Trade and Investment Promotion—One Agency?

28 October 2016 Category: Topical Review

As many countries and regions seek to promote their economic development, their governments establish agencies to promote trade and investment, often focussing on attracting foreign direct investment to the country or region. These agencies can be wholly publicly funded, or a mixture of private and public funding, and may involve cooperation, formal or informal with bodies such as chambers of commerce or business sectoral groups.

Many governments and regional authorities, however, struggle with the question—is it better to have one agency dealing with trade or export promotion and investment promotion or is it better to have separate agencies with their own mandates, staff and budget?

The simple answer is that there is no perfect formula. Indeed, many developed countries have tried both formulas when one or the other has been found wanting.

It’s worth looking at the advantages and disadvantages of the two broad types of structure.

First the advantages:

With one ’super’ agency there are clear synergies and efficiencies; one central administration, finance, human resources and publicity department. Common branding can give a greater impact in world markets, and there are clear efficiencies if offices and representation can be shared in foreign markets. There may also be synergies if joint ventures or technology transfer activities are priorities, and linkage or spin-out programmes benefit from joint activity. Sectoral and industry knowledge can be shared by both functions and joint promotional activities can have a greater effect in foreign markets.

But there are disadvantages to take into consideration:

Investors and trade or export partners are rarely the same people. An investment promotion agency has a clear target for the type of foreign direct investment it is seeking, and the target companies which might invest. They will seek to influence the decisions of senior management, or indeed the board of directors of a target company, and will direct their marketing or promotional activities accordingly. A trade or export promotion organisation usually targets the purchasing managers of companies in foreign markets and has a large function in market research, internationalisation of domestic companies and supply chain development. It will also be involved in seeking distributors, promoting products at trade fairs and arranging buyer missions.

Those countries which operate the joint approach, for example, the UK, Spain and Germany, recognise the different tasks and usually have clear departments which operate independently, albeit under one brand.

Other countries, the Netherlands, Chile, Sweden and Ireland, which may in the past have tried the joint approach, now operate very separate models.