Mike Pfister, OECD, 2014 ASEAN-OECD Investment Policy Conference
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Transcript of Mike Pfister, OECD, 2014 ASEAN-OECD Investment Policy Conference
Trends and Practices in investment promotion
Mike PfisterInvestment Division
OECD
2nd ASEAN-OECD Investment Policy Conference10-11 December 2014, Jakarta
• A 10% increase in an investment promotion budget can lead to a 2.5% increase in FDI*
• 170 national and 260 sub-national IPAs have been established to facilitate, promote and attract FDI*
• 83% of executives responsible for selecting where to invest indicated that they normally consult IPAs directly during the selection process*
• Assistance and information by the government through an IPA had a considerable influence on decisions as to where to invest (based on an analysis of 30 000 FDI projects with high levels of high value-added activities)*
• *Source ICA 2014
Some figures…
Analysing country experiences: the role of investment promotion and facilitation
..but good practices for attracting and retaining investment
No one-size-fits-all solutions
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Examples from:•OECD Investment Policy Reviews,•Advisory work on investment promotion•2 Dec, Paris, seminar with IPAs (Canada, Chile, UKTI, Czech Invest, Business Sweden, IDA Ireland)
• Investment leads• Prospective
Missions in key markets
• Representations abroad
• Back-to-back calls• Marketing &
communications (website, brochures, market information, contacts)
Regular co-ordination with
agencies & institutions (including,
Ministries, R&D and academic institutions)
Regions & provinces
Local business community,
business associations
Investment Promotion
Agency
International Domestic
Strategy development
Marketing
After-care
Policy Advocacy
Sales
Functions
Promotion / Facilitation
LINKAGES
• Some empirics reveal that aftercare / policy advocacy appears to have the strongest impact on FDI inflows, followed by image-building, investor servicing, and investment lead generation.
• Information & Sales Packs• Investment plans• Policies and incentives• Procedures and
requirements• Progress and achievements• Create awareness
Image Building
• Advertizing and PR• Information & Marketing• Missions & Events• Company targeting• Company visits• Follow-up
Lead Generation and Targeting • Information provision
• Assistance with contacts• One-stop-shop services• Assessment of manpower,,
Infrastructure service needs• Follow-up
Investor Servicing
• Continued “account executive attention”
• “Ombudsman” role and trouble-shooting function
• Follow-up on manpower, infrastructure, service needs
Aftercare and Policy Advocacy
Prioritising IPA activities
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For IPA activities: •About 50% of FDI is re-invested earnings
•Encouraging re-investment is less costly and complex than attracting new investors
•Satisfied clients are an IPA’s best promotion tools
For the host economy:•Strengthening links between foreign companies and the local economy, e.g. through the development of local production chains and further GVC integration
•Creating a reputation of a host government that takes care of its foreign investors
•Higher likelihood of high-value added activities (e.g. R&D, innovation) in expansion and re-investments
United Kingdom Trade and Investment (UKTI)– Strategic relationship management for major companies: bringing
together different government agencies to improve the relationship with major companies
– Key accounts for 150 target companies and “virtual teams”
Aftercare: Increased focus on investor retention
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• Identification of key markets and investors, proactive reaching out to investors, direct marketing
• A way to optimise IPA resources and services, but…
– Difficult to get right
– Can be very costly, adaptation to changes in global demand, is the labour market flexible enough?
• But increasing investment into target sectors should not happen at the expense of supporting sectors the economy functions as a whole
• Policy evolution example: The case of manufacturing
Services are essential to the success of manufacturing
• Policies to enhance the absorptive capacity of the domestic economy through training and human capital development are superior to “picking winners”
Invest in Canada– 14 sectors: no focus on natural resource sectors as investors analysis
show that investors come anyway
Targeting: a fine line to optimise limited resources
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IPAs to be strong advocate for FDI : addressing the current problems that companies face and improving long-term competitiveness
Advocating for policies to improve the business climate
• infrastructure• legal framework• education• training• red tape and
bureaucracy – “investment irritants”
• to attract more investment• to fully reap the benefits
from inward investment• to improve the country’s
global position
IPAs are well-placed to identify issues in the investment environment and advocate
for enabling policies
Improvements in
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Assessing whether IPAs are doing the right thing and doing it right
Performance evaluation
Investment indicators:
• number of new investment projects
• value of new investment projects
• number of direct jobs created
• Impact of investment
• Linkages
• Potential for expansion
Activity indicators:
• number of events or meetings organised
• number of event attendees
• referrals to local partners
• client satisfaction
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Careful: Focus on measuring IPA’s role in facilitating investments, be careful of what you can deliver – risk of overpromising!
International good practice:
IDA Ireland
•Broad and sophisticated set of indicators
•Beyond the activities of the IPA, assess the impact of investment on national economic and development objectives
Performance and evaluation
• Reflect the agency’s strategic objectives outlined in the IDA Ireland Strategy - Horizon 2020
o attracting investment outside the largest cities o attracting investment in the areas of research,
development and innovation
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• Linkages policies need to address challenges for both quality and quantity
• Quality of suppliers: skills development using MNEs in developing curriculum for training suppliers (Penang Skills Development Center)
• Quantity: financial support to support SMEs in producing volumes (advance contract, co-operation with banks etc..)
• Inter-ministerial cooperation : Invest in Canada’s works with Industry Canada to identify clusters and local partners, size and profile of structure /functions
• Cluster example: Automotive sector in Czech republic
– Illustration of top sector expertise in an IPA
– Key criteria: Cluster must have training facility
– Czechinvest also offer consulting services to companies
Encouraging linkages and clusters
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• Increase intra-ASEAN investment
• Enhance RVCs/GVCs
• How can competing investment destinations co-operate? – GVCs offer opportunity = not a zero sum game
– Joint investment promotion missions/activities?
• ASEAN desk at IPAs?
• Forum to discuss intra-ASEAN challenges?
Attracting investment into the ASEAN region
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