Investment Promotion As A Key Fdi Tool
The growing attention paid to FDI is reflected in the way countries seek to attract
investment and the subsequent establishment of investment promotion agencies or IPAs. Investment promotion refers to a range of different activities similar to those performed by a chamber of commerce. These IPAs are largely government-run in order to attract FDI.
IPAs communicate the nature of a countrys investment climate to foreign investors, in order to persuade and assist them in investing in a particular country. They adopt targeted approaches by focusing on selected industries and countries. The most common modes of entry in order to gain FDI are through Greenfield investment and joint-ventures. Other ways of entry are Brownfield investment, mergers and acquisitions, and privatization. Investment promotion is client-oriented, as it lays more stress and emphasis on personal contacts with investors than non-personal methods of promotion.
Investment promotion was bolstered into the scenes in the 1990s because of the emergence and opening up of the Eastern Europe and the Former Soviet-Union, along with the liberalization of FDI regimes across the world.
Commonly known as the advocates of the private sector, IPAs are associated with the day-to-day dealings with private sector representatives. Some of the activities include image building through investor targeting, which is seen as an effective and cost saving technique.
Their core functions can be divided as follows:
Investment policy advice
Providing consulting services
Granting incentives
Foreign investment registration
Promotion of outward investment
Promotion of privatization
Managing export processing zones (EPZs)
The IPAs core functions are also country-group specific:
OECD countries
Investor targeting
After care programmes
Consulting services
Economies in transition
Investor targeting
After care programmes
Consulting services
Investment policy formulation
Promotion of privatization
Other developing countries
Investor targeting
Investment policy formulation
Promotion of domestic investment
Least developed countries
Promotion of domestic investment
Investment policy formulation
After care programmes
Promotion of tourism
Granting incentives
Investor targeting
Foreign investment registration
Foreign investment licensing
The regions most commonly targeted for IPA inward investment include Western Europe, North America, Asia, North Africa, Middle East, Eastern and Central Europe, Latin America, and the Caribbean.
The types of industries that fall under the purview of the IPA include:
Basic manufacturing industries like textiles, automotives, etc.
Advanced manufacturing industries such as biotechnology, optoelectronics, aerospace, etc.
Infrastructure including transportation, utilities and telecommunications
Agro-based industries like food processing, fisheries, etc.
Services in the form of call centres, shared service centres, E-commerce industries
R&D, regional headquarters, sales offices, distribution centres, value added logistics in the realm of strategic investment
Natural resources like mining and quarrying, petroleum, gas products, etc.
Others forms of investment comprise of high-tech investment, eco-friendly technology, labour intensive investment, skills enhancement, health services, etc.
Some of the pre-investment decision services provided to investors include:
Business matchmaking in the form of strategic alliances and joint-ventures
Domestic market information
Advice on local employment conditions
Transportation facilities
Foreign market information
Verification of tariffs and codes
The post-investment decision services are as follows:
Assistance with licensing and registration
Legal assistance and work permits
Customs and telecommunications assistance
Power and water supply assistance
The promotional techniques used by the IPA encompass international conferences, trade fairs, trade missions, organizing meetings and seminars, direct mailing, telemarketing, and others.
With the rise of IPAs, comes increased FDI in the form of various benefits to the recipient economies. This can be in the form of capital inflows, knowledge transfers, access to international markets and new competition, among others.
by: PSD Global
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