This presentation by Mike Pfister was made at the session "Promoting investment in ASEAN: the role of IPAs and regional co-operation" during the 2nd ASEAN-OECD Investment Policy Conference held on 10-11 December 2014. Find out more at: http://www.oecd.org/daf/inv/investment-policy/2014-asean-oecd-investment-policy-conference.htm

1. Trends and Practices in
investment promotion
Mike Pfister
Investment Division
OECD
2nd
ASEAN-OECD Investment Policy Conference
10-11 December 2014, Jakarta

2. • 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…

3. 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)

4. • 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

5. • 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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6. 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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7. • 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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8. 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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9.  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!

10. 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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11. • 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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12. • 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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13. Let’s discuss…
Mike Pfister: mike.pfister@oecd.org
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