Tools and Best Practices:

Investment Promotion

Dr. Serdar Altay Coordinator for Strategic Planning, Research and

Development

Republic of Turkey Prime Ministry

Investment Support and Promotion Agency of Turkey

(ISPAT)

TURIN, 5 May 2016

Effective Investment Facilitation and Sustainable Development

Training by WAIPA and ILO

AGENDA

• Basics of FDI

• Effective Investment Promotion

• Key Promotion Strategies

• Value Proposition and Marketing Messages

• Investor Targeting and Lead Generation

BASICS of FDI

https://www.youtube.com/watch?v=U-dzl4G_VhE

Source: UNCTAD, fDi Market

A significant amount of FDI is taking place in the world and countries (IPAs) are competing hard to receive a higher share..

70% 41%

30%

59% 0,6 0,6

0,7

0,9

1,4

1,9

1,5

1,2 1,3

1,6 1,4 1,5

1,2

2002 2004 2006 2008 2010 2012 2014

Global Inward FDI ($ Trillion)

92% 61% 8%

39%

0,5 0,5

0,9 0,8

1,3

2,1

1,7

1,1

1,4

1,6

1,3 1,3 1,4

2002 2004 2006 2008 2010 2012 2014

Advancedeconomies

Developingeconomies

Global Outward FDI ($ Trillion)

29% 32%

71% 68%

0,7 0,7 0,7

0,8 0,8

1,4

1,0

0,8 0,9

0,6 0,7 0,7

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Global Inward Greenfied FDI ($ Trillion)

80% 69%

20% 31%

0,7 0,7 0,7

0,8 0,8

1,4

1,0

0,8 0,9

0,6 0,7 0,7

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Global Outward Greenfied FDI ($ Trillion)

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Source: OECD, World Bank

Basics of Foreign Direct Investment (FDI)..

FDI is a category of investment that reflects the objective of establishing a lasting interest by a resident enterprise in one economy (direct investor) in an enterprise (direct investment enterprise) that is resident in an economy other than that of the direct investor. The “lasting interest” is evidenced when the direct investor owns at least 10% of the voting power of the direct investment enterprise.

Economic and Other Benefits from FDI

Capital inflows Employment Revenue benefits Favorable impact on local investment Technology transfer Improved labor skills Improved exports Improved international competitiveness

of local firms. Increased competition

What Qualify as FDI?

Purchase/sale of existing equity in the form of mergers & acquisitions (M&A)

Greenfield investments

Expansions of existing investments

Financial restructuring (debt repayment or loss reduction)

Market

Market size and per capita income Market growth Import barriers (tariff and non-tariff barriers) Access to regional and global markets Country-specific consumer preferences Competitive considerations (e.g., market share, pricing, entry barriers)

Cost

Cost, quality, availability, and productivity of trained/trainable labor Costs of inputs, components, raw materials Transportation, communications, and utility costs Taxation, financing costs, foreign exchange access and availability Incentives and disincentives (e.g., performance requirements) for investment and trade

Natural Resources Availability of resources (e.g., oil and gas, minerals, raw materials, agricultural land, tourism resources)

Infrastructure Framework

Physical infrastructure (e.g., ports, airports, roads, telecommunications) Technological and R&D infrastructure (e.g., research institutions, universities) Industrial infrastructure (e.g., subcontracting and business services, supplier industries, industry clusters) Educational infrastructure (e.g., schools, colleges, universities)

Policy Framework

Economic, political, and social stability Private-sector orientation and privatization of state-owned enterprises Entry rules, guarantees, and incentives Structure and functioning of markets International agreements on trade and FDI; bilateral tax and trade policies General legal systems (e.g., intellectual property rights, competition and labor laws, tax administration, and regulations regarding business establishment)

Business Promotion & Support

Availability of information and assistance Promotion (e.g., internal and external, targeting of investors) After-care services Administrative efficiency of IPA and other agencies

Source: UNCTAD, 2009

Key factors used by Companies to evaluate an investment location

Multinational companies look at certain factors, including promotion, to choose a location for their next investment..

Source: World Bank, 2002

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64

54

50

39

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33

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Access to customers (1)

Stable social and political environment (2)

Ease of doing business (3)

Reliability and quality of infrastructure and utilities (4)

Ability to hire technical professionals (5)

Ability to hire management staff (6)

Level of corruption (7)

Cost of labor (8)

Crime and safety (9)

Ability to hire skilled laborers (10)

National taxes (11)

Cost of utilities (12)

Roads (13)

Access to raw materials (14)

Availability & quality of university & technical training (15)

Available land with all services in place (16)

Local taxes (17)

Access to suppliers (18)

Labor relations & unionization (19)

Air service (20)

Top 20 Critical Location Factors, percent cited as "very influential"

Investors’ choice of locations depends on critical factors…

Source: World Bank, Development Counsellors International (DCI). July 28, 2008. “A View from Corporate America: Winning Strategies in Economic Development Marketing”

Companies work closely with Investment Promotion Agencies (IPAs) when looking for their next investment location…

Why IPAs? A recent survey of executives with direct site–selection responsibilities for large U.S. companies reveals that:

65 percent of companies have worked closely with IPAs while working on a location decision.

64 percent of executives indicate a strong likelihood that that they would use the IPA Website in their next location search.

Only 8 percent of companies would not contact the IPA during the site-selection process.

The percentage of companies that believe the Website to be an IPA’s most effective marketing tool jumped to 56 percent, up from 34 percent in 2002.

How IPA functions correspond to the investor’s process

Source: World Bank

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Main Components of IPA Value Chain

National Framework, Policies, Strategy, Plan and Objectives

Regional/State Framework, Policies, Strategy, Plan and Objectives

Agency mandate, role, mission, vision, objectives

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Finance

Human Resources

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Information ~ Teamwork~ Workflow ~ Standards

Research Strategy Planning Promotion Servicing Facilitation

After Sales

Monitoring and Evaluation, Performance Measurement

Source: M Porter: Value chain & GDP Global

In order to be successful, an IPA should be effective at every component..

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Primary Functions of an IPA

• Work flows and processes • Internal communication flows • Information sharing • Well-functioning support systems

• Agency policies and standards • Work ethics • Team spirit

BR

AN

DIN

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Information ~ Teamwork~ Workflow ~ Standards

Research Strategy Planning Promotion Servicing Facilitation

After Sales

• Strategy for econ dev’p, trade & FDI promotion • Research of macro & micro economy • Monitoring economy • Sector competiveness and market studies • Policy advocacy • Strategy reviews

•Objectives •Targets •Budgeting •Plans •Trend reviews

•Place marketing •Location brand •Brand values •Addressing perceptions •Delivering the brand

• Marketing messages • Marketing collateral & channels • Communication /PR to position country & sectors • Lead generation • Attraction activities from HQ and international network/offices • Investment propositions • Sector presentations • Sector targeting • Priority markets • Value add: Clusters/R&D • Conversion: enquiries > leads >prospects > investment projects

•Non-financial incentives: full package •Information provision •Cost provisions •Site visits •Real estate •Regulatory matters •Legal matters •Registrations •Authorizations •Service providers •Incentives •Suppliers •HR solutions •Problem solving

•Investor development •Business start up •Business expansions •Business retention •Supply chain dev’p •Infrastructure •Testimonials •Lead generation •Problem solving •Investor satisfaction

Source: M Porter: Value chain & GDP Global

Promotion is an integral component of an IPA’s core functions..

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EFFECTIVE INVESTMENT PROMOTION

An effective promotion strategy can be built on detailed analysis and deliberations..

3. Develop Your

Marketing Strategy

2. Target Industries and focus markets

1. Assess Your Investment Needs and Potential/Competitiveness

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1. Assess Your Investment Needs and Potential • Identify Agency and National Development Goals

• A list of national development goals.

• A list of FDI-related goals that are based upon these national goals.

• A policy statement summarizing the relationship between the mandate of the agency, the FDI-related goals and the national development goals.

• Examine FDI Trends and External Influences

• Undertake a SWOT Analysis of Your Location (Your competitiveness)

• Analyze Your Competitors’ Competitiveness

• Determine the factors to be compared (e.g. labor cost & skills)

• Determine your location's unique selling proposition.

"A highly educated work force that is among the most cost-competitive worldwide/in the region;"

"Unparalleled access to a market of 500 million people;"

"Best port serving 1000 square miles;"

An IPA’s strategy should be in line with local and national policies while taking into account global FDI trends and developments..

Source: World Bank, Investment Climate, Investment Generation Toolkit

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2. Target Industries and Focus Markets • Develop a Long List of Potential Industries

• Analyze the Competitiveness of Each Sector

• Assess Industry Compatibility With Your Location

• Develop a Short List of Industries

• Identify Target Markets/Geographic Sources of Investment

• Keep This Analytical Process Ongoing

• Continued Policy Advocacy for Maintaining Competitiveness

• Improvement in the policy and regulatory climate, new trade agreements improving market access; improved infrastructure or services resulting from privatization or increased competition; or increased labor force quality due to the establishment of new technical training programs..

Targeting is imperative to an IPA’s sectoral focus which will eventually bring tangible results..

Source: World Bank, Investment Climate, Investment Generation Toolkit

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3. Develop Your Marketing Strategy

• Adjust the Agency’s Promotional Approaches • ‘Image-building’ instruments: brochures, newsletters, video, advertising, and public

relations. • Lead generation techniques: direct marketing and focused advertising. • Questions to be answered:

• Does your image-building campaign reflect the unique selling proposition identified when conducting your SWOT analysis?

• Do you need to shift your advertising to publications read by your targeted audience?

• Do your investment generation activities clearly address the targeted investors on how your location can meet their specific requirements?

• Evaluate Organizational Functions and Responsibilities • Evaluate the Agency’s Partnerships

• government agencies, sectoral associations, property developers, embassies, banks, and law and consulting firms

• Assess the Budget Implications of the New Promotional Focus • Develop a ‘Strategy Document’ with Promotion Instruments, Timeline, Targets and

Budget

It is important to have an action plan based on the strategy developed by the IPA

Source: World Bank, Investment Climate, Investment Generation Toolkit

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3. Develop Your Marketing Strategy

• Adjust the Agency’s Promotional Approach

• Evaluate Organizational Functions and Responsibilities

• Evaluate the Agency’s Partnerships

• Assess the Budget Implications of the New Promotional Focus

• Develop a ‘Strategy Document’ with Promotion Instruments, Timeline, Targets, Budget

• What are the ‘strategic objectives’ of your agency?

• What industry sectors will be targeted by the Agency in the short term (1-2 years) and in the medium term (3-5 years)?

• What are the prioritised markets, if any?

• What promotional tools will be used to reach these firms, and why were they selected?

• What changes in the Agency’s organizational structure, functional responsibilities, and staff responsibilities will have to be made?

• What are the implications of this strategy for the Agency’s current partnerships?

• How much will these promotional activities cost and what will be the source of any additional funding that is needed?

Specific targets and timetables for achieving the targets need to be incorporated throughout the strategy document..

Source: World Bank, Investment Climate, Investment Generation Toolkit

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IPAs can employ a wide range of promotion tools with multiple purposes ranging from image-building to investment generation…

Advertising & PR

Attending exhibitions

Investment mission to/

from host/home

Business seminars on investment

opportunities

Engaging in direct mail

and/or telemarketing

Website; internet and

e-mail

image building (if only exhibiting) and investment

generation if the IPA “works” the event: proactively looks

for business

Mature IPAs have generally reduced their attendance to

the exhibitions as their image as an investment location has improved and as they adopt more research-driven direct

marketing.

General mission: image-building. Sector-specific mission: investment generation.

A seminar with a sharp sectoral focus held in the target market is Investment generation. A seminar with general focus: image building.

Investment generation

With a marketing department of four people,

the IPA potentially could communicate directly with

6000 prospective customers annually. The key to success are the quality and integrity of the database, which must

be populated in strict accordance with the IPA’s

targeting strategy.

Image-building & agency institutional

strengthening

Spans image building and investment generation A website will be an effective marketing tool if it has quality data, is easily accessible, and stimulates the potential investor to visit and re-visit the site.

Key Promotion

Tools

Source: World Bank, Investment Climate, Investment Generation Toolkit

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Strategic Objectives of Invest in Turkey

1. Building a positive image for Turkey as a “safe haven” for FDI

2. Becoming a reliable business partner, a leading business advisory body and a “knowledge center” on FDI in Turkey

3. Proactive promotion of strategic priorities with a focus on • sub-sectors that brings high value-added production • upgrading “functional tasks” assigned to Turkey by MNCs • incorporating Turkey into global production networks of

“future industries” • integrating new Turkish firms (especially SMEs) into Global

Value Chains (GVCs)

4. Proactive engagement with business expansions and retention of foreign investors in Turkey

5. Adoption of an aggressive stance on policy advocacy to improve investment climate and promote FDI in Turkey

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Example:

1. Focusing on sub-sectors that brings high value-added production

(sub-sectors within automotive, electrical and non-electrical machinery, chemicals; energy, construction, distribution, logistics and transportation services.)

2. Upgrading “functional tasks” assigned to Turkey by MNCs (focus on pre-production and post-production tasks such as professional, business and IT services as well as data storage and big data for MNCs in Turkey and new-comers.)

3. Incorporating Turkey into global production networks of “future industries.” (focus on HVAC (heating, ventilation, and air conditioning), pharma and biotech, aerospace and aviation, ICT, scientific instruments, sophisticated chemicals, professional, software and data services.)

4. Integrating new Turkish firms especially SMEs into GVCs (focus on connecting Turkish firms as high quality suppliers or M&As and partnerships to multinational corporations in Turkey and new-comers especially in automotive, machinery, and IT, professional and logistics services etc.)

Strategic Priorities of Invest in Turkey

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Example:

KEY PROMOTION STRATEGIES

Key Investment Promotion Strategies

Sector targeting, and proposition based marketing

Technology marketing

Cluster promotion

Trade and export promotion

Incentives

Investor Development / Business retention and expansion (BRE)

Policy advocacy

Depending on the needs of a country/region, an IPA may adopt various strategies or a combination of strategies.

Source: GDP Global

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Sector targeting, and proposition-based marketing

Most IPAs focus on sector promotion..

• Sector / market strategies

• Company databases & CRM

• Trade program linkages

• Investor development (BRE)

• Marketing

• Sector manager

• Key Account Manager

Source: GDP Global

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Both national and regional agencies have been targeting sectors..

..focus on Aviation & Aerospace, Life Sciences, Information Technology, Defense, Clean Energy, Financial &

Professional Services, Manufacturing..

..target sectors: Nanotechnology & Advanced Materials, Automotive, Aerospace, Energy & Environment, Life

Sciences, High-Tech Mechanical Engineering, ICT, Business Support Services, Electronics & Electrical Engineering

key sectors: Aerospace, Agri-food, Ground Transformation, ICT, Life Sciences, Microelectronics,

Mining, Multimedia

Sector targeting, and proposition based marketing

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Technology marketing

Agencies also promote their country’s/region’s technological competences..

• Technology managers

• Technology mapping

• Interaction with research

institutes

• Financial incentives

• Proposition-based marketing

• Cost vs quality

• Technology transfer & marketing

Source: GDP Global

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IPAs have developed specific strategies to attract technology-intensive investments..

Internet of Things, Big Data, Security Biometrics, Smart Ageing, Portable Services, Sharing Economy, Financial

Technology, Medical Devices, Media & Content, Engineering, Bio Pharmaceuticals

•Toronto technology sector is the largest in Canada, and 3rd in North America •Canada's technology companies are the country's largest investors in R&D •Of the top 250 Canadian technology companies, 40% are based in Toronto •Over 168,000 people are employed at more than 15,000 technology

companies generating approximate annual revenues of $52 billion. •More than 57% of technology professionals in the Toronto are below the age

of 45; the sector reflects a highly educated work force, with more than half having achieved a bachelor's degree or higher levels of education.

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Cluster promotion

Cluster development is an opportunity for IPAs...

• Cluster mapping

• National & int’l alliances

• Private-public partnerships

• World leading infrastructure

• Cluster investment

• Cluster marketing

• Cluster champions

Source: GDP Global

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Cluster promotion

Some IPAs have taken initiative to a develop clusters, while where else governments have supported initiatives taken by private sector..

Noted IPA/Other Agency Cluster Micro Cluster Development Initiatives

State-Supported Private Sector Initiatives

• IID Denmark: Medicon Valley, Food Valley, ICT (Bluetooth and optical) • EDB Singapore: Biosciences • AFII France: Several large technopoles, R&D Sophia Antipolis, e.g. aviation Toulouse • Business Sweden: Launched 10 clusters in seven years • GTAI Germany: 10 priority sector including cluster promotion

• Florida: •Bioscience Scripps Institute •Retirement Tourism

• Maryland: Chesapeake Bay Nanotechnology Initiative • Poland: Medical tourism

Source: GDP Global

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Investor Development / Business retention and expansion (BRE)

Business retention and expansion can be a significant source of additional FDI (in some countries, 60% of total FDI)

• Work with the management of local subsidiaries of transnational corporations to win new mandates for new products or new markets.

• Help firms to overcome potential obstacles to expansion; for example, by working with local training agencies to increase the number of workers with a specific skill.

• Assist domestic companies to overcome management or other problems constraining their growth.

• Manage existing investors through a system of account managers (Key Account Managers) to maintain close relations with those investors. Investors often prefer to deal with the same individual over time. This individual must have deep sector expertise.

• Investor development program based on financial support. • To support modernization, acquire equipment, train personnel, or to obtain certification or a patent. • Other bodies, e.g. Institute for Product Development (IPD) offer practical solutions that lead to productivity, enhanced competitiveness.

Source: World Bank, GDP Global

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VALUE PROPOSITION AND MARKETING MESSAGES

Building Your Marketing Message: CONTENT

Results

Solutions

Problems

Knowledge

Mark

eting M

essage

• Examples and evidence of other satisfied customers

• How your product will solve the problems • How your solution is better than your competitors’

• Of your target investors. Like: • Profitability • Growth • Diversification • Innovation

• Of your: • Location • Target investors • Competitors

Start right with a strong Value Proposition

• Ideally, just 1-2 sentences long, a value proposition is the foundation of your

marketing message.

• A value proposition is a clear statement of the concrete results an investor gets

from doing business in your location.

• Worth repeating: what benefits the investor gets from doing business in your

location…not what they get from your IPA.

• Your IPA provides customer service, but your location is the product.

• Benefits should be direct.

• Example: Highest profitability rate among 10 objectively evaluated clusters.

• Should be as specific to an audience’s needs as possible

• For a large audience, such as on the web site: (sub)sector-specific

• For an outreach campaign: company-specific

Example: 10 Reasons to Invest in Turkey

Strategic Location

Robust Economy

Domestic market + EU

OPEN

for BUSINESS

Liberal Investment Climate

Benign R&D Ecosystem

Sectorial Opportunities

Favorable Demographics

Skilled & Cost-competitive Labor Force

Lucrative Incentives

EU Perspective EU

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Example: Reasons to Invest in Ireland

Strategic Location

Domestic market + EU

OPEN

for BUSINESS

Liberal Investment Climate

Benign R&D Ecosystem

Sectorial Opportunities

Favorable Demographics

Skilled & Cost-competitive Labor Force

Lucrative Incentives

EU Perspective EU

http://www.idaireland.com/invest-in-ireland/why-invest/

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In addition to generic sectoral reports on website, we also prepare pitch-books for investors customized to the business requirements of investors..

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INVESTOR-TARGETING & LEAD GENERATION

Why is investor-targeting important?

• Without targeting:

• A location’s investment promotion depends on investors to “make the first

move.”

• The country surrenders some of the little influence a government can wield

over investor decisions.

• Government allocation of valuable land assets may be driven by unsolicited

proposals from investors of suboptimal merit.

• With targeting:

• IPAs may have some influence over the types of investment attracted (e.g.,

sector, companies, mode of entry)

• Governments get valuable insights into what a location can do to improve its

attractiveness to investors.

• Developing countries can counteract poor images or weak investment track

records

Targeting campaign preparation

• Targeting generally takes the form of a “campaign,” in which one:

• Identifies high-potential investors

• Tries to get face-to-face meetings with these investors

• Presents them with the ‘business case’ for why they should invest in a

location

• Preparation requires:

1. Tailored marketing messages and materials

2. Clear campaign objectives, activities, team, budget, timeline

3. Cooperation of partners and stakeholders for facilitation and reforms

Steps in lead generation

1. Define investor profile appropriate for your location

2. Establish a database to manage investor leads

3. Generating a list of several hundred investor leads through research

4. “Qualifying” leads through a series of filters in additional research to arrive at a short list

Commercial Databases for Long-Listing

• fDi Markets (www.fdimarkets.com)

Strengths: Project specific details, Weakness: No contact information

• Hoovers (www.hoovers.com )

Strengths: Detailed company info and contacts, Weakness: US focus

• Dun and Bradstreet (www.dnb.com)

• Corporate Affiliations (www.corporateaffiliations.com)

Strengths: Details company linkages, Weakness: US focus

• Business Monitor International (www.businessmonitor.com)

Strengths: Maps MNCs and competitors, Weakness: Not exclusively FDI focused

• Kompass (www.kompass.com)

Strengths: Great for Europe, various languages, Weakness: Data quality issues

• EIU World Investment Service (http://eiu.bvdep.com/ )

Strengths: Includes business costs and forecast, Weakness: Limited country coverage

• Datamonitor (www.datamonitor.com)

• Investment Map (www.investmentmap.org)

Strengths: Complementary data on sector, Weakness: Lacks company info

From ‘long list’ to ‘short list’

Narrow long list of companies to short list of targets

First Filter (Company Size and Location)

Potential indicators for first screening: • Company Size (Capital and # of Employees)

• Why? • Company size is a basic indicator which can be used to weed out the

very small players which are unlikely to have sufficient capital to make

overseas investments

• Note that in many cases it does not make sense to target

largest most well-known companies (company targets should

be context and location specific)

Second Filter (Potential for Outbound Investment)

• Potential indicators for second screening: • Revenue growth

• Overseas operations/office locations

• Why? • Companies with higher revenue growth would typically require similar

growth in production and/or operations (and thus might have need to

invest abroad)

• Companies with foreign subsidiaries in fields related to target sectors

(e.g. manufacturing, operations, not only sales offices) would be more

open to investing abroad

• Companies with existing operations in nearby countries or states may be

less likely to invest in your location

Third Filter (Benchmarking Local Competitiveness)

• Potential indicators for third screening:

• Presence of key competitors in local market

• Availability of local suppliers

• Costs and quality of local inputs

• Why? • Companies (depending on sector) maybe less interested in a new

market if competitor already has dominant position in local market

• Company would likely only consider market if local suppliers are

available, inputs meet required quality standards and their costs are

sufficiently competitive to make investment realistic

Fourth Filter (Logistical Considerations)

• Potential indicators for fourth screening:

• Headquarters Location

• Why?

• Preparing for outreach campaign team will want to consider

(especially in larger countries) the logistics of targeting

group of companies which are geographically located

within the same city (in order to maximize use of time and

reduce costs)

Prioritize Prospects

• Using short list, prioritize prospect potential by conducting more detailed

research

• Focus on company’s recent activities:

• Changes in management or key personnel

• New business ventures or strategic changes

• New products

• Competitors

• Major capital expenditures

• Information on the company’s decision-makers

• Business alliances and partners

Arrive at a final list of top targets for a campaign

• Create a short list of 10-25 top target companies

• The most desirable for your location in terms of likely impact and

chances of success

• Top target companies should receive the highest attention

• “Anchor” outreach campaign agenda and schedule around top targets,

and later try getting appointments with secondary targets

Thank you!