The Macro, Mid-Range and Micro roles in FDI Attraction

14 November 2016 Category: Topical Review

Foreign Direct Investment enables locations, regions and countries to diversify and upgrade their industrial manufacturing, service output and achieve a rapid growth of exports.

Attracting FDI is a complex process consisting of many elements. One way of looking at it is to divide it into three segments:

  1. Macro – Government inputs
  2. Mid-range – activities of the Investment Promotion Agency
  3. Micro – skills of the executives of the Investment Promotion Agency

 

Macro – Government inputs: 

Countries and regions cannot wait for international market forces to bring foreign investors. They must develop a pro-active policy to attract them. The investment climate must be attractive to FDI as it is easier to promote a good product than a bad product.

An outsider such as Communique International and other international consultants are often best placed to see the blockages to FDI and how the investment climate can be improved. Improving the investment climate is an ongoing role of Government who must also recognize that the IPA is best placed to reflect investors’ concerns on issues affecting the investment climate and competitiveness.

International best practice is for the Investment Promotion Agency to be an independent agency with its own board of directors and reporting to a senior Minister or the Prime Minister/President. However, this does not mean that one size fits all. Communique International has advised many locations on the organization on the structure of their IPA taking into account local conditions.

 

Mid-range – activities of the Investment Promotion Agency:

The Government is responsible for the overall policy, the investment climate, the organization structure and funding of the IPA. The IPA is responsible for FDI strategy and operations. The strategy Includes:

  • Investment Generation – choosing industrial sectors, marketing message, target markets, types of companies, route to market, online marketing and marketing material, etc.
  • Image Building – both internationally and domestically.
  • Advocating improvements to the Investment Climate
  • Aftercare – like in all businesses it is easier to sell to an existing customer than a new customer.

 

Micro – skills of the executives of the Investment Promotion Agency:

Consultants can help IPAs identify industrial sectors, target companies and the individuals an IPA wishes to contact.

A problem facing many IPAs is to get a meeting with target companies in order to make their pitch to persuade them to invest in their country, region or city. Many capacity building projects concentrate on what must be done to secure meetings with potential investors but spend insufficient time on developing the communication skills to do so – which can lead to greater difficulty for the IPA in attracting FDI.

Communique International as its name suggests is extremely strong in this area and believes in spending a lot of time working with the IPA executives developing these “soft communications skills”. A number of training sessions are first held on site and over the following months numerous Skype sessions are held with the executives involved. These focus on developing their skills in making the initial contact, their pitch when they contact the target company and finally their meeting and presentation to the targeted executive in the target company. Skype has the advantage that as it is a number of short sessions over a longer period it enables the FDI executives to better absorb the material and also causes less interference with their on-going work, as well as being a cost effective method of training.