Unlocking the potential of the regions

1. THE WORLD BANK
World Bank Group
Multilateral Investment
Guarantee Agency
Unlocking the Potential of the Regions
Benefiting from World Bank Group Expertise
David Brown
World Bank Group Consultant
Moscow December 5th 2012

2. THE WORLD BANK
World Bank Group
Multilateral Investment
Guarantee Agency
2
Contents ( 13 slides - presentation duration 10 to 15 minutes)
Snapshot –FDI decision flow Russia Jan 2011 – Sept
2012 – regional breakdown
Regional Certification to Increase FDI – Case Study –
Successful Czech Model
Leveraging Regional Cluster Development + Cluster-
mapping based investor targeting
Maximizing Entrepreneurship and Innovation Spillover
from FDI – Role of Regional Development Agencies

3. THE WORLD BANK
World Bank Group
Multilateral Investment
Guarantee Agency
3
Between Jan 2011 – Sept 2012 – fDi Intelligence
tracked 620 FDI Projects for Russia

4. THE WORLD BANK
World Bank Group
Multilateral Investment
Guarantee Agency
4
Investment Certification Program for Regions (ICPR)
– The Successful Czech and Croatian Models
ICPR created three standards that aim to certify
that regions can:
Anticipate and respond to needs of investors
(international and domestic) by presenting a
compelling ‘ local business case’ to invest
Ensure investment process is streamlined and trouble
free
Encourage existing investors to ‘upgrade’ activities by
removing barriers to growth

5. THE WORLD BANK
World Bank Group
Multilateral Investment
Guarantee Agency
5
Investment Certification Program for Regions (ICPR)
– The Successful Czech and Croatian Models
Information
Standard
Complete detailed
information
checklist
Conduct survey of
existing investors
to determine
strengths &
weaknesses
Develop local
suppliers
database
Profile high growth
sectors
Property
Standard
Demonstrate
ability to offer
range of sites and
buildings
Document extent
to which strategic
sites – circa 150
ha – serviced and
zoned can be
available within 12
months
Marketing
Standard
Marketing strategy
with resources to
implement
Effective website in at
least two languages
Promotional material
answering question
why host region and
not others
Dedicated team /
individual for investor
facilitation

6. THE WORLD BANK
World Bank Group
Multilateral Investment
Guarantee Agency
6
ADVANCED Investment Certification for Regions includes
Investment Outreach; Aftercare; Benchmarking
Overarching aims of Benchmarking Component
Motivate and enable participating RDA’s to create a benchmarking
culture and to capitalise on benchmarking methodologies and tools to
improve operational performance
Systematic comparison of the processes and practices with other
organizations and gauges their performance relative to a peer
Prominently reveals gaps between performance of the ‘benchmarker’
and the performance of the benchmarked “best practice” leader
Suggests means by which the benchmarker might close the gaps

7. THE WORLD BANK
World Bank Group
Multilateral Investment
Guarantee Agency
7
Long-list of RDA Institutional Factors which
can be benchmarked
Legal Status
Governance
Independence / Credibility
External Profile of RDA
Organizational Structure
Management / Staff Skills
Strategic Direction
Systems, processes & internal
communications
Demand-side dynamics
Benchmarking & knowledge of
competition
Investment Generation
Internet & ICT Strategy
Sector specific value proposition
Public-Private Partnerships & Public
Private Dialogue
Investor servicing / project
management & selling skills
Ability to offer full service
Aftercare focused on embedding and
upgrading
Policy Advocacy – how to gain
recognition as good interlocutor
Policies impacting on sector
competitiveness
Performance Impact ratio analysis
Reporting
Monitoring & Evaluation

8. THE WORLD BANK
World Bank Group
Multilateral Investment
Guarantee Agency
Benchmark-
ing gap at
its widest
5 5 = best
practice
Results Croatian RDA (Regional Development
Agency) Benchmark Gap Analysis 2011
Source: D. Brown Team Leader from completed questionnaires July 2011
Creates a baseline against which the impact of future RDA
performance initiatives can be measured over time

9. THE WORLD BANK
World Bank Group
Multilateral Investment
Guarantee Agency
Cluster Development – Regions in the Driving
Seat - Czech Model
Projects
ongoing
Initiated
Wood processing
Musical instruments
Tableware
Chemical
Waterworks eng.
Electronics
Automotive
Mechatronics
Electronics
Bridge technology
Automotive
Engineering
Beer Industry
Imitation jewellery
Technological
textile
Glass
ICT
Wood processing
Water-treatment tech.
Renewable resources
Polygraphic
Packaging tech.
Technical textiles
Pharmaceuticals-
medicine tech.
Beer industry
Engineering
Wood proc.
Chemicals
Electronics
Engineering
Technical
plastics
Engineering
Electronics
Optics
Nanotechnology
Winery
Biotechnology
ICT
Engineering
Aeronautics
Plastics
Shoemaking
Automotive
Engineering
Wood processing
ICT
Construction
materials
Metallurgy
Renewable
resources
Chemical industry

10. THE WORLD BANK
World Bank Group
Multilateral Investment
Guarantee Agency
10
Food/Drink
Healthcare
Final
Markets
Consumables
Support &
Supply
Infrastructure/Services
Regulatory
FrameworkMedia
Specialist VCs,
analysts, IPR & Legal
Research
Funding
Scotland’s Biotechnology Cluster
Incubators
Rapid/secure
transport
Contract
Manuf’s
Vets
Equipment
Speciality
chemicals
Health service
NHT, SBTS
Agriculture
Farmers,
breeders,
seed co’s
Environment
Pharma
Co’s
Specialist
inputs
Research
Institutes
CROs
R&D/clinical
trials
Cluster
Core
Software
Innovation
E.g. Mice
Xeno-
transplant
Animals
Environment
Food
Genomics
Development
Companies
Therapeutics
Diagnostics
Universities
No presence
Weak
Medium
Strong
Critical linkage - strong
Denotes key driver
Critical linkage - weak
Industrial gases
Cluster Mapping to 1) Identify Opportunities for
Domestic Companies and 2) International Firms

11. THE WORLD BANK
World Bank Group
Multilateral Investment
Guarantee Agency
11
Innovation and technology-related benefits for SMEs
& Entrepreneurs from FDI will not flow automatically
Positive spillover effects cannot be taken for
granted
Much depends on
the investment policy framework
The investment climate
Motivation & capacity of local SMEs to harness the
innovation and capitalize on the new technologies
Characteristics and behavior of the foreign investors
Intermediary agencies / e.g. national and regional

12. THE WORLD BANK
World Bank Group
Multilateral Investment
Guarantee Agency
Some very good FDI Results and encouraging
reforms in Russia …………………………….but
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Important to note correlation between triggering innovation
from FDI and ‘openness’ of economy
OECD gauges the restrictiveness of a country’s FDI rules
by looking at the four main types of restrictions on FDI:
Foreign equity limitations
Restrictions on the employment of foreigners as key
personnel
Screening or approval mechanisms
Operational restrictions, e.g. restrictions on branching
and on capital repatriation or on land ownership

13. THE WORLD BANK
World Bank Group
Multilateral Investment
Guarantee Agency
but… much scope to further ‘open’ economy to maximize
innovation and entrepreneurship spillover form FDI
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0,00
0,05
0,10
0,15
0,20
0,25
0,30
0,35
0,40
0,45
0,50
ICELAND
CHINA
SAUDIARABIA
INDONESIA
INDIA
JAPAN
NEWZEALAND
RUSSIA
MEXICO
CANADA
KAZAKHSTAN
KOREA
AUSTRALIA
ISRAEL
UKRAINE
POLAND
PERU
AUSTRIA
US
SWITZERLAND
BRAZIL
TURKEY
NORWAY
DENMARK
CHILE
MOROCCO
LATVIA
EGYPT
UK
IRELAND
SWEDEN
CZECHREP.
SOUTHAFRICA
ITALY
HUNGARY
SLOVAKREP.
FRANCE
LITHUANIA
BELGIUM
GREECE
FINLAND
ARGENTINA
GERMANY
ESTONIA
SPAIN
NETHERLANDS
ROMANIA
SLOVENIA
PORTUGAL
LUXEMBOURG
Closed = 1; Open = 0
Source: OECD
Non-OECD average
OECD average
OECD FDI Restrictiveness Index 2010

14. THE WORLD BANK
World Bank Group
Multilateral Investment
Guarantee Agency
Sector / Industry
Analysis
• Industry trends
•Technology
•Ownership
• Market trends
• Price trends
• Competition policy
• Links to national/global
supply chains
• Global policy trends
(WTO/AFTA)
Price Factors
• Factor costs
• Input costs
• Finance availability/cost
• Transaction costs
•Taxes and customs duties
• Investment law
• Utilities service quality, price
• Regulatory barriers
• Market structure &
competition policy
• Factor market rigidities
(e.g., min. wage)
• Product standards
• Risk
Appropriate role for
Government
Determinants of
Competitiveness
Productivity Factors
o Skills
o Innovation
o Management
o Infrastructure
Public PolicyPrivate
Sector
Competitiveness
enhancing
Source: Ivan Nimac
IFC Vienna June 2011
Linking competitiveness analysis with Investment Policy –
Regions have a key role to play – e.g. Productivity Factors

15. THE WORLD BANK
World Bank Group
Multilateral Investment
Guarantee Agency
Thank you