Key services:• Lead Generation: Secured >$5 bn FDI since 2014 for IPA clients• FDI Consulting: Strategy, Propositions, Training, etc.• FDI Products: fDi Markets, fDi Benchmark & below products

• Partner of fDi Intelligence, Financial Times:• Cover Asia, Canada & Middle East for data services• Technology and consulting partner

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WAVTEQ IPA clients

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1. Framework for investment promotion

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2. Lead Generation•Competitive positioning•Image building/breaking•Awareness creation•Lead Generation

Investment promotion

•Approvals•Incentives•Investor handling

3. Investment Facilitation

•Product development•Account management•Supplier attraction•Monitoring & evaluation4. Investment Services

Source: Loewendahl, ‘A Framework for Investment Promotion’ TNCs, UNCTAD (April 2001)

1. Strategy/Organisation•National policy context•Objectives•Sector/market strategy•Organisation structure

Through investment promotionA framework

5/4/2016

Does investment promotion work?

Impact on inward investment• A 10% increase in investment promotion budget leads to a 2.5% increase

in FDI (World Bank)• The net present value of pro‐active investment promotion is almost $4 for

every $1 expended (World Bank)

5/4/2016

WAVTEQ launched a new software & data product in 2015 to track and measure FDI and its economic impact and the performance of the IPA/EDO,

which is now used by Select USA, Dubai FDI and many IPAs:http://www.fdiaccounting.com/

Impact on the economy• $1 in FDI leads to $1 in domestic investment • 1 manufacturing FDI job creates 3 indirect jobs in the local economy• Microsoft estimates that for every 1 person it employs, 30 new jobs are

created in the local economy!

Three main types of FDI

3. New forms of investment (NFI)• Subcontracting, licensing, production sharing• Franchising, management, and turnkey projects

2. Equity investments• Mergers & Acquisitions (M&As)• Joint Ventures (JVs)

1. Greenfield • New physical operation• Brownfield (in existing site, typically by a new company)• Expansion/Re‐Investment (of an existing operation)

Investment promotion & facilitation services vary considerably depending on type of FDI being targeted

2. Best practices in investment facilitation

The corporate perspective

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How do companies set‐up overseas?

51% of corporate executives rely on resources provided by local government/chamber of commerce

43% of corporate executives outsource all or part of the set‐up process to external service providers

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Source: Economist Intelligence Unit, “Corporate overseas expansion: Opportunities and barriers” (2015) based on a survey of 155 senior corporate executives

WAVTEQ is launching in May 2016 www.fdiprofessionals.com a subscription database of all the key location advisors in the world so IPAs can promote their location to corporate

location advisors & influencers. Its also free for IPAs to register on FDI Professionals so that inward investors can find and contact the IPA to facilitate their projects

Compliance: % companies with significant issues in FDI

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HR related: % companies with significant issues in FDI

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Importance of investment facilitation

“Governmental support for corporate overseas expansion plays a crucial role across all key areas”(Economist Intelligence Unit, 2015)

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2. Best practices in investment facilitation

The government perspective

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The Minister wants to see….

5/4/201615

Nestle $120 million, 400 job new plant in Dubai

Winning new investment

5/4/201616

What % of companies considering your location for a project will actually invest (i.e. what is your “conversion” rate)?

‐ IDA and SEDB:‐ Best practice:

50%

25%

‐ Typical EDO: 10‐20%

How to create 500 new jobs with a 20% conversion rate?

5/4/2016

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I need 5 project successes (average project = 100 jobs)

So I need 25 active projects with decision this year20%

That means I need to have 125 qualified prospects20%

And prospect 650 leads to find them!!20%

Source: WAVTEQ

It gets worse…

5/4/201618

What is the average length of time from first contact with a lead to when they have a project

and have selected your location?24 months

What is the average time until a project is operational?

12 monthsIts going to take 3 years before you can cut that ribbon!

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So how can IPAs attract more FDI?

Most FDI is market‐seeking so cannot be directly influenced by

IPAs

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Motives for FDI worldwide (% respondents)

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Source: EIU, “Corporate overseas expansion: Opportunities and barriers” (2015) based on a survey of 155 senior corporate executives

7

23

30

31

39

42

44

47

57

59

0 10 20 30 40 50 60

Other motives

Access raw materials/energy

Moving to business‐friendly location

Acquiring foreign brands

Finding capital

Improving R&D/technology

Producing more cost effectively

Seeking foreign markets due to competition…

Gaining market share

Opening new markets for products/services

Motive for greenfield FDI in countries attending this training

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Source: fDi Markets database, based on motives data for 275 FDI projects from 2015 to Q1

2016

Improving the regulatory & business climate, skills, and infrastructure are long term policy advocacy goals of IPAs

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The key to attracting increased FDI in the short to medium term is

therefore more effective facilitation and increasing that

conversion rate as high as possible

How to do that….

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Organization effectiveness

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A. Organisation

1. Is there a clear mandate to attract FDI?2. Who has this mandate?3. Is there sufficient status and visibility?4. Is there control over strategic & executive functions?5. Are the relevant skills/staff in place?

B. Coordination1. Is there effective co-ordination & networks?2. Coordination at national & regional levels? 3. Is there access to expertise?

C. Commitment

1. High level government mobilisation?2. Strong role and value system?3. Can the inward investment organisation influence

decisions and have an active role in government policy?

D. Strategy1. Is there a clear and coherent, focused approach?2. Is the agency agile and flexible enough?

Source: Henry Loewendahl “Bargaining with Multinationals”

A. Ownership

1. How many agencies/departments are responsible/involved in project handling?

2. Is there one point of contact for the investor?3. Is there clear ownership of a ‘project’?4. How is the process managed?5. Are all the stakeholders involved, understand the

process and committed?

B. Investor requirements

1. Is an attempt made to understand investor requirements (‘project brief’)?

2. Is there effective research and timely information provision to the investor?

C. Visit handling

1. Who has ownership of the visit?2. Are senior official involved?3. Is there a well planned process?4. Is the investor satisfied?

Enquiry handling process


Investment facilitation support

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A. Permits and licenses

• What permits & licenses are needed by investors?• What do investors think about these?

B. Application • Is there a clear road-map for navigating the procedures and making the application?

C. Process• Is the process predictable and transparent?• Is the process politicised?• Who has responsibility for the process?

D. Approval

• Is there a clear evaluation framework for authorisations?

• Is there a target timeframe for approvals?• Is there a key point of contact for the investor?


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A. Type of incentives?

1. What are the objectives of incentives?2. What type of incentives are on offer?3. Are they linked to performance targets?4. Do these meet the objectives?5. Are the incentives clear to investors?

B. Negotiation1. Who can get the incentives?2. Who allocates/awards the incentives?3. Is the negotiation process predictable and

transparent?

C. Approval1. What is the process for awarding incentives?2. Is it politicised?3. How speedy and fair is the process?

D. Post approval

1. What happens after approval?2. Is there monitoring of performance targets?3. Do investors receive the incentives?

Incentives policy & negotiationSee www.incentivesmonitor.com


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A. Aftercare policy

1. Is there an aftercare strategy for keeping in contact with investors once they make the investment?

2. What are the objectives of aftercare (expansions, marketing, supply chain linkages, upgrading of plants etc.)?

B. Aftercare techniques

1. What aftercare techniques are used?2. Do these meet objectives?3. Who are the stakeholders in aftercare?

C. Resources

1. Are adequate resources and skills available for aftercare?

2. Is there a dedicated aftercare team?3. Are resources used effectively?

Aftercare/business retention & expansion (account management)


3. Most effective techniques to attract FDI

Corporate perspective

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Most effective marketing techniques used by IPAs/EDOs (% rating 4 or 5 on a 5‐point scale)

31(Source: DCI, Winning Strategies, 2014 based on 356 corporate executives and location advisors)

The website had become a key tool for effectiveness facilitation

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3. Most effective techniques to attract FDI

Government perspective

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Most effective techniques ‐ PwC survey of IPAs/EDOs

Method No. IPAs using Average rating for FDI

After‐care services for target firms 40% 5.0

Links to target firms and networks 60% 4.8

Links to industry associations etc 40% 4.1

Direct mail to targeted brokers 50% 4.0

Sales representatives overseas 30% 4.0

PR companies 30% 4.0

Conferences, seminars 70% 3.6

Outward missions 50% 3.6

TV commercials 20% 3.5

Organisations in source countries 20% 3.5

Conventions, exhibitions 80% 3.4

Trade press advertising 50% 3.2

Direct mail to targeted companies 90% 2.8

Inward missions 40% 2.8

Directory listings 40% 2.5

Most effective techniques – fDi Intelligence, Financial Times survey of IPAs/EDO

Technique – most effective% Agencies

usingAverage score of

effectiveness (5=most)After‐care services for existing firms 100% 4.1Sales representatives overseas 75% 4.0Outsourcing LG to consultancy firms 50% 3.5Diaspora inward investment targeting 13% 3.5Conferences, seminars 100% 3.4Inward investment website 100% 3.3Inward FDI missions 63% 3.3Outward FDI missions 63% 3.3Referrals from the national IPA 38% 3.3Conventions, exhibitions 100% 3.1Direct mail to targeted companies 63% 3.0Outward trade missions 38% 3.0

5/4/2016

Effective facilitation of reinvestment and expansion projects from existing investors

is key to success in attracting FDI

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Having overseas offices / consulting representatives also supports facilitation of investors especially from Asia and emerging

markets

Thank you!• Dr Henry Loewendahl, Founder & CEO, WAVTEQ Ltd• E‐mail: [email protected]• Skype: hloewendahl | Linkedin: Henry Loewendahl• Cell: +447557965393

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