Many locations – countries, provinces/regions and even cities – have trade and investment promotion agencies which engage potential investors directly by serving as intermediaries between foreign direct investors and their governments. Many of these agencies are affiliated to the World Association of Investment Promotion Agencies (WAIPA). In many countries, particularly least and developing countries, foreign direct investment (FDI) serves as a generator of skilled jobs, innovation, provision of access to markets, and other benefits flowing out of it.
Previously I’ve written about my research that indicated a mismatch between the investors and IPAs’ perception of what factors were significant in investor decision making. So as we mobilise all our resources to attract investors for our recovery post the COVID-19 pancession, let me share with you the findings of the survey by the WAIPA and the World Bank Group (WBG). This survey was conducted among 91 IPAs from across the world covering various economic sizes from July to December 2019 and it sought “to capture the innovative approaches of investment promotion; to gauge where improvements can be made; and to understand the trends, challenges and opportunities that IPAd face today”.
The study was structured on the WBG’s framework for investment promotion which was centred on the following pillars:
- Corporate planning and sector prioritisation: This looks at to what extent IPA’s strategic focus is premised on its corporate and strategic planning and its improvement on sector prioritisation as anchors for investment promotion.
- Structural framework for FDI: To what extent does the IPA’s institutional framework result in improving mechanisms for governance, tools, capacities, resources and organisational coordination with stakeholders.
- Investor services: Efficient investor-centred services anchored on a comprehensive investor services framework – this is critical in identifying the kind of services provided to investors throughout the lifecycle of a project from lead generation, development, facilitation to after-care services.
- Marketing Services: This is about generating a positive brand image of a location as variable and sustainable destination for investment.
- Information delivery for investor decision making: Providing appropriate market intelligence to investors including linkages with suppliers.
- Assìstance to investors in contributing to their success: This speaks to developing and implementing success factors in investment decision making, establishment and operations (including retention), grievance management and expansion support.
- Advocacy to improve the investment climate: This speaks to also advocating for investor-friendly legislative and regulatory environment.
The IPAs are the first port of call for investors and traders hoping to do business with any locations. The report of the WBG and WAIPA re-emphasises this point by asserting that they are “an indispensable part of most countries’ development strategies and frequently, they are the first entity contacted by foreign investors, giving them a main role in the overall site selection process.
The key findings of the report could be summarised as follows:
- 79% of IPAs have a multilateral strategy while 34% of them do not. These strategies are often influenced by a strategic intent to achieve the Sustainable Development Goals (SDGs). The strategies are also sector-based – the most popular sector is renewable energy (68% of the IPAs); ICT (62%); informed by a country’s National Decelopment Plan (81%)) and comprehensive research on global demand and FDI emerging trends (49%)
- The institutional framework of an IPA shoukd ensure structural and financial autonomy; operational independence; key engagement with the regulatory regime, private sector and civil society; and, flexibility and dynamism to adjust internal structures, resources and procedures to respond to the changing environment. The structures of IPAs vary – semi autonomous (37%); submits to a government ministry (26%); autonomous public agencies (18%); and. reporting directly to the ministry of trade and industry (32%).
- Financial flexibility has influence on such aspects as quantity and quality of staff and structures.
- IPAs have to offer high quality and relevant services to investors. The most common that IPAs provide to them are business events and conferences abroad (or within the country) for investor attraction to promote investment opportunities (93%); advice on regulations and investor support services for start-ups (77%); provision of customised answers to questions for retention and expansion (65%); and networking opportunities in the local ecosystem for linkages and spillovers.
- IPAs need a customer relationship management (CRM) system and standard operating procedures (SOPS).
- IPAs need to develop internal systems to manage information services such as investor information system (IIS) and CRM-based investor-relationship management system (IRMS).
Furthermore, the report indicated the most common change anticipated by IPAs was the impact of digitalisation and technology disruptions (56%), changes in the markets (30%); new investment promotion methods (23%); policy and regulatory changes (18%); and global and trade uncertainty (11%). Looking back at the past two years, one may say these issues they anticipated became double-fold due to the outbreak of COVID-19 pandemic.
Post COVID-19, the improvements that the IPAs yearned for are even more critical and urgent: better institutional coordination (59%); strategic alignment (44%); and more streamlined regulations (43%).
While the WBG and WAIPA have identified these variables for benchmarking, Adam Jones-Kelley has indicated the Site Sellection magazine has produced proprietary rankings to recognise the the trailblazers in their Global Best to Invest Report (GBIR). She indicates these institutions “will shoulder much of the burden of helping rebuild economies, and replace the jobs lost, in response to this unprecedented challenge(s).”
The author posits the IPAs are all-often-underappreciated. “Few truly understand the hypercritical role IPAs play in ensuring the economic stability and growth of tge (locations) thru serve. In a period of exploding unemployment and heretofore unseen economic headwinds, their work has never been more vital. The best of tge best deserve their well-earned recognition, and we’ll look to them to continue their sound stewardship of the economies they serve as we rebuild.”
The GBIR assesses the effectiveness of the IPAs on the following criteria:
- Most professionally responsive enquiries
- Staff possessing the best knowledge and language diversity
- Offering access to user-friendly databases of available sites and incentives (General and sector-specific)
- Readily available information on timing expectations of permitting and other processes
- Access to recent investors in the region who can vouch for the area and agency
- Best reputation for protecting investor confidentiality
- Best reputation for aftercare services
- Website: is it easy to navigate, does it possess a wide breadth of data and does it have an efficient, modern design with current data?
I’m glad to discover from Africa three IPAs – Invest in Morocco, Economic Development Board Mauritius and Trade and Investment KZN (TIKZN) – and a regional economic community, Common Market for Eastern and Southern Africa (COMESA), have made the cut. Congratulations to them.
Before closing off, let me invite those interested in listening to our podcast on a Chai FM’s “Beyond Governance” programme presented by Dr Nimrod Mbele in which he interviewed me and Mr Alan Mukoki, the CEO of the South African Chamber of Commerce and Industry (SACCI), to click here. We tackled the issue of international best practices on good corporate governance and the lessons for us as South Africa.
Enjoy your weekend.
Saul Molobi (FCIM)
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