Svetlicic Marjan [email protected] European Regions Sustainable FDI Strategies and Policies...
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Transcript of Svetlicic Marjan [email protected] European Regions Sustainable FDI Strategies and Policies...
Svetlicic MarjanSvetlicic Marjan [email protected]@siol.net
European Regions’ Sustainable FDI European Regions’ Sustainable FDI Strategies and Policies for Strategies and Policies for
enhancing Competitivenessenhancing Competitiveness
Marjan SvetličičMarjan SvetličičFaculty of Social Sciences, Ljubljana, SloveniaFaculty of Social Sciences, Ljubljana, Slovenia
EERREF-2010EF-2010 Graz Preparatory Workshop, April 23, 2010 Graz Preparatory Workshop, April 23, 2010
Svetlicic MarjanSvetlicic Marjan [email protected]@siol.net 22
Winners do the right things at the right moment!!Winners do the right things at the right moment!!Are sustainable FDI the right thing as the Are sustainable FDI the right thing as the
response to the crises?response to the crises?
Svetlicic MarjanSvetlicic Marjan [email protected]@siol.net 33
IntroductionIntroduction1. FDI is hard to love, easy to hate2. Many misconceptions about FDI;
• 9 out of 10 skeptics are from EU and from public organizations??
3. Frequently scapegoat for own mistakes4. In the crises still performed better in spite of
reduction of flows 5. Tectonic changes demand new thinking6. Making them even more sustainable (sunk
costs…) major challenge.
Svetlicic MarjanSvetlicic Marjan [email protected]@siol.net 44
ObjectivesObjectives1. What theory, empirical studies say 2. Definition of sustainable FDI3. What our survey say4. How to promote regional development
by enhancing FDI; strategic considerations
5. Incentives for sustainable FDI; host countries perspective!
6. Conclusions
Svetlicic MarjanSvetlicic Marjan [email protected]@siol.net 55
1. What theory says1. What theory says
1. No general consensus, but mostly positive impact, provided…
2. Spillover effects contingent on absorptive capacity,
3. Without intervention, FDI may widen regional inequalities,
4. Private motives and firm characteristic major determinants of FDI location;
• not host countries determinants
Svetlicic MarjanSvetlicic Marjan [email protected]@siol.net 66
2. What empirical studies say?2. What empirical studies say?1. Location factors play decisive role (market size,
infrastructure, language, proximity, GDP pc, ..)2. But also; signal (existing FDI), access (market…),
innovation and skill effects3. Effects are sector and type of FDI specific4. FDI policy as part of regional development
policy/priorities perform the best5. Incetives perform better in developed countries6. Spillover effects positive: up to 40% increase in
productivity (cohesion regions and Eastern Europe)7. Net positive effects on employment
Svetlicic MarjanSvetlicic Marjan [email protected]@siol.net 77
3. Our survey showed that:3. Our survey showed that:1. FDI important for competitiveness;more in the future2. Crises have moderately affected FDI (less reinvesting,
less new inflows…)3. Main benefits; jobs, fresh capital (crises!!!), market…4. Main disadvantages; dependence on foreign
decisions, too much subsidies, reduction of local suppliers,
5. No validation for reduced R&D,6. Key attraction factors: qualified personal, good
infrastructure, economic fundamentals; 7. Subsidies and fiscal incentives (correlated with poor
econ. fundamentals) are of low importance, but schizophrenic attitudes
8. Better negotiation skills can improve the host country benefits from FDI
Svetlicic MarjanSvetlicic Marjan [email protected]@siol.net 88
4. How to promote sustainable regional 4. How to promote sustainable regional development by enhancing FDI?development by enhancing FDI?
1. By incentives or other measures?• Although incentives widely applied, not so efficient !• No incentives can compensate weak economic and
political fundamentals…. (negative correlation),
2. Rationale for incentives are:• Correcting market failures and• Capturing externalities
3. Incentives should be: selective, refundable, temporary, targeted and regularly evaluated
Svetlicic MarjanSvetlicic Marjan [email protected]@siol.net 99
What are sustainable FDI?What are sustainable FDI?
1. Leaving our children and grand children opportunity to lead the same quality life as us now at local, regional, global level
2. Those staying in the country/region, not volatile (location stick FDI),
3. Contributing to sustainable development
4. Negative correlation between incentives and sustainable FDI;
– expiration of incentives FDI may go
Svetlicic MarjanSvetlicic Marjan [email protected]@siol.net 1010
5. Attracting sustainable FDI; strategic 5. Attracting sustainable FDI; strategic considerationsconsiderations
1. No one fit all strategies2. Regional promotion of FDI has limited
reach; can only add some specific measures
3. Shift from inward to outward FDI 4. Special incentives for remote, not
bordering regions 5. FDI must be part of coordinated
national/regional policy
Svetlicic MarjanSvetlicic Marjan [email protected]@siol.net 1111
Otherwise….Otherwise….
Svetlicic MarjanSvetlicic Marjan [email protected]@siol.net 1212
5. Attracting sustainable FDI; strategic 5. Attracting sustainable FDI; strategic considerations #2considerations #2
1. Three edge FDI promotion policy has proved to be the most productive:
• improving general investment climate, economic fundamentals, infrastructure (positive correlation)
• coherent (regional) development strategy, • Specialized region (core competencies) attract
more FDI.2. Regions should differentiate themselves by improving
factors enabling sustainability like:• infrastructure, • education, (skill effets)• R&D, (innovation effect)• ICT effect; networks&skills,• Developing suppliers (agglomeration effect, clustering)
Svetlicic MarjanSvetlicic Marjan [email protected]@siol.net 1313
5. How to make FDI sustainable; host 5. How to make FDI sustainable; host countries perspectivecountries perspective
1. Targeting existing FDI ( best promoters)• Stimulating their new and reinvestments• Climbing value added chain• Improving after investment service activities
2. Targeting new investors:• specific value added activities, tasks oriented
incentives (Baldwin)• specific groups of investors (investment brokers,
strategic partners, diasporas, neighboring countries and new actors/SWFs)
• non traditional FDI; R&D, medical services, education
Svetlicic MarjanSvetlicic Marjan [email protected]@siol.net 1414
Some regions can do it, others Some regions can do it, others need assistance! need assistance!
• Developed regions can trapez
• less developed regions need a trampoline
• Remote regions… need safety net
Svetlicic MarjanSvetlicic Marjan [email protected]@siol.net 1515
How to do it?How to do it?1. Providing information is the simplest and most cost
effective measure
– Strong correlation (0.72) between important role of authorities and providing info
2. Recruit staff on the basis of their soft skills, private sector experience and language proficiency
3. Enhance competition and making FDI coherent with development goals (positive correlation)
– Public organizations believe more than private
4. Establishing sustainebility standards, codes, checking FDI by environmental standards, equal distribution of incomes….
Svetlicic MarjanSvetlicic Marjan [email protected]@siol.net 1616
6. Conclusions6. Conclusions
1. FDI can be good if:– in good hands– In good climate– Eliminating attitudinal barriers (Gresham
law)
2. Can sell regions only if persuasive;– Cizelj; OECD study
3. Soft, negotiation skills needed
4. And avoid doing wrong things efficiently
Svetlicic MarjanSvetlicic Marjan [email protected]@siol.net 1717
Svetlicic MarjanSvetlicic Marjan [email protected]@siol.net 1818
Let’s get Let’s get sustainable, sustainable, green….green…. FDI FDIthinking about future generationsthinking about future generations