Promoting Sustainable Investments:Modern approaches to Investment Promotion

Roberto Echandi

WAIPA Conference

Istanbul, October 14, 2016

Cross-border Investment:

• Changing motivations

• Flowing in new directions

• Driven by new actors

• Evolving in composition

• Using different modalities

• Being increasingly regulated by patchy framework of international investment agreements (IIAs)

Critical to understand the changing paradigms affecting

cross-border investments

These developments

entail the need

for countries to

rethink the role and

nature of

Investment promotion

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Investment policy should not be about choosing between foreign and domestic investment, but rather about

connecting them

Investment policy and promotion should go beyond investment attraction…

Not all types of foreign direct investment are the same, need for more specific policy mixes

Integrating Investment Policy and

Promotion Solutions…

Going beyond investment attraction…

Vision and Strategy

Investment Attraction

Investment EntryInvestment Retention

& Protection

Linkages & Spillovers

Not all FDI is the same, nor react the same to investment

promotion strategies nor generate the same socio-economic

impacts

Natural resource-seeking

Market-seeking

Efficiency-seeking

Strategic-asset

seeking

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Investment Promotion is a key function that can help to deliver a broader Investment

Vision and Strategy integrating host country to the world

Investment Vision

and Investment

Strategy (IRM)

Going beyond attraction, fully integrating investment

promotion throughout the investment cycle

A host economy articulates

a coherent investment

policy AND investment

promotion strategy

Tools

Investment

Promotion

IPAs’ mandates, functions,

strategic plans and activities

are directly derived from the

host country’s vision.

Closely connected to

incentives and strategic

planning, Investment

Promotion plays a role in

every stage of the cycle.

Vision & Strategy

Attraction

Entry & Establishment

Retention & Expansion

Linkages & Spillovers

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Marketing

Information

Assistance

Advocacy

Information

Assistance

Advocacy

Marketing

Information

Assistance in retention

Advocacy

Information

Assistance in matchmaking

Advocacy

IPAs provide investor services

at each stage

Key implications for effective investment promotion

1. Investment Promotion and Policy should be formulated within an integrated lens

Policy/Strategy (and Investment Promotion strategy) helps them make choices,

defining the institutions needed for the task, the services they need to provide to

investors and the sequencing/phasing

2. Promotion is not only about investment attraction, but also about assisting investors

during the establishment, retention, expansion and linking FDI in the host country

Promotion strategies should be framed within broader investment and economic

policies integrating the host country into the international economy

3. Investment promotion requires service-oriented intermediary with a marketing

specialization and focus on targeted investors/segments

Countries must evolve towards having a professional and dedicated investment

promotion agency or IPA (at least a dedicated IPA unit within those offered by IPIs)

IPAs are a bridge between investors and government. They interpret and communicate

policy to investors, while providing evidence and advocating for reform

IPAs (or the IPA unit within an IPI) should operate with institutional flexibility/autonomy,

have personnel with a private sector mindset/experience, coordinate with public and

private partners and stakeholders to provide services to investors.

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High quality investor services are essential to overcome

the challenges investors face

Poor provision of services to investors

Investors do not location because of

lack of information or poor image perceptions

Investors consider location but drop it from the short list because of lack of

information/assistance

Investors decide against location

because process of establishment and

operation is too difficult

Investors stop expanding or withdraw their investments from

the location

Investors do not connect with local

businesses

Addressed by IPAs

providing …...

Marketing Services Information Services Assistance services Advocacy services

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The full array of investor services shows on this 4x4 matrix

More granularity on

the different

services provided

by IPAs and a new

classification under

a new matrix taking

into account the

investment cycle

and the 4 key areas

in which IPAs work.

Stages of the Investment Cycle:

Categories

of IPA

services:

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Four big buckets matrix

Investment

attraction

Investment

entry

Retaining /

expansion

investment

Linkages &

spillovers

Bucket 1:

Marketing services

Bucket 2:

Information services

Bucket 3:

Facilitation services

Bucket 4:

Policy advocacy

Marketing:

Services offered in the attraction and

persuasion of investors:

• Image building

• Investor outreach

Information:

Provision of information on the location:

Inquiry handling

Basic research and market intelligence

Advanced market research

Assistance:

Services facilitating investor persuasion,

entry and establishment:

Initial investor contacts

Pre-site visit arrangements

Site visits

Facilitating decision to invest

Individual investor troubleshooting

Advocacy:

Services on behalf of investors advocating

for policy reform for better business

environment:

Collecting information on problem areas

within business environment

Feeding recommendations back to

government on reform options

Evolving as the IPA moves from from basic to advanced services …………

… which IPAs can package for maximum effectiveness

Focus on investors’ services provides more granularity to the traditional

terminology referring to outreach, facilitation, aftercare and “policy advocacy”

IPAs need to make choices as to the range and depth of services offered …..

establish programs to package services to provide value to investors

Outreach

and

facilitationAftercare

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Investment promotion supports clients within three work streams

Strategy

• Formulating FDI and Investment promotion strategy within an integrated Investment Policy and Promotion Approach

Institutions

• IPA creation and reorganization

• IPI-to-IPA transition

• IPA strengthening

• Wider investment promotion institutional landscape

• National and subnational coordination framework establishment or strengthening

Investor Services

• IPA service offering: design and implementation (following the 4x4 with (i) marketing (ii) information, (iii) assistance; and (iv) advocacy

• Standard Operating Procedures, IRMS/CRM, systems, website implementation

• M&E/KPI design and establishment

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And ending with strong M&E Framework to measure

success

Reform area Reform description

A Reforms improving investment promotion strategy

Establishing/improving investment promotion strategy Investment Promotion Strategy is adopted or improved by IPA

in terms of strategic alignment, quality, focus, and

sequencing.

B Reforms improving the institutional framework for

investment promotion

1. Creating/strengthening investment-related

agency/intermediary (IPA)

1. IPA is legally created, established or strengthened to:

a. Improve the level of autonomy;

b. Strengthen investment promotion mandate;

c. Improve governance;

d. Improve organizational structure, internal reporting lines

and operating procedures;

e. Improve results orientation;

f. Improve budget and secure funding.

2. Improving coordination among agencies involved in

investment promotion

2.Investment promotion mandates across relevant agencies

are better aligned and formal coordination mechanisms are

established and functional.

C. Reforms improving investor services

Establishing/improving investment promotion services

provided to investors

Investment promotion services provided during the

investment lifecycle are upgraded in at least 2 of the following

areas:

a. Buckets of services: Marketing, Information, Assistance,

Advocacy

b. Programs: Outreach, Facilitation, Aftercare, Advocacy

c. Systems: SOP, IRMS/CRM, M&E/KPI, Website,

INSTITUTIONS/

IPAs

SERVICES

STRATEGIES,

(link to IRM)

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Thank you

Rechandi@ifc.org