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Investment Promotion Handbook For Diplomats

Manual by Wessendorp, Paul, Whiteway, Paul, Wigren, Andreas, 2011

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This handbook is aimed at diplomats who may be new to investment promotion. It deals with the role of diplomats posted abroad, seen from the perspective of the host country (i.e. the country receiving FDI). The handbook explains what FDI is, provides an insight into the process through which companies go when they are making investment decisions, and describes the parallel activity which governments undertake in order to persuade firms to locate in their economy. The intention is both to equip diplomats with the tools needed in the promotion of FDI and to give them confidence that many of their existing skills are directly relevant to the process.

U n i t e d n at i o n s C o n f e r e n C e o n t r a d e a n d d e v e l o p m e n t


Investment Advisory Series
Series A, number 6


INVESTMENT PROMOTION
HANDBOOK FOR DIPLOMATS


UNCTAD’s Investment Advisory Series


The Investment Advisory Series provides practical advice and case
studies of best policy practice for attracting and benefiting from
foreign direct investment (FDI), in line with national development
strategies. The series draws on the experiences gained in UNCTAD’s
capacity- and institution-building work in developing countries and
countries with economies in transition. The Investment Advisory
Series consists of Series A and Series B.


Series A deals with issues related to investment promotion and
facilitation and to the work of investment promotion agencies. The
publications are intended to be pragmatic, with a how-to focus. They
include toolkits and handbooks.


Series B focuses on case studies of best practices in policy and
strategic matters related to FDI and development arising from
existing and emerging challenges.


For more information please visit
http://www.unctad.org, e-mail ips@unctad.org


or contact James Zhan, Director, Division on Investment
and Enterprise at +41 (22) 917 57 97


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UNITED NATIONS




Investment Advisory Series
Series A, number 6





United Nations Conference on Trade and Development






INVESTMENT PROMOTION
HANDBOOK FOR DIPLOMATS


 
 












United Nations


New York and Geneva, 2011








 
 


ii


Note

As the focal point in the United Nations system for


investment, and building on more than three and a half decades of
experience in this area, UNCTAD, through its Division on
Investment and Enterprise (DIAE), promotes understanding of key
issues related to foreign direct investment (FDI) and enterprise
development. DIAE also assists developing countries in enhancing
their productive capacities and international competitiveness
through the integrated treatment of investment and enterprise
development.



The term “country” as used in this publication also refers,


as appropriate, to territories or areas. The designations employed
and the presentation of the material do not imply the expression of
any opinion whatsoever on the part of the Secretariat of the United
Nations concerning the legal status of any country, territory, city or
area, or of its authorities, or concerning the delimitation of its
frontiers or boundaries. In addition, the designations of country
groups are intended solely for statistical or analytical convenience
and do not necessarily express a judgment about the stage of
development reached by a particular country or area in the
development process.



The material contained in this publication may be freely


quoted or reprinted with appropriate acknowledgement. A copy of
the publication containing the quotation or reprint should be sent to
the Chief, Investment Promotion Section, DIAE, UNCTAD, Palais
des Nations, Room E-10080, CH-1211 Geneva, Switzerland; by
fax: (41 22) 917 01 97; or e-mail: ips@unctad.org. Publications are
available on the website http://www.unctad.org.



UNCTAD/DIAE/PCB/2011/2


ISSN 1995-6088
United Nations Publication




Investment Promotion Handbook for Diplomats



 
 


iii


Preface

The Investment Advisory Series provides practical advice


and case studies of best policy practice for attracting and benefiting
from foreign direct investment (FDI), in line with national
development strategies. The Series draws on the experiences gained
in, and lessons learned through, UNCTAD’s capacity- and
institution-building work in developing countries and countries with
economies in transition.



Series A deals with issues related to investment promotion
and facilitation and to the work of investment promotion agencies
(IPAs) and other institutions that promote FDI and provide
information and services to investors. The publications are intended
to be pragmatic, with a how-to focus, and include toolkits and
handbooks. The prime target audience for Series A is practitioners
in the field of investment promotion and facilitation, mainly in
IPAs.


Series B focuses on case studies of best practices in policy
and strategic matters related to FDI and development arising from
existing and emerging challenges. The primary target audience for
Series B is policymakers in the field of investment. Other target
audiences include civil society, the private sector and international
organizations.



The Investment Advisory Series is prepared by a group of


UNCTAD staff and consultants under the guidance of James Zhan.

This handbook was prepared by an UNCTAD team led by


Paul Wessendorp and comprising Paul Whiteway and Andreas
Wigren. The team worked under the supervision of Nazha
Benabbes Taarji-Aschenbrenner. Comments and contributions were
received from Richard Bolwijn, Masataka Fujita, Natalia Guerra
and Jörg Weber of UNCTAD, Claudia Ma, Head of Research and








 
 


iv


Knowledge Management at InvestHK, and Abdulla Thawfeeq,
Counsellor for Trade at the Permanent Mission of the Republic of
Maldives to the United Nations Office at Geneva. It was desktop
published by Teresita Ventura.



The publication was made possible by generous funding


from the Swedish International Development Cooperation Agency
(SIDA).




Investment Promotion Handbook for Diplomats



 
 


v


Contents

Abbreviations ................................................................................ vii


Executive summary .................................................................... viii


Introduction .................................................................................... 1


1. FDI and investment promotion ................................................. 3


1.1 Foreign direct investment ....................................................... 3
1.2 The investment process........................................................... 7
1.3 Why FDI matters .................................................................. 12
1.4 Investment promotion ........................................................... 15


2. The diplomat’s role in investment promotion ........................ 27


2.1 The investment promotion network ...................................... 27
2.2 Managing leads ..................................................................... 29
2.3 Diplomats and aftercare ........................................................ 33
2.4 Coordinating investment promotion ..................................... 37


3. Investment promotion techniques and tools ........................... 47


3.1 Designing and delivering the message ................................. 47
3.2 Identifying target companies ................................................ 52
3.3 Meeting with potential investors .......................................... 53
3.4 Handling information ........................................................... 57


4. Conclusions................................................................................ 59


Annex: Action plan template ....................................................... 61


References...................................................................................... 63









 
 


vi


Boxes

1. The national development strategy and investment promotion .. 17
2. Useful online resources .............................................................. 25
3. Investment promotion network: South Africa ............................ 28
4. Helping a company expand in the United Kingdom ................... 36
5. How diplomats help to promote FDI in the Netherlands ............ 37
6. Messaging ................................................................................... 47



Figures


1. Strategy development and implementation ................................ 20
2. Convering leads into investment projects ................................... 22
3. Account plan template ................................................................ 41




Investment Promotion Handbook for Diplomats

 


 
 


vii


Abbreviations

BEDIA Botswana Export Development and Investment Authority
CEO chief executive officer
CRM customer relationship management
FDI foreign direct investment
FIAS Foreign Investment Advisory Service
IMF International Monetary Fund
IPA investment promotion agency
M&As     mergers and acquisitions
NEM non-equity mode
NFIA Netherlands Foreign Investment Agency
ODA official development assistance
OECD     Organization for Economic Cooperation and Development
R&D     research and development
SWOT strengths, weaknesses, opportunities, threats
TISA Trade and Investment South Africa
TNC     transnational corporation
UKTI United Kingdom Trade & Investment




Executive Summary



 
 


viii


Executive summary


This handbook is aimed at diplomats who are new to
promoting foreign direct investment (FDI). Most commonly, FDI
takes place when companies set up and expand affiliates or acquire
firms in foreign markets. Most governments promote and facilitate
inward FDI as it can be a major source of capital, employment,
skills, technology and revenue. As part of these efforts, countries
have set up investment promotion agencies (IPAs) on both the
national and subnational levels. In foreign markets, diplomats can
lend key support to these agencies because of their proximity to
potential investors and their knowledge of economic and political
conditions in the countries where they are posted.


A company’s decision to invest in a specific location is
normally based on examining the suitability of a range of locations
against the operational requirements that will enable the company
to add value from the investment. The investment promotion
process runs in parallel to the company’s decision making process.
It involves (a) defining the “product” (i.e. a growth opportunity for
potential investors) to be promoted; (b) identifying the target group
of potential investors; and (c) devising a promotional strategy to get
the message across. The intention is to generate investment leads.
When leads have been generated, the task is to convert them into
concrete investments.



Diplomats help to deliver marketing messages to the target


group of potential investors, but above all they are involved in
managing relationships with individual companies and providing
them with the data they need to make an informed investment
decision in favour of the diplomat’s home country. This applies
equally to existing investors as part of an aftercare strategy, because
such companies are a good source of new investment. Diplomats
also have a role in policy advocacy, channeling the views of
investors about the investment climate in their country so that their




Investment Promotion Handbook for Diplomats



 
 


ix


government may consider what reforms are necessary to attract
more investment.


Investment promotion rests on good teamwork between the
national IPA, the embassies and other stakeholders in the host
market. Poor coordination can lead to the failure to win investment
projects. Drafting account plans that specify responsibilities and
actions with regard to individual companies can help avoid
duplication between stakeholders with an interest in the same
company.





Key messages to diplomats


 Get to understand the
investment process


 Work within the framework of
your country’s development
strategy


 Set guidelines for enquiry
handling


 Do company research before
meeting with potential
investors


 Set ambitious but realistic
goals


 Identify target firms and focus
your efforts on them


 Coordinate with other
stakeholders


 Build trust – keep
confidentiality of client
information!


 Stay in touch with established
investors


 Evaluate your promotional
activities






 


 


Introduction


The diplomat as an investment promoter



FDI is an important driver of economic growth and


prosperity. It helps to create jobs, facilitates technology transfer,
and is a major source of capital for developing countries.
Governments overwhelmingly see FDI as positive, although they
are aware that it has potential pitfalls too. Most countries therefore
maintain agencies to promote and facilitate it. Given that FDI
involves foreign companies, embassies play an important role in the
task of promoting investment.



Promoting inward FDI may at first seem removed from the


traditional job of a diplomat. However, diplomats can be vital parts
of the investment promotion network. They are often posted in
markets which are sources of FDI. Furthermore, diplomacy ─ like
investment promotion ─ involves relationship management and
requires strong contact-making skills. Diplomats are expected to
maintain wide networks of contacts, often including key business
figures and decision makers. Among these there may already be
existing investors.



Diplomats enjoy strong communication skills and are


already well-equipped to market their own country as an investment
location. The diplomats’ knowledge of their duty station could be
useful to obtain business information and identify potential
investors. Diplomats can furthermore act as a conduit for feedback
from transnational corporations (TNCs) headquartered in the
country in which they are posted, thus helping their governments to
identify investment-related regulations, policies and practices in
need of reform.




Introduction



 
 


2


Aim of this handbook

This handbook is aimed at diplomats who may be new to


investment promotion. It deals with the role of diplomats posted
abroad, seen from the perspective of the host country (i.e. the
country receiving FDI). The term “investment promotion” as used
in this publication refers to the promotion of inward FDI, unless
otherwise stated. The handbook explains what FDI is, provides an
insight into the process through which companies go when they are
making investment decisions, and describes the parallel activity
which governments undertake in order to persuade firms to locate
in their economy. The intention is both to equip diplomats with the
tools needed in the promotion of FDI and to give them confidence
that many of their existing skills are directly relevant to the process.

Structure of the handbook


Chapter 1 provides an introduction to FDI and investment
promotion; chapter 2 takes a closer look at the diplomat’s role in
promotional activities, and chapter 3 deals with investment
promotion techniques and tools. Chapter 4 presents the conclusions
of the handbook.





 


 


1. FDI and investment promotion

1.1 Foreign direct investment


Over the last decade, FDI has been the greatest source of
external finance for developing countries, exceeding portfolio
investment and other private capital flows as well as official
development assistance (ODA).1 But what exactly is FDI?

What FDI entails


According to the definition used by UNCTAD,2 FDI is “an
investment involving a long-term relationship and reflecting a
lasting interest and control of a resident entity in one economy in an
enterprise resident in an economy other than that of the foreign
direct investor (foreign affiliate)”. An equity capital stake of 10 per
cent or more of the ordinary shares for an incorporated enterprise,
or its equivalent for an unincorporated enterprise, is normally
considered as the threshold for FDI.



FDI has three components:

 Equity capital is the direct investor’s purchase of shares of


an enterprise in a foreign country. FDI projects that entails
the establishment of new entities (greenfield FDI), is also
part of this component;


 Reinvested earnings are the direct investor’s share of
earnings not distributed as dividends by affiliates, or
earnings not remitted to the direct investor;


 Intra-company loans are short- or long-term borrowing and
lending between direct investors and affiliates.




                                                            
1 UNCTAD (2009c): 5.
2 The UNCTAD definition is based on OECD (2008) and IMF (2009).




Chapter 1. FDI and Investment Promotion



 
 


4


Transactions whereby an investor acquires influence or
control of a foreign entity without taking an equity stake are not
FDI, even though they can have effects similar to those achieved
through equity ownership. Such non-equity modes (NEMs) include
contract manufacturing, services outsourcing, contract farming,
franchising, licensing and management contracts.3


The modes by which foreign investors enter into a foreign
market vary. There are two primary routes: (a) merging with, or
acquiring an existing company; and (b) setting up a new entity.



Mergers and acquisitions (M&As) entails the taking over or


merging of capital, assets and liabilities of existing enterprises. The
main difference between mergers and acquisitions lies in the fact
that a new legal entity is established in the former case, but not in
the latter. Otherwise, these two forms may be treated as identical.4



M&As have the important advantage of providing


immediate access to the host market, to the assets owned by the
local enterprise (including potentially its intellectual property), to a
skilled and experienced workforce, and to an established supply
chain. It has the disadvantage of carrying higher risks because
M&As involve two firms, which could have rather different
corporate organizations and cultures. Establishing a new entity as
the vehicle for the investment is advantageous since the new
enterprise can be structured more easily to fit the investor’s
business needs and can be expanded gradually if necessary. It
involves less risk, but may also offer smaller immediate rewards.
(For a discussion of potential benefits and disadvantages of FDI
from the host country’s perspective, see section 1.3.).

                                                            
3 See UNCTAD (2011) for more information on non-equity modes of


international production.
4 UNCTAD (2009b): 98-99.




Investment Promotion Handbook for Diplomats



 
 


5


FDI is not usually about investing in land or property,
although such investments can be very profitable. An affiliate may
own assets including land or buildings, but these are usually
connected with the running of the business. FDI is about investing
in an overseas market in order to carry out a specific business
activity.



In terms of investment motives, there are four basic types of


FDI:5


(a) Market-seeking;
(b) Efficiency-seeking;
(c) Resource-seeking; and
(d) Strategic asset-seeking FDI.


Market-seeking FDI is driven by the current size or
expected growth of the host market. The market size can be further
enlarged by regional, preferential and bilateral trade agreements
with other countries. Diplomats are in a unique position to promote
such international legal arrangements, and this is often done as part
of the embassies’ work to develop value propositions to potential
investors.



Efficiency-seeking FDI aims to rationalize the investor’s


operations by taking advantage of lower costs or economies of scale
and scope. Resource-seeking FDI takes place when the investor
wants to acquire resources such as raw materials, while strategic
asset-seeking FDI is driven by access to created assets, for example
special skills or technology. It is worth noting that many TNCs
engage in FDI that combines characteristics of the above categories.
The motives for foreign investment may also change when a firm
becomes more internationally established and experienced.6
                                                            
5 Dunning (1993).
6 Ibid.: 56.




Chapter 1. FDI and Investment Promotion



 
 


6





Transnational corporations


The companies involved in FDI are called transnational
corporations (TNCs). They comprise “parent enterprises” and their
“foreign affiliates”. A parent enterprise controls assets of other
entities in countries other than its home country, usually by owning
a certain equity capital stake. A foreign affiliate is an enterprise in
which an investor, who is a resident in another economy, owns a
stake that permits a lasting management interest. Subsidiaries,
associates and branches are all referred to as foreign affiliates or
just “affiliates” in this publication.


In a subsidiary, the foreign investor owns more than 50 per
cent of the shares, giving it the right to appoint or remove a
majority of the board members, and so control the company. A
subsidiary is an incorporated company, that is to say “a legal person
in its own right, able to own property and to sue and be sued in its
own name”.7 If the investor owns 10-50 per cent of the shares of an
incorporated enterprise, it is called an associate, as the investor
influences rather than controls the company. A branch is an
unincorporated enterprise in the host country, owned wholly or
jointly by the investor. This may involve ownership of substantial
assets, including land and buildings, or equipment such as aircraft
or ships.



Affiliates may begin as small operations that later expand


and diversify. Such expansions also fall within the definition of
FDI.


                                                            
7 Oxford Dictionary of Finance and Banking (2005): 83.




Investment Promotion Handbook for Diplomats



 
 


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1.2 The investment process


The process leading up to a decision to invest abroad
usually involves a systematic comparison of prospective locations.
Once a decision to invest has been taken, the process enters into the
implementation phase, which – depending on the nature of the
investment – may feature a complex series of transactions.

The investment decision



Overseas investment involves risk. If it goes wrong, an


investment can weaken the company so that it becomes a target for
a takeover, or cause it to go bankrupt. Companies seek to mitigate
the risk by conducting due diligence about the market, but this takes
time, even for large TNCs. Investing in another economy involves
special challenges, as the company may not be very familiar with
local conditions at the outset of the due diligence process. This
means that decisions to invest abroad can be lengthy. It can take
months or even years for a company to reach the point where it
actually goes ahead. This has important implications for diplomats
involved in targeting potential investors. We will come to these
later.


Given the risks involved in investing in another market,
companies will normally take such decisions at the highest level.
Decisions to enter a new overseas market for the first time usually
fall to the parent company. However, TNCs with an existing
network of affiliates overseas may establish one or more regional
headquarters with the power to make decisions about investments in
their region. When it comes to an expansion, the affiliate itself may
also have significant influence on the decision, even if the final
decision rests with the parent or a regional headquarters. When
diplomats conduct research about potential investors it is therefore
important to establish where the key decisions are taken and who is
likely to take them.




Chapter 1. FDI and Investment Promotion



 
 


8


Location benchmarking


In general terms, a TNC planning on a foreign investment
first needs to determine what its operational requirements are. A
series of locations will then be assessed on the basis of these
requirements so as to establish whether any of them fit. If so, the
TNC may proceed to rank potential locations in order of priority.
Successfully matching the operational requirements with the
desired location factors will enable the TNC to create value from
the investment. The requirements will vary enormously from
company to company, sector to sector, and market to market.



The locations to be examined will often be in different


countries, but they can also include more than one location in a
single market. The process of comparing potential investment
locations is known as “location benchmarking”. It is important to
understand how companies benchmark locations.



When benchmarking locations, TNCs take a number of


factors into consideration. These can be divided into three broad
categories:8


 Policy framework for FDI: political stability; security;
investment policies, laws and regulations, including
protection of investments, rules on the entry and operations
of foreign firms; tax regime;


 Economic determinants: local and regional market
characteristics; availability and quality of raw materials;
physical infrastructure; technological and innovatory
capacities; cost of labour, land, energy and other inputs;


                                                            
8 For a detailed overview of host country determinants of FDI, see


UNCTAD (1998): 91.




Investment Promotion Handbook for Diplomats



 
 


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 Business facilitation: investment promotion, including
practical assistance during and after the investment;
incentives; social amenities.



Each TNC has its own specific requirements for the host


location ─ often a combination of the different types of factors
mentioned above.



TNCs will often assess each of the locations using multi-


criteria analysis. This involves scoring the performance of each
location on each factor using a numerical scale, and then assigning
a weight to each one, depending on the relative importance attached
to it by the company.


A location may score highly on a couple of factors, but lose
out overall because of low scores on others which attract higher
weights. The scores are recorded in a performance matrix, so that
the locations can be easily compared against each other. The output
from the analysis is a prioritized list of locations which meet the
overall needs of the TNC.



Factors which impact directly on cost are paramount. The


assessment process may have to be repeated as factors can change
with time. It is important to note, however, that not all TNCs will
use systematic means of analysis: it depends upon the business
culture from which they come, and the ownership structure. Some
companies may be more inclined to make more rapid decisions
partly based on soft factors such as quality of living in the host
country.



Location benchmarking can be done in-house by the


company or be outsourced, for example to a location consultancy, a
bank, or an audit firm. Fundamental to the success of the
benchmarking exercise is the collection of reliable data. Companies




Chapter 1. FDI and Investment Promotion



 
 


10


use a variety of means to obtain this, starting with publicly-
available information from the Internet or print publications.



At the outset, the information collection process may not be


visible to outsiders as companies usually keep such activities
confidential so as not to alert competitors. However, the company
may contact the host government or its agencies in order to obtain
information about government policies or the existence of
incentives such as grants or tax breaks. The data collection process
is likely to involve visits to some locations.



Once a short list of locations has been drawn up, there will


probably be further visits as the search has become site-specific,
and the characteristics of each site need to be examined in detail.
When all this data has been collected and analysed, a proposal can
be submitted to the relevant decision makers in the company.



Implementation



When the decision to invest has been taken, the process


moves to the implementation stage. If the investment involves
setting up a new affiliate, the TNC is likely to be involved in a
complex series of transactions and processes. Here are some generic
examples:



 Registering the new company;
 Obtaining finance;
 Setting up bank accounts;
 Obtaining visas and work permits for expatriate staff;
 Buying, leasing or renting a suitable site;
 Contracting with an architect and builder to design and


construct new buildings;
 Securing planning permission for new buildings;
 Securing any necessary operating/industry licenses and


environmental permits;




Investment Promotion Handbook for Diplomats



 
 


11


 Establishing the supply chain for its future operations;
 Negotiating with suppliers of goods and services, including


utility companies;
 Raising the company profile in the local market through


public relations or advertising;
 Recruiting the local workforce;
 Obtaining any necessary permits for imported inputs.



During the implementation stage, the company will need


professional assistance from local lawyers, accountants, banks,
property and recruitment companies, as well as help from
government agencies in obtaining licenses, visas and permits.

Expansion



Expansion often follows the initial investment, and


expansion often means diversification, too. For example, a TNC
that exports its products to a market often begins by establishing a
sales and distribution operation, including dedicated warehousing,
as a first step. This gives it better control over the marketing and
distribution of its products, instead of relying on agents. The next
step could be to establish a call centre, so as to handle technical
questions from its customers. In some circumstances, it may be
advantageous to build a local manufacturing plant, for example to
profit from lower labour costs or gain access to markets protected
by tariffs. If the TNC is expanding throughout the region, a next
step may be to set up a regional headquarters. Finally, if the host
country has a strong research and development (R&D) capability,
the company may choose to establish an R&D centre in order to
profit from local expertise.



Expansions therefore represent an important opportunity for


the host country. Diplomats are well placed to help influence
decisions taken by the parent company. We will address this subject
later on in section 2.3 dealing with aftercare.




Chapter 1. FDI and Investment Promotion



 
 


12


1.3 Why FDI matters

Potential benefits of inward FDI9



FDI brings capital, which may be in short supply in the


host country. FDI is the largest source of external finance for
developing countries and FDI inflows are generally also more
stable and easier to service than commercial debt or portfolio
investment. In distinction to other sources of capital, TNCs
typically invest in long-term projects. FDI may also stimulate new
investment by other foreign or domestic producers, for example
when firms supplying a foreign affiliate invest in order to service
the needs of their customer better.10



TNCs can bring new technologies, some of which may not


be available without FDI, and they can raise the efficiency with
which existing technologies are used. They can also adapt
technologies to local conditions, drawing upon their experience in
other countries. Moreover, foreign investors can stimulate technical
efficiency in local firms, suppliers, clients and competitors, by
providing assistance, acting as role models and intensifying
competition.


Furthermore, TNCs can provide access to export markets,
both for existing activities and for new activities that exploit the
host country’s comparative advantages. The growth of exports itself
offers benefits in terms of technological learning, realization of
scale economies, competitive stimulus and market intelligence.


                                                            
9 The analysis of potential benefits and drawbacks of inward FDI is


based primarily on UNCTAD (1999).
10 In case the supplier is also a foreign TNC, this investment is referred to


as “associated FDI”.




Investment Promotion Handbook for Diplomats



 
 


13


FDI generates employment in host countries both directly
and indirectly. In 2010, over 68 million workers were employed in
TNCs’ foreign affiliates, according to UNCTAD estimates.11 The
number of jobs and required skills vary according to the nature of
the investment. TNCs also possess advanced skills and can transfer
these by bringing in experts and by training the local workforce.
Furthermore, FDI may help to improve management techniques in
the host country as the investors train local managers in how to
operate the local facilities. In addition, the presence of TNCs may
force local firms to strengthen their managerial capabilities as well.



Foreign investors can also help improve the host country’s


environment. TNCs may possess clean technologies and modern
environmental management systems and can use them in all
countries in which they operate. For example, a foreign investor
may introduce new low-carbon production processes, goods or
services to the host country.



Finally, foreign affiliates can be an important source of


government revenue, for example through payment of corporation
tax, or duties on traded goods. The local workforce will also pay
income tax and the affiliate will usually pay tax on the goods and
services which it receives. This revenue could, however, be offset
by tax breaks used as incentives to help persuade foreign TNCs to
invest.


The result of FDI can thus be to boost the overall
competitiveness of the host country.


                                                            
11 UNCTAD (2011): 24.




Chapter 1. FDI and Investment Promotion



 
 


14


Potential drawbacks of inward FDI


FDI is not invariably beneficial, however. For example, the
crowding out of domestic firms by foreign affiliates is often an
issue of concern: new employment created by the investor may be
offset by the disappearance of old jobs in competing enterprises.
Competition from foreign affiliates can also hamper the growth of
domestic capabilities in strategic industries if it prevents local
enterprises from undertaking learning processes.



Since the parent company normally seconds senior


management and specialized technical staff to the new foreign
affiliate, the jobs created by FDI may also be at the lower end of the
spectrum of skills and wages. Low-skill jobs are considered less
desirable by many host locations since they are unlikely to result in
spill-over of know-how and new technology that would improve
productivity and competitiveness. However, some locations (e.g.
least developed countries) may actually seek low-skilled jobs due to
high unemployment in low-skilled labour markets.



FDI could furthermore have adverse effects on net exports.


Foreign affiliates have to conform to sourcing patterns imposed by
the parent enterprise and they are usually more prone to source
inputs from abroad than domestic firms. The inputs may be
imported from other affiliates in the TNC network, or from
established suppliers based in the investor’s home country or third
countries.



In addition, the business models of foreign investors may


be economically, socially or environmentally unsustainable.
Concerns have been raised, for example, about FDI in agriculture,
which could – if poorly managed – lead to land degradation, water
depletion, or loss of biodiversity. There is also some concern that
TNCs may choose to relocate polluting activities from highly




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15


regulated jurisdictions to countries with less stringent or no
environmental regulation.



For all these reasons, it is important that investment


promoters carefully target foreign investors, not only to maximize
development benefits but also to minimize negative impact on the
host location.



Finally, in the case of M&As, FDI could have negative


effects on local innovatory capacities, for example if an acquisition
results in the scaling down of R&D in the acquired firm. M&As can
also have anti-competitive effects if they reduce the number of
competitors in the domestic market, especially for non-tradable
products and services.12 However, investment promotion activities
rarely extend to M&As.

1.4 Investment promotion

The rationale for government involvement


There are around 170 national IPAs in the world and many
more at the subnational (state/province/city) level. Since
governments fund most IPAs, they obviously believe that
promoting inward FDI justifies the use of public resources. But why
do governments get involved in a process which concerns
investment decisions by mostly private-sector firms?



Governments are responsible for promoting economic


prosperity. As we have seen, inward FDI can have both positive and
negative impacts on the economy, and governments naturally wish
to increase the former and mitigate or reduce the latter. This leads
them to introduce policies which are aimed at attracting those types


                                                            
12 UNCTAD (2000): 178, 192-195.




Chapter 1. FDI and Investment Promotion



 
 


16


of investment which will have the most beneficial impact on the
economy. Such policies are likely to be linked to a wider economic
strategy, which may prioritize development in key sectors.



This explains why governments facilitate inward FDI. But


it does not explain why they actively promote it, rather than leaving
it to the market. In most market-oriented economies, governments
need a strong economic rationale before they are prepared to
intervene in the economy. The rationale for intervening is usually
built on identification of a failure in the market to produce what are
considered optimal outcomes in terms of resource allocation,
production and distribution. For example, much of the market
information provided by IPAs have a public goods nature and is
therefore not likely to be sufficiently produced by private firms.
The private sector may also not be able or willing to develop or
support networks that help foreign investors gain access to overseas
contacts and opportunities. Governments therefore step in to
provide what the market cannot.



FDI is also to a great extent determined by public policy,


and government interlocutors have a valuable role in disseminating
information on such policies to potential investors. However, not all
investors require government assistance. Large firms often have
sufficient resources in-house to overcome barriers to market entry,
but for smaller and less experienced companies, government help
can be crucial in persuading them to invest. The fact that the
potential investors are located abroad gives diplomats a crucial role
as intermediaries between their government and target companies.



We will now look more closely at the activity which


governments undertake in order to attract foreign investors. The
national IPA plays an important role here, but diplomats can also be
key players.




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Identifying opportunity areas

Before developing a promotion strategy, it is necessary to


assess the national investment needs and potential for attracting
FDI, and identify IPA and national development goals. This
involves establishing the strengths and weaknesses of the host
country as an FDI destination, and consulting other government
departments about overall economic planning, so that the
investment strategy dovetails with those plans. The link between
national economic planning and investment promotion is illustrated
in box 1.



Box 1. The national development strategy and investment


promotion

The promotion of inward FDI usually forms part of a wider


economic strategy, as illustrated by the example of Botswana.

Botswana’s 9th National Development Plan (2003–2009) was


conceived as a blueprint for achieving economic diversification. The
problem facing Botswana was that the economy was highly dependent for
its growth on the mining sector. An important aim of the Plan was
therefore to stimulate the manufacturing and services sectors. The
Botswana Export Development and Investment Authority (BEDIA) was
given the task of actively promoting investment flows in manufacturing
sectors such as leather, jewelry, glass and beef by-products, as well as in
service industries, for example information and communications
technology and tourism. UNCTAD helped to devise a new FDI strategy
that would further these aims. Meanwhile, the World Bank’s Foreign
Investment Advisory Service (FIAS) carried out a study of the
administrative and regulatory barriers to FDI in Botswana. Areas deemed
to be in need of improvement were the granting of residence permits and
the availability of factory space.

Source: UNCTAD, based on information provided by BEDIA.




Chapter 1. FDI and Investment Promotion



 
 


18


The next step is to identify what business sectors should be
targeted, and in which foreign markets investors in those sectors are
likely to be found. Sectors are an important means of categorizing
investment opportunities for the purpose of targeting inward
investors. The mix of sectors will vary from country to country and
over time. Some developing countries focus on manufacturing in
order to attract FDI that will create large numbers of jobs in the
local economy. Gradually, services often become more important
target sectors. Developed economies may focus on the same sectors
as developing countries, but they are likely to be more interested in
attracting “knowledge-intensive” investment projects. Such projects
require a much higher level of education and/or technical
specialization in the host country. Examples include R&D, design,
high technology manufacturing, sophisticated financial services
operations, legal work and accountancy.



In case a national economic development plan exists, it is


likely to specify sectors of the economy in which investment is
being sought, allowing the IPA to focus its promotional effort on
companies which operate within them. If the IPA faces a situation
where there is no such plan, it must set out to identify sectors on its
own. (Figure 1 provides a schematic illustration of the process of
identifying sectors and the development and implementation of an
investment promotion strategy.)



Setting out to identify sectors to target, the IPA must first


obtain an understanding of global trends in the sector under
consideration. The next step is to map out the country’s current
offer within the sector at a detailed level. The IPA should then
consider which types of business within the sector could generate
internationally mobile projects, as well as their potential
destinations.



The IPA should now develop criteria in order to select


targets. These criteria will measure the relative importance of




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19


identified mobile projects to the territory. After candidate projects
or opportunity areas have been weighted in terms of these criteria
and ranked on their relative attractiveness, they should be further
examined in terms of the competitive position of the territory.
Before one or more opportunity areas are finally selected, it is wise
to have a “sense check” with a group of experts and policymakers
to ensure that the area(s) identified by the IPA are realistic to
pursue.



The promotion strategy



The understanding of opportunity areas is fundamental to


the promotion strategy. When opportunity areas have been selected,
the marketing strategies can be developed. It will define the target
group of companies, for example large mining corporations, or fast-
growing, innovative “cleantech” companies, it determines what
such companies are looking for in a host location, and it sets out
what is being promoted, i.e. the growth opportunity for the target
companies. It will also specify how the IPA will go about attracting
investors, and the resources that will be needed for that purpose.



The timeline for the promotion strategy should be at least


three years. The pitfall to avoid is to promote the host country only
as a location. Although it is necessary to provide some generic
messaging about the host market, this is unlikely to be enough to
make a company really sit up and take notice. Target companies
want to know how locating in the host country will enable them to
boost their profits. Therefore, the messaging needs to focus as much
as possible on the needs of the target companies rather than generic
features of the host country. Achieving this is one of the central
challenges of promoting FDI.



Companies in particular sectors will often belong to trade


associations linked to those sectors. For targeting purposes,




Chapter 1. FDI and Investment Promotion



 
 


20


contacting trade associations and other business organizations, such
as chambers of commerce, is therefore a potential short cut.


Figure 1. Strategy development and implementation



Source: UNCTAD.




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21


Implementing the promotion strategy


The next step is to implement the promotion strategy in the
target markets. This is where diplomats come in. Its aim is to
overcome one of the classic barriers to inward FDI ─ knowledge
gaps on the part of the potential investor. As we have seen, this is
one of the main justifications for a government becoming involved.


The basis for the campaign is the assembly of compelling
messages which will encourage potential investors to take a closer
look at the host market. With so many locations competing for a
limited number of investors, differentiating the offer is crucial. The
top level messages need to be simple and credible. They should
boost business confidence and build the image of the economy as
an investment destination based on its assets.



The targets for the promotion campaign are the companies.


There is no point in devoting resources to channeling messages
outside this group, although in practice, the channels used will
make the messages available to a wider audience.



The channels for delivering these messages to potential


investors are numerous. Websites, television and radio advertising,
direct mail, events, news features and sponsored visits by
journalists are all examples of such distribution channels. Social
media is also increasingly used (more detailed information on
marketing channels is found in section 3.1). Embassies will play a
part in getting the messages across, but the messages should be
designed by the IPA.



The ultimate aim of a promotional campaign is to generate


leads, that is, opportunities for investment. If no leads result from
the activity, it is time to rethink the strategy!






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22


Converting leads into investments


Converting investment leads into concrete investment
projects in the host country involves direct contact with companies,
whereas promotion is primarily aimed at groups of enterprises.
Investment leads come from a variety of sources. Many result from
promotion campaigns. Some come without any promotional
activity. In these cases, the embassy may become aware of the lead
when the company makes contact (see section 2.4, on enquiries).
Others fall out of proactive activities, such as company visits
(which could be regarded as a form of marketing). The type of
company to be visited will be driven by the overall strategy. Section
3.3 discusses company visits at greater length.



The process of converting leads into investments may be


thought of as a pipeline. This is illustrated in figure 2. Leads enter
the pipeline at one end. They must first be “qualified” to establish
whether they can become viable projects. As they move along the
pipeline, they either develop into projects, or are lost. At the end of
the pipeline the project wins emerge. The number of leads entering
the project pipeline is much greater than the number of project
wins. The ratio may also vary from market to market.



Figure 2. Converting leads into investment projects









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23


A project is a much more highly developed proposal, and is
likely to include an idea of scale, business function and timeline. It
may not be location-specific; indeed, the TNC is quite likely to be
looking at a range of options involving more than one country. By
the time a company has reached the project stage it has crossed an
invisible threshold and become a client.



The task of the IPA and the embassy is to qualify as many


leads as possible, and then convert these to project wins. They will
also seek to influence positively the timing and scale of the project.
The IPA should provide all the data necessary to convince the
company that investing in the host country will add value. As the
project moves along the pipeline and becomes more location-
specific, the nature of the information needed by the company will
change. This may involve the IPA and/or embassy in arranging a
visit (or visits) to the host market by company representatives.
Finally, when the company takes the decision to invest, the project
moves to the implementation phase and emerges from the project
pipeline. This can take weeks, months or even years.



Investor aftercare



Aftercare is the subject of a dedicated UNCTAD study.13 In


the introduction, it quotes a definition of aftercare by Young and
Hood14 as “comprising all potential services offered at the company
level by governments and their agencies, designed to facilitate both
the successful start-up and the continuing development of a foreign
affiliate in a host country or region with a view to maximizing its
contribution to the local economic development”. This definition
therefore embraces both the assistance connected with the
immediate establishment process, and the longer-term help
designed to unlock value from the investment in the future.
                                                            
13 UNCTAD (2007).
14 Young S and Hood N (1994).




Chapter 1. FDI and Investment Promotion



 
 


24


Aftercare therefore means having a structured relationship
with the company over the long term. This has important
advantages, for example if the company wishes to expand its
presence. Expansions also require the collection and analysis of
data, and again the gestation period can be long. It is quite likely to
require information from government agencies and government
intervention may be decisive in encouraging the expansion to occur,
especially if the decision hinges on issues such as grants or tax
breaks. The IPA may be able to influence the scale and timing of
the expansion, or encourage the company to diversify its presence.
Note that aftercare may be offered to companies which originally
located without government assistance.



If the company eventually decides to disinvest, the IPA is


also more likely to obtain advanced information about the move if it
has established a relationship of trust with the company. In some
instances, the IPA may even be able to rescue the situation and
offer something which will enable the company to maintain its
presence (this is known as retention).



The essence of aftercare is relationship management.


Again, a lead may emerge as a result of contact with the company.
It then passes through the project pipeline in the same way as a new
investment. Diplomats can be very influential in the process
because of the contacts which they can maintain with the parent
company.



For those who wish to know more about FDI and


investment promotion, there are many useful resources online. Box
2 gives some examples.




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25


Box 2. Useful online resources


UNCTAD’s Investment Advisory Series addresses investment
promotion and policy issues. Series A provides practical advice on
investment promotion-related topics, with IPAs and other institutions
promoting FDI as its primary target group. Series B provides case studies
of best practices in FDI policies and strategies. The annual World
Investment Report focuses on FDI trends and issues related to the role of
FDI and TNCs in development. The Series on International Investment
Policies for Development provides analyses of issues that arise in
international investment rule-making and their impact on development
(www.unctad.org).



The Organization for Economic Cooperation and Development


(OECD) has online FDI resources, including member country statistics
and a “Policy Framework for Investment” tool
(www.oecd.org/daf/investment).



The United Nations Industrial Development Organization


(UNIDO) also has online resources for investment promoters. For
example, an Investment Monitoring and Management Platform is currently
being developed for African countries (www.unido.org).



The World Bank Group hosts an FDI Promotion Center, which


offers online access to resources and tools designed to help organizations
seeking to attract FDI (www.fdipromotion.com). The Doing Business
project gives in-depth analysis of the costs of doing business and rankings
of country performance (www.doingbusiness.org).



Source: The respective organizations’ websites.





 


 





 


 


2. The diplomat’s role in investment promotion


2.1 The investment promotion network


The responsibility for directing overseas investment
promotion normally lies with an IPA. The IPA cascades its
promotion strategy to its overseas representatives ─ often diplomats
acting as agents of the IPA. The main role of the diplomat is to
target actual and potential foreign investors, building on their
presence in markets where such investors are to be found; their
knowledge of the local political and economic situation; the
networks which they are expected to establish in the local business
community and in government circles; and their contact-making
skills.



Promoting inward investment is a team activity. However


good an individual may be at promoting his market to potential
investors, success depends in part on working with other
stakeholders to see the project through to realization. A country’s
promotional efforts rest upon a network in which the IPA sits at the
centre and communicates with the overseas representatives in one
direction and a range of stakeholders in the other. The latter
includes a principal government stakeholder (usually a ministry),
other government departments with a stake in attracting FDI, and
subnational IPAs ─ if such exist in the country.



Some investment promotion networks are relatively
complex: the case of South Africa is one example (box 3).


An IPA reports to a principal stakeholder, for example the
Prime Minister’s Office, the ministries of industry, trade, economy
or finance. This body sets the targets which the IPA must achieve
and often provides the necessary budget.




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28


Box 3. Investment promotion network: South Africa

In South Africa, the responsibility for promoting inward


investment lies with a ministry, the Department of Trade and Industry.
One of its key objectives is to “promote direct investment and growth in
the industrial and services economy, with particular focus on employment
creation”. The division charged with attracting FDI is Trade and
Investment South Africa (TISA). TISA’s primary mission is to “increase
South Africa’s capability and capacity to promote exports into targeted
markets; increase and retain the level of foreign and domestic direct
investment and manage the Department’s network of foreign offices”.


TISA has three business units, of which one deals with
investment promotion and facilitation. The other units deal with export
promotion, and management of TISA’s network of overseas
representatives. This network is located within South Africa’s diplomatic
missions. At home, TISA works with a range of stakeholders, including
other divisions of the Department, other national government departments,
provincial government departments and their agencies, urban metropolitan
councils, chambers of commerce, private sector companies and
international counterparts. The nine provincial investment promotion
agencies are also important stakeholders.

Source: TISA website (www.thedti.gov.za).


IPAs are structured in different ways. Some IPAs are
integral parts of government departments, others are standalone
operations. Some are combined trade and investment agencies,
while others are restricted solely to investment promotion.



There is a basic difference between IPAs which focus on


facilitation, and those which are involved in more active promotion.
The former are mainly involved in assistance with obtaining
permissions for investors, for example building and work permits,
or helping with access to utilities, or tax authorities. Some aim to
act as a one-stop shop, and are staffed partly by representatives
from those government departments from which the permissions




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29


must be obtained. Such IPAs may do some promotion, but their role
is largely a reactive one, and they move into action when
approached by a client.


IPAs which focus on promotion may still do facilitation,
but they have more resources devoted to marketing, possibly a
dedicated promotion department. They are also more likely to have
overseas representatives and may have a team tasked with
providing data for clients about a wide range of issues. Promotional
IPAs have a more proactive business model and they often strive to
recruit staff with private-sector experience.



Promotional IPAs tend to be organized along one of two


broad principles. The first approach is geographical, with teams that
support activity in particular overseas markets, for example Asia-
Pacific, Europe, or North America. This has the advantage that each
team becomes expert in the business cultures of a narrow range of
markets, and has a small number of overseas staff to support.



The geographical approach is now being superseded by one


based on sectors. The sectoral approach has a number of
advantages. The task of the IPA is to market a growth opportunity
for companies in particular sectors, allowing the team to acquire a
deeper knowledge of these sectors and be able to speak with greater
confidence to the clients. Such a structure is especially suitable if
the IPA headquarters team is expected to engage directly with
clients, and not just provide back-office support for the agency’s
overseas representatives.



2.2 Managing leads


Chapter 1 explained the process of generating investment
leads. The embassy can try to generate leads by establishing a
programme of company visits, aimed at businesses which have a




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30


propensity to invest overseas, and which operate in sectors which
would be a good fit for the host country.


The task of the embassy, supported by the IPA, is to
manage its project pipeline so as to convert as many leads as
possible into investment projects in the host country. The embassy
does this by providing all the data necessary to convince the
company that investing in the host country will add value and that
risks are minimized. It should do this in a proactive way,
maintaining regular contact with decision–makers, collecting
business intelligence, and responding promptly to requests for more
data.


This work also involves stakeholder management, because
much of the data will come from the IPA or other government
agencies. Getting them to respond quickly is important. This is less
straightforward than it sounds, even though all the parties have an
interest in securing the investment. The types of issue which can
cause delays include firm offers on financial incentives, especially
if these have to be approved on a case-by-case basis by ministers.


Moving the company along the pipeline is likely to involve
a series of meetings between the embassy and the client, and the
drafting of presentations. The critical meeting is the first one: if
handled badly, the embassy may not get a second chance to make
its case. Section 3.3 provides practical advice on client meetings.


At this stage, it is important to remember when dealing with
the company that it will expect the embassy to maintain
confidentiality at all times regarding its future plans. The TNC is in
competition with other companies, and if it believes that the
embassy is not to be trusted with sensitive information, it will not
share it. What the embassy must do is to build trust. When the
embassy passes on data belonging to the company to other parts of
the investment network, it is essential to ensure that the information




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31


is properly protected, and that it is shared only with those parts of
government which need the data.


The ground rules for the subsequent meetings are the same
as for the first one, although as the relationship with the client
develops, greater informality may emerge. A lot of the skill in
handling the process from the embassy side lies in asking the right
questions, and in being good at listening.


Sometimes it will not be necessary to produce formal
presentations at all. Some businesses may ask for frequent snippets
of information sent by e-mail. Other companies, by contrast, may
welcome longer, formal presentations, delivered in hardcopy. The
rule is to deliver the data in the format requested by the client, not
the one which happens to be convenient for the embassy.


Apart from formal meetings at which information is handed
over, the embassy may also consider inviting senior company
representatives to any appropriate social events, so as to reinforce
the relationship.


As the process moves along, it thus becomes increasingly
location-specific. The embassy may start to deal more with a
subnational IPA to supply the necessary data, and the information
may include details of individual properties. At this point, the
company may wish to visit the host country and view prospective
sites. This is an important moment in the project. The embassy is
likely to act as an intermediary in organizing the visit programme.
Getting the details right is essential and will require good staff
work. Section 2.4 contains advice about how to do this.


If the visit has been a success and all the other pointers are
favourable, the company will now move towards making the
decision. A project may still be lost if the business case does not
stand up to scrutiny by the investor. If so, it will be instructive to




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32


ask the company for feedback, so that any mistakes can be avoided
in the future. But if the company decides to go ahead, the embassy
(and the IPA) can register a success. (It is, however, important to
remember that unexpected developments can still cause the investor
to reverse the decision, and that nothing is absolutely certain until
the presence in the host country is physically established).



The project now enters the implementation phase. At the


outset, the company is still going to require practical assistance
from the embassy, especially with regard to visas and work permits.
More help may be required with introductions to business networks,
banks, accountants, recruitment companies and business services
providers. Increasingly, the action shifts to the host country and the
role of the embassy diminishes, while that of the national or
subnational IPAs may grow.

Promotion of NEMs


Some countries may include the attraction of NEMs in their
investment promotion campaign. For firms, NEMs have a number
of advantages above FDI in terms of lower up-front capital
expenditure and operational costs and reduced exposure to risk. For
countries, NEMs can bring employment, increased exports,
technology and skills acquisition, and transfer of best social and
environmental practices. NEMs can, however, also lock countries
into long term dependency with relative “footloose” productive
activities limited to low-value added and low-tech segments of the
global value chain.15

An UNCTAD survey showed that IPAs which promote
NEMs are mostly involved in information provision, for instance on
franchising opportunities, and project facilitation. Investor
                                                            
15 UNCTAD (2011): 142, 147-164.




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33


targeting, aftercare and policy advocacy were less used as
promotional tools with targeting activities mainly focused on
contract manufacturing.16


The role of embassies in the promotion of NEMs is limited.
A foreign company may approach the embassy as a short cut to
identifying suitable business partners or to get information on
specific firms. Embassies should refer such leads back to the IPA.
Diplomats could also be involved in the promotion of NEMs at, for
instance, trade and investment fairs in the country where they are
stationed.





2.3 Diplomats and aftercare


As we saw in chapter 1, investor aftercare means having a
long-term, structured relationship with the investor once it has
established operations in the host country: it does not just involve
helping the company to sort out any immediate issues after the
affiliate has located. The aim is to ensure that the IPA remains close
to key investors, and helps them to grow and diversify their
presence. In the event that the TNC decides to disinvest, the IPA
can work with the company to try to mitigate the impact, or even
find ways of persuading it to change its mind.



Aftercare presents a number of challenges. The more


successful an economy is in attracting FDI, the larger the number of
aftercare relationships which need to be managed. This can give
rise to problems of prioritization. Responsibility for aftercare is
complicated by the fact that the TNC now has a presence in the host
country. Several stakeholders may now be involved: the IPA, the
embassy, and perhaps a subnational IPA as well. It is important to
                                                            
16 UNCTAD (forthcoming).




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coordinate approaches to the company so that duplication is
avoided, and the company does not receive mixed messages. It does
not really matter who coordinates the approaches, provided that it is
done effectively. A good way of ensuring that all the stakeholders
understand and buy into the approach is to draft an account plan for
each company. Account plans are explained more fully in section
2.4.


The role of the embassy is to maintain contact with the
parent company, unless the decision-making is delegated to a
regional headquarters. The list of companies with whom the
embassy should maintain contact for aftercare purposes ought to be
driven by the overall promotional strategy, which should specify
the sectors and types of company to be targeted. The list of targets
need not be confined to companies which the Government has
helped previously. Once it has produced the target list, the embassy
can then set about a programme of visits to the companies. The
purpose of these visits is:


 To establish what the company thinks of the host country,
and to ensure that there are no issues of concern to the
company regarding its affiliate; and


 To collect business intelligence about the company’s future
strategy. In particular, to obtain early information about
possible expansion plans, or warnings about possible
disinvestments.



The diplomat making the visit may also wish to find out


whether there are any opportunities for firms based in the host
country to partner with the company or to export goods or services
for its use.



The ground rules for the meeting are the same as for any


meeting with a company (see section 3.3). Recording the visit
properly and sharing the details with stakeholders including any




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subnational IPAs are of key importance. Above all, the embassy
must be careful to respond to any requests from the client for
information as quickly as possible.



The pattern of future contact will depend on how the first


meeting proceeded. Where there is no evidence of any future
company activity in the host market, it may be enough to schedule a
further meeting after six months or even a year. However, if it is
plain that the company has plans to expand or disinvest, the
embassy should attempt to hold another meeting in a much shorter
timescale.


As in the case of a first meeting with a new investor,
maintaining client confidentiality is essential if the embassy is to
establish a relationship of trust with the company. It should not
come as a surprise that the company is reluctant to divulge sensitive
data at the outset. Hopefully, it will do so in the future once the
embassy has proved that it is a reliable partner.



Box 4 provides an example of the role that diplomats can


play in aftercare.


Sometimes an existing investor will not respond to
approaches from the embassy. If the company is important enough
to be on the target list, it may be wise to try another approach. One
possible way of handling this is to wait until there is a ministerial
visit, and then invite the chief executive officer (CEO) to meet the
minister. Sometimes an invitation to a cultural event may help. It is
important to be persistent, but without being imposing and causing
resentment on the part of the investor.






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36


Box 4. Helping a company expand in the United Kingdom

Headquartered in Japan, one of the world’s leading research-


based pharmaceutical companies has had a presence in the United
Kingdom for over 20 years. It started conducting clinical research in the
United Kingdom in 1988, and established a research laboratory in London
in 1990. In 1995, the company set up a sales and marketing office in the
same city.


In 2009, the company opened a new facility in the United
Kingdom. Total capital investment was over £100 million and the site now
employs some 600 people with the potential for further expansion. Its
functions comprise European headquarters, drug discovery, clinical
development, drug manufacturing and marketing.


Throughout the project, the British Embassy in Japan, United
Kingdom Trade & Investment (UKTI, the United Kingdom’s national
IPA) and East of England International (a subnational IPA) all assisted the
company in different ways. The investment team in the British Embassy
kept in touch with the parent company in Japan from the outset as part of
its aftercare strategy. In late 2004, the company informed the embassy that
it was considering centralizing its sales, marketing and R&D operations at
a single site and carrying out manufacturing there as well. It was
understood that the company was considering three different European
countries including the United Kingdom. With support from UKTI, the
team delivered presentations to the company dealing with issues such as
the overall attractiveness of the United Kingdom, R&D tax credits, and
property. UKTI, working with the subnational IPAs, helped draw up a list
of 30 possible sites in the United Kingdom and brokered meetings for the
company with local service providers. British ministers also met senior
company representatives on several occasions.


In early 2006, the company announced publicly that it had chosen
a site in the United Kingdom. The site had been identified by East of
England International. Since then, the Embassy’s investment team in
Japan has remained in touch with the company in order to assist with any
issues arising from its investment in the United Kingdom and to identify
any potential opportunities for further expansion.
Source: UNCTAD, based on information provided by the company and UKTI.




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Diplomats’ contacts with investors through aftercare
provide a window into the difficulties that TNCs encounter in their
business operations and possible expansion plans in the host
country. This is valuable information for the IPA, which needs to
identify problems that investors face and prioritize them for their
policy advocacy agenda.17 It is therefore important that diplomats
channel this information to their IPA and other government
institutions that may be able to initiate the necessary improvements
or reforms.

2.4 Coordinating investment promotion


Investment promotion demands good teamwork between
the embassy, the national IPA, subnational agencies, and other
stakeholders.  Box 5 illustrates how investment promotion in the
Netherlands is coordinated between the Dutch embassies and the
national IPA, Netherlands Foreign Investment Agency (NFIA).



Box 5. How diplomats help to promote FDI in the Netherlands



The responsibility for promoting FDI in the Netherlands lies with


the Netherlands Foreign Investment Agency (NFIA), an operational unit of
NL EVD International, one of the five divisions of NL Agency, which in
turn falls under the Ministry of Economic Affairs, Agriculture and
Innovation. The NFIA is headquartered in The Hague and has overseas
offices, mostly in North America and Asia. These offices are physically
located inside Dutch embassies and consulates-general. However, in
markets where the NFIA has no presence, Dutch diplomats act as its eyes
and ears. This widens NFIA’s net considerably, as the Netherlands has
over 100 embassies and more than 20 consulates-general.


/…


                                                            
17 More information on IPAs and policy advocacy can be found in


UNCTAD (2008a).




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38


Box 5 (concluded)


The economic guidelines provided to the commercial staff in
Dutch embassies by the Ministry also cover the topic of FDI and the role
of NFIA. Commercial staff are informed how to identify potential
investors, especially companies which are growing and which are looking
to expand physically in Europe. They are then requested to contact them in
order to discuss their expansion plans and to market the Netherlands’
strengths as a location for their business. NFIA provides a basic marketing
brief for this purpose.



When the embassy has identified a serious potential investor, it


completes a form confirming project details, which the staff then send to
the nearest NFIA office. The commercial staff are also able to obtain
information from NFIA’s websites, and from an NFIA intranet, which is
also shared with NFIA’s network in the Netherlands. They then pass on
this data to the company. The embassy may also be required to organize a
visit by company representatives to the Netherlands. The embassy
provides these services free of charge and on a confidential basis.


As soon as an active project emerges, NFIA becomes responsible
for managing it. Depending on the topic, negotiations of a more detailed
nature will take place with the relevant (government) bodies. For example,
negotiations on tax rulings will involve a tax inspector and NFIA will
assist where needed. Roles will vary depending on the nature of the
project.


The instructions from NFIA to the diplomatic network are
specific with regard to the business activities and sectors of interest to the
Dutch Government. NFIA does not, however, help M&As, nor purely
financial investments.

Source: UNCTAD, based on information provided by NFIA.




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39


Stakeholder management


IPAs have to spend time managing their relationships with
stakeholders. The IPA must pay attention to satisfying its principal
stakeholder, the government ministry from which it receives its
funding. Other government departments can play potentially useful
roles in helping to promote inward FDI: they too need to be
cultivated. National IPAs may also need to devote significant
attention to managing their interface with subnational IPAs. This is
because such agencies may be in competition with each other, and
their activities can cut across what the national IPA is trying to
achieve (and vice versa). Diplomats can sometimes be caught in the
middle when there are differences to be ironed out between national
and subnational IPAs. Time spent on managing stakeholder
relationships means that there is less time to devote to clients.
Experience shows that it is vital to get the balance right.



Account planning


A useful way to manage relationships with potential and
existing investors is to draft account plans. These identify the nature
of the investment opportunity, help to focus resources, whether
human or financial, promote cooperation between the various
members of the investment promotion network, and avoid
duplication of efforts. An account plan needs:


 To have a clearly stated objective. This should be agreed at
the outset with the IPA and any other relevant stakeholders;


 To set out a simple strategy for achieving the desired goal.
It should record agreement on: (a) who should have contact
with the company (primarily the client relationship
manager), (b) what the timeline should be, and (c) what
inputs are necessary to encourage the company to invest;


 To be succinct. A one-page plan will often be all that is
necessary.




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40


Drafting the plan must not become a big bureaucratic chore,
diverting investment officers from spending time with clients. The
plan itself should be reviewed at agreed intervals. If the
stakeholders believe that it is not worth devoting more effort to
winning investment from that particular company, they should
focus instead on a more promising prospect. Otherwise, they should
modify the plan as necessary, changing the objective as new
opportunities arise. Account plans become even more important
when it comes to managing aftercare, which often involves multiple
stakeholders. Figure 3 gives a template that can be used when
drafting an account plan.

Action planning


Diplomats may also find it useful to have their own general
action plan setting out what they intend to achieve in the coming
three years and what resources are available to them for that
purpose. The national IPA may of course require embassies to have
plans using a set format. However, if it does not, the template in the
annex may be useful. This begins with a SWOT analysis which
looks at the strengths, weaknesses, opportunities and threats related
to their own economy from the standpoint of attracting FDI from
the country in which they are posted, and considers how their
embassy is positioned to promote such investment. It identifies a
series of objectives, notes the available resources in staff and
money and sets out what activities are to be carried out in order to
achieve the objectives.


Two major areas of coordination between the stakeholders
are handling of investor enquiries and organizing visits.






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41


Figure 3. Account plan template
Electronic file reference:


Account plan for [name of company]

Sector:

Turnover:

Number of employees:

Parent company/regional headquarters/foreign affiliate:


Company contact information

Address/telephone number of
company:

Contact name(s)/position(s):

E-mail/telephone:

Website:


Account management

Client relationship manager:

Stakeholders:
a)
b)
c)
d)


Account plan
Date:
Objectives:
1)
2)
3)

Key milestones:
1)
2)
3)

Client presentation needed/delivered?
Date of next review:
Comments:
1)
2)
3)




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42


Enquiry management


One area that requires close coordination between different
stakeholders is the handling of investor enquiries. As the
promotional campaign rolls out, embassies must be equipped to
handle enquiries from potential investors. This is harder than it
sounds. A 2008 World Bank benchmarking study found that 70 per
cent of IPAs did not handle enquiries in a consistent manner.18 Yet
enquiries are precious to an investment network since they can
metamorphose into investment leads. Below are some suggestions
about how to deal with this issue:


 Establish clear protocols for staff handling enquiries,
setting out standards such as checking e-mail and voice
mail regularly, using an agreed formula when answering
the phone, answering within so many rings, establishing
deadlines for acknowledging enquiries and providing
material;


 Nominate a person to act as the first point of contact.
Ensure that the website provides his/her contact details.
This person needs to have a good telephone manner, speak
the local language and be sufficiently informed about FDI
attraction in order to deal confidently with basic enquiries.
Thought should be given to providing leave cover when the
nominated person is away. The receptionist/telephonist
should be briefed about the person’s role;


 On receiving a telephone enquiry or handling a visitor, the
staff member should make certain to write down the
caller’s full contact details and the nature of the enquiry for
subsequent entry in the embassy database;


 The staff member must then rapidly assess whether the
enquiry is a routine one which can be dealt with using


                                                            
18 World Bank (2009).




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43


standard information material, or whether it looks more like
a potential investment lead. If the latter, it needs to be fast-
tracked to a more senior member of the mission;


 The embassy needs to respond to all enquiries as quickly as
it can. An enquiry languishing in someone’s in-tray for a
week could make the difference between winning and
losing a project. To prevent such losses, the embassy can
establish an internal performance pledge, stating that all
enquiries need to be responded to within a certain time
frame. For enquiries that require more time for extensive
research, a holding reply should be sent to let the enquirer
know the enquiry is currently being processed.



The sort of standard materials which the embassy should


have will often be found on the website. However, a company with
a serious enquiry is unlikely to be impressed by being told to visit
the website. The enquiry could be the start of a long and fruitful
relationship, so the embassy should respond by e-mailing or
sending a hard copy – whichever the company prefers – with
relevant, tailor-made information. The material should address the
specific enquiries raised and it typically includes information about
the business environment, living conditions, or fact sheets and
brochures about individual sectors.



Having provided the data, the embassy needs to follow up


as soon as possible. The embassy should establish whether the data
has been useful, and whether the company needs any more
information. This is an opportunity to try to discover more about
the reasons for the enquiry, and to test whether a meeting would be
fruitful. The enquiry may reflect the early stages of a company’s
due diligence into the host market, and the response may be
guarded. Or it may be that the enquiry is made by a location
consultant on behalf of an “unnamed client”, who is also likely to
be circumspect. Other enquiries may reflect nothing more than a
general curiosity about the market. The enquiry may even be from a




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44


“mystery shopper”, seeking to test the effectiveness of the
embassy’s enquiry handling as part of a benchmarking study!
However, some enquiries will now achieve the status of leads, i.e.
they appear to demonstrate concrete interest in investing on the part
of a named company within a reasonable timescale.



If the embassy does not have the information described


above, and it is not accessible via the IPA website, it should
speedily contact the IPA. It may be that the embassy needs to
provide a customized client presentation, most likely supplied by
the IPA. The latter may need to contact other stakeholders, such as
a subnational IPA, in order to obtain the data. The embassy needs to
make sure that the IPA replies promptly, and to manage the
expectations of the company about when they will get the
information. For example, it would be a mistake to promise to
supply the information within one week when in fact it would take
three weeks to assemble. To do so would undermine the credibility
of the embassy with the company. Some advice on client
presentations is given in section 3.3.



A decision will need to be taken about whether to hand
over the presentation in a meeting or simply to send it by e-mail,
courier or post. A meeting is greatly to be preferred, because it
offers the opportunity to explain the information in a more
favourable and detailed way, establish a rapport with the company
and gather more business intelligence about its future strategy. The
meeting will then enable the embassy to qualify the lead, thus
moving it along the project pipeline to the next stage – active
project. Guidance on company meetings is also contained in chapter
3.


Note that enquiry-handling is largely a reactive process, and
contrasts with the proactive targeting of companies. However, it can
be a very successful way of assisting inward FDI, and is less
resource-intensive than the proactive model. It depends for its




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45


success on having an effective means of capturing all enquiries,
prompt footwork, good client relationship skills, and effective
coordination with the IPA.



Visits to the host market



As an investment project moves along the pipeline, so it


becomes more location-specific. The company will almost certainly
want to visit the host market before it makes an investment
decision. Organizing such visits is another activity that requires
good coordination between diplomats and other stakeholders.



A visit is of course a good sign, but it does not mean that


the company is going to invest. The firm may test a number of
different markets, and yours may lose out in the competition. To
maximize the chances of a successful outcome, the embassy, the
IPA and other key stakeholders (such as subnational IPAs) need to
collaborate closely in arranging the visit. Here are some pointers
about what to do:


 Establish clear objectives for the visit with the company.
Find out who or what they want to see, and establish the
wished length of the visit and the number of visitors. Do
this as far in advance as possible and inform the IPA and
other stakeholders. Ensure that the IPA and other
stakeholders have a clear picture of the potential investment
opportunity;


 Agree on dates which do not conflict with holidays in the
host country (unless the company wants it that way).
Ensure that these suit the other stakeholders;


 In consultation with the IPA and other stakeholders, draw
up a proposed itinerary which responds as closely as
possible to the company’s stated wishes. Include the key
stakeholders. Be realistic about travel times. Leave time for
a closing meeting with the IPA at the end;




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46


 Normally the IPA will make the logistics arrangements in
the host country, including booking hotels and local
transportation. Make sure that it does this promptly;


 Show the company the draft itinerary as soon as possible.
Get their comments and inform the IPA of any changes.
Obtain biographical material on the visitors and send this to
the IPA. Also, provide information about participants in the
host country to the visiting company;


 Issue a final programme approximately one week before
departure. Make certain that all participants have copies of
the final version and that all the calls/visits have been
confirmed;


 It may be appropriate for someone from the embassy to
accompany the delegation, especially if language is an
issue. If so, this person should stay with the visitors
throughout the tour;


 The closing meeting will hopefully provide information
about the company’s position and any major concerns at the
end of the visit (a segment dedicated to the collection of
feedback could perhaps be formally included in the
agenda). The embassy should follow this up on their return
home and establish whether the company needs any further
information.







 


 


3. Investment promotion techniques and tools


3.1 Designing and delivering the message


The promotional campaign is the means by which the
overall promotion strategy is implemented. It is designed to fill
knowledge gaps about the host country and build its image as an
investment destination. The ultimate aim of the promotional efforts
is to generate leads from potential investors, which can then be
qualified and converted into projects. The choice of promotional
techniques and tools is crucial in getting the message out to the
target companies.



Designing the message to investors



The promotional campaign rests on the delivery of


compelling messages to the target group of potential investors (box
6).


Box 6. Messaging

Messaging operates on a number of different levels. For example,


there are messages designed to promote the country’s image in a general
sense. These help to create the right environment in which the company
may begin to consider the country as a potential place in which to invest.
Messages can also focus on specific regions, business clusters, sectors, or
individual companies.


To the extent possible, the messaging should:


 Be specific to the target market and delivered in the local
language;


 Differentiate the host market clearly from the competition;
 Be credible, authoritative, accurate, up to date, verifiable, sharp,


and therefore easy to assimilate;
 Promote trust in government;
 Address negative stereotypes.


Source: UNCTAD.




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48


The assembly of these messages is, or should be, a task for
the IPA rather than the embassy. Diplomats become involved in
getting them across to the target audience using a variety of
channels. However, sometimes the embassy will also be involved in
putting them together, so it is worth considering the basic
principles.

Marketing channels


There are a number of marketing channels available to
embassies. The balance between them will vary from country to
country, and depend on the available budget. As noted above,
location marketing is all about how you can assist your economy to
stand out in contrast to the others, and to get these messages to the
target audience. This does not just depend on the messages used,
but also on the techniques employed to get them out. So the
marketing channels matter.


Websites are searched extensively by TNCs conducting
research on possible locations for investments. IPAs have their own
websites, usually containing information about the services which
they offer as well as information regarding the business
environment (labour laws, taxes, incentives, etc.), and data about
sectors of potential interest to investors. Most embassies also have
either their own websites, or dedicated web pages hosted by a
central government website. What is important is to ensure that the
messaging on the embassy website is consistent with that on the
IPA site. In some cases, this is achieved simply by having a link
from the embassy to the IPA site. Wherever the information is held,
it needs to be updated regularly, and be available in the language of
the target market. This may sound straightforward, but ensuring that
this happens is a challenge even for the larger IPAs. The embassy
website should also have a contact name, telephone number and e-
mail address so that a potential investor knows whom to approach
with an enquiry. Diplomats should check their website on a regular




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49


basis to make sure that the links work and that all the information is
up to date.



Adverts can be placed in newspapers, business magazines,


online publications, on radio or television. It is also possible to take
advertising space at places where business people are likely to be,
for example at airports or at business-oriented events. Adverts have
the advantage that they can be targeted, they are fully under the
control of whoever places them. The big drawback is the cost. Few
IPAs or embassies are likely to have the budget to use this channel
very much. But not all adverts are costly. Embassies should have
portable advertising materials such as pull-ups for use at events that
they organize or sponsor. At a minimum, these should display their
government emblem and contact details, helping to funnel enquiries
to the embassy.


Sponsorship of events can be a very good means of raising
the profile of the host market. The partner organization should
ideally be connected to the business world. The embassy can also
use its own funds to sponsor events organized by other bodies,
thereby generating more publicity for itself. Another commonly
used approach is to sponsor business awards in a particular market.
These can be aimed at companies already investing in the host
country, leading to further news stories about investment
opportunities.


Newsletters and magazines are a common means of getting
the message out. These should contain authoritative, up-to-date
information about the host country, backed up by findings from
third parties. They should follow an attractive format. The aim
should be to prompt the readers to contact the embassy for more
information, or to visit its website. They can be sent out
electronically or in hard copy. In either case, it is essential to have
an up-to-date mailing list of recipients representing companies of
interest from an FDI perspective. The IPA may supply part if not all




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50


of the information, which should be translated into the local
language. It is often possible to offset the production costs by
means of advertising from other organizations. Hard copy
magazines have the advantage that they can be easily read by more
than one person when left lying around.


Workshops and seminars are opportunities for experts,
government officials, leading businessmen and professionals from
the host country to speak about specific aspects of interest to
potential investors in front of invited audiences. A successful
workshop or seminar depends on several factors: (a) an interesting
and relevant programme; (b) speakers of the right stature and
expertise, who will be a sufficient attraction for the audience; (c) a
good database of contacts from which to select relevant participants
(including the press); (d) an accessible venue of the right size and
standard; (e) persistent staff who will follow up the invitations so as
to ensure a good turnout; (f) active pre-event marketing; (g)
sufficient staff on the day to network with the invitees; (h) (if
appropriate) simultaneous interpretation; (i) an effective moderator
(a possible role for the head of mission); and (j) post-event media
coverage.


Ministerial visits can be used for a variety of purposes. The
embassy can work its press contacts so as to ensure that the profile
of the country is raised. Visits by a minister often result in media
coverage stimulated by the press offices of the organizations which
are visited. They can sometimes also unlock contact with the CEOs
of large corporations. The embassy can then follow up, taking
advantage of the opening made. The minister can also make a
speech promoting the country as an inward investment destination,
hopefully leading to further publicity. It is common to arrange a
reception during a ministerial visit. Leading business people can
then be invited to meet the minister. With careful choreography it
should be possible to ensure that the minister gets round the
reception and meets anyone of commercial importance. It is up to




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51


the ambassador and his/her staff to make sure that this happens.
Such contacts can be even more fruitful if the minister is briefed
beforehand about the business people whom he or she is likely to
meet, and primed to ask the right questions about their future
strategy. Before departure, it may be appropriate to organize a press
conference. Diplomats may have a role in arranging this, unless the
government to which they are accredited hosts it. If the former, it
will depend for its success partly on the quality of the mission’s
contacts with the media, although even the best arrangements can
come to nothing if the media are diverted by a major news story
elsewhere.


Press releases offer a succinct means of getting stories into
the media, but they depend upon the willingness of local
newspapers to cover them. For this purpose, press releases have to
be newsworthy. It is no use issuing a release dealing with a topic of
little interest to the newspaper’s readership. A small number of
highly relevant, timely press releases are likely to be more effective
than a plethora of poorly focused ones.


News features about the host country by journalists based in
a target market may be more persuasive to potential investors than
officially-supplied information. Diplomats can help by cultivating
editors of key newspapers and other media by providing
information. This, however, does not give them full control over the
article, so there is an element of risk to this approach.


Another effective ─ but expensive ─ method of securing
good press coverage is to organize inward press visits by carefully
selected journalists to the host market. These take time to arrange
because of the many stakeholders involved. They need to have clear
objectives, which support the IPA’s overall targets. For example,
the visit could be aimed at journalists working in specialist trade
magazines which are widely read by senior executives in companies
belonging to sectors of interest to the IPA.




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52


3.2 Identifying target companies


Cooperating with professional services firms


When searching for a location, many prospective investors
will contact professional services firms such as auditors, law firms,
real estate consultants or banks in order to gather information. If
there are such firms with offices both in the home country and in
the duty station, it might be a good idea for diplomats to get in
touch with them. The relationships built with these firms can help
diplomats find out which enterprises are currently making location
enquiries and thus give an indication of which local firms to focus
the promotional efforts on.


The national IPA may already have links with several
professional services firms, and these are often keen to help because
of the possibility of getting revenue from investors in the longer
term. Professional services firms can sometimes also be brought in
to offer pro bono expert advice about location issues before the
prospective investor has decided where to invest.


Establishing priority among target companies


The government or the IPA has usually identified the main
sectors to be promoted (see chapter 1, section 1.4), and diplomats
should consequently focus their efforts on potential investors in
these sectors. Priority among the target companies can be
established through criteria such as:


 Market leadership and brand recognition;
 Potential customers and suppliers in the host


country/region;
 Product and technology strengths;
 Potential competition in the host country/region;




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53


 Internationalization;
 Financial performance; and
 Corporate social responsibility and sustainability policy.




3.3 Meeting with potential investors

Guidelines for company meetings



Meetings with company representatives lie at the heart of


the process of converting leads into concrete investments. An
embassy may get only one chance to visit a company and present an
investment proposition. First impressions therefore matter. The
secret of a successful meeting is preparation. The following steps
are suggested:



 Find out more about the company. Identify the ownership


structure and key decision–makers of the company.
Establish what ties or contacts (if any) there have been
between the embassy and the company. Investigate what
the company does, which sector it operates in, whether it
has invested overseas before and, if so, where. (More
information on company research, including potential
sources of information, is presented below);


 Request the meeting. The level in the company should be as
high as possible: investment decisions are often taken by
the owner, or by the board. Suggest the Ambassador as the
interlocutor if necessary. The request can either be made on
the phone, or if that is unlikely to work, the Ambassador
should write a letter. Some companies will readily accept;
others will not see the immediate value in this. Be
persistent. Use your diplomatic skills. Intermediaries may
succeed if a direct approach fails;


 Establish the objectives for the meeting. Work out what the
company may seek to gain from it. These objectives will




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54


help to decide the overall line to take. For a first meeting, it
is useful to have a short sales pitch explaining the benefits
to the company of locating in your economy. Practice the
sales pitch! Decide who will accompany the Ambassador.
Keep the delegation as small as possible.

At the meeting:


 Focus on building a good relationship with the company
representatives;


 Use your judgment about when to make the sales pitch;
 Ask questions about the company’s business strategy, its


recent trading history, and any overseas investments. Use
open questions, i.e. ones which will not elicit a simple
“yes” or “no”. The aim is to identify the company’s
operational requirements;


 Avoid making assumptions about the company. The
purpose of the meeting is to find out more about it. You do
not want to foreclose any options at this stage;


 If the meeting goes well, suggest further contact in the
future.

After the meeting, be scrupulous about:



 Recording what was said;
 Informing all the stakeholders; and above all
 Carrying out any promises made to the company regarding


follow-up.

Meetings in other locations


Meetings with companies do not have to take place at the
company premises. A cost-effective way to meet a large number of
companies is to attend a trade exhibition. These attract senior
company representatives from particular sectors. The best approach




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55


is to find out, first of all, who is coming from the organizers, and
then to fix up meetings in advance. Some embassies outsource this
function to telemarketing companies who call large numbers of
enterprises. Diplomats need to ensure that there is a suitable space
or room for the meetings.



Sometimes it is possible to hold a client meeting at the


embassy. Before agreeing to the meeting at the embassy, however,
the diplomat should consider whether the building and its facilities
would convey the right image. It might be better to hold the
meeting at the Ambassador’s residence or in a hotel.



Less formal meetings can take place at other events such as


receptions or dinners. A short contact with a company at a reception
can still offer the chance to make a brief sales pitch!



Doing company research



As mentioned earlier, a successful company meeting


depends on good research. The amount of research required will
depend upon the purpose of the meeting. The issues have already
been outlined above. They surround the basics of who owns the
company, who the decision–makers are, what the company actually
does, and what its international footprint looks like. It also needs to
cover any information regarding the company’s future intentions.



Sources for this information include the Internet,


commercially available databases, the local business press,
chambers of commerce and trade associations, as well as the
company’s annual report (if any).



The embassy may have records of previous contact with the


company: these should be looked for. Sometimes it is possible to
have meetings at a lower level to collect data in advance of a more
important meeting. It may also be feasible to obtain data filed with




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56


the local government, for example information about senior office
holders, and some limited financial details.

Making sales pitches



At the company meeting, the embassy will usually make


some form of a pitch aimed at persuading the company to look at
the host market from an investment perspective, or if the meeting is
with an existing investor, to expand. The nature of the pitch will
depend on whether the visit is purely speculative, or whether it is
connected with an active project.



For a more speculative visit, a short sales pitch may be all


that is necessary. This should highlight the advantages of investing
in the host country and be tailored as closely as possible to the
perceived needs of the company. It should be punchy, and delivered
orally, although the embassy may wish to leave behind a note
recording the points. If the meeting is about determining the
likelihood of a future investment by the company, it will probably
involve a longer pitch, although the purpose of the meeting will be
as much about listening as talking.



If the company has a project in the pipeline, it is likely that


a longer presentation will be required. The material to be handed
over will be dictated by the company’s business requirements.
Examples of such requirements will be found in chapter 1. Finding
out what these are is the key to an effective presentation. The data
is likely to be sourced from the IPA, but sometimes it is necessary
to supplement this through local research.




Investment Promotion Handbook for Diplomats



 
 


57


Synergies with trade promotion19


Opportunities to discuss investment prospects may arise
from company meetings intended for the purposes of trade
promotion. Such meetings sometimes yield interesting pieces of
information about investment plans. Apart from making a careful
note, so that the information can be fed back to the IPA, it is also
useful if diplomats participating in such meetings are equipped to
have conversations about inward FDI. At a minimum, they should
know the top-line messages and understand how an enquiry can be
helped. The same applies in reverse: staff going to investment
meetings should be able to speak knowledgably about trade
promotion. Trade and investment promotion are separate activities,
but they are closely linked.




3.4 Handling information



Databases



A good database is a valuable tool for investment


promoters. Fortunately, a wide range of software packages is
available to record contact details, and these can be shared within
the same network so that staff can have access to the data. The main
concern is, however, not so much the software as the need to ensure
that staff are diligent in keeping the details up to date. This is a
managerial, rather than a technological problem.



Embassies with substantive commercial sections may go


further and equip themselves with a customer relationship
management (CRM) system. Such systems enable embassies to
record all interactions with their clients in a single database, and
                                                            
19 For more information on synergies between investment and trade


promotion, see UNCTAD (2009a).




Chapter 3. Investment promotion techniques and tools



 
 


58


often to share them with the IPA. This has great benefits, because
anyone dealing with the same client has access to the same data,
regardless of their geographical location. The CRM system can also
be employed for running reports which provide useful management
information, thus helping the IPA to keep track of and control
investment promotion activity. On the other hand, CRM systems
can be expensive to procure, especially if they are to be customized,
and getting staff to use them properly is often difficult at the outset.
The payback is in the longer term.



When creating and maintaining databases, it is of course


important to comply with any data protection laws of the country in
which you operate.



Evaluation20


All the above techniques and tools are aimed at creating an
environment in which potential investors might start to consider the
host country as a possible location for an investment. Given limited
resources, it is critical to get the balance right between them. This
means that evaluation is essential: the embassy needs to weigh up
the costs and benefits of particular approaches. For example, it
could analyse the numbers of press cuttings produced over a year as
a result of promotion activities, work out the size of the audience
they have reached (based on the circulation of the newspaper), and
establish the overall cost. It is especially useful to establish from
enquiring companies what prompted the companies to approach the
embassy, whether a press release, ministerial visit, news feature, or
some other activity. Some IPAs and embassies outsource their
marketing activities wholly or partly to public relations companies,
including the evaluation of the results.


                                                            
20 Practical information on how to evaluate investment promotion can be


found in UNCTAD (2008b).




 


 



4. Conclusions





In the highly competitive world of investment promotion,
the diplomatic corps is a potentially important resource, especially
for the many countries that cannot afford to maintain an IPA with
overseas offices. With diplomats actively promoting the host
country in foreign markets, chances of attracting FDI increase. A
diplomat familiar with the local market and with broad private-
sector networks in the country is a very valuable asset to an IPA.


Well-resourced embassies may be able to assign a staff
member or a team specifically for promotional tasks (perhaps
combining investment and trade). This way, significant time can be
devoted to investment promotion. For smaller embassies, where the
promotional activities must be shared with other duties, there is a
risk that promotion will fall into the background. Where resource
constraints prevent investment promotion, a channel should at least
be established with the national IPA, so that any enquiries can be
passed on to its staff.



Embassies with sufficient resources for investment


promotion need to plan their activities ahead. If the national IPA
does not require each embassy to have an action plan, it is useful
for the embassy to draft one on its own. The plan should set
ambitious but realistic objectives, specify available resources in
staff and money, and outline the tasks which are to be carried out to
achieve the objectives.




Chapter 4. Conclusions



 
 


60


For some diplomats, whose careers may have centered on
political work, investment promotion can seem challenging at first,
but they can strengthen their capacity to carry out these activities
through dedicated training. This should build on their existing
skills, with the focus on using different marketing channels,
managing relationships with companies, handling company
meetings and collaborating effectively with stakeholders. After
receiving such training, the best way for diplomats to further
develop their skills is to get involved directly in investment
promotion activities. Hopefully, they will find this a rewarding
experience.















 


 


Annex: Action plan template


Inward investment action plan
Name: Post:


SWOT analysis
Strengths


What are the strengths of the country as an FDI
location seen from the market in which you are
posted (e.g. good market access, political and
economic stability)?
What are the strengths of your embassy in
promoting FDI (e.g. qualified and experience staff
at the embassy)?


Weaknesses


What are the weaknesses of the country as an FDI
location seen from the market in which you are
posted (e.g. problems with key infrastructure)?
What are the weaknesses of your embassy in
promoting FDI (e.g. low budget for investment
promotion)?


Opportunities


What are the opportunities for the country as an
FDI location seen from the market in which you
are posted (e.g. forthcoming signature of a
bilateral/multilateral agreement that favours your
country; concrete projects/investment
opportunities)?
What are the opportunities for your embassy in
promoting FDI (e.g. organization of an important
trade and investment fair in your duty station or a
very active outward investment promotion
programme in the country of duty)?


Threats


What are the threats to the country as an FDI
location seen from the market in which you are
posted (e.g. instability in the region, perception of
corruption)?
What are the threats to your embassy’s work to
promote FDI in the country (e.g. potential bilateral
problems between the two countries or
neighbouring countries)?




Annex



 
 


62


Overall mission statement for investment promotion at
embassy/duty station level


Based on the results of the SWOT analysis, state how to use the
strengths and opportunities to promote investment, taking into
consideration the weaknesses and threats, both at country and
embassy/duty station level.


Objectives
A Describe specific objectives in priority order, i.e. what you want


to achieve, not what you are going to do. Example: secure an
investment project in the tourism sector.


B


C


D


E


Budget What is the budget over the 3-year period?
Staffing List in terms of full-time equivalents, e.g. 10% of First


Secretary
Targets If the IPA or the responsible minister sets targets for


individual posts
Activities



Research Image


building
Investor
targeting


Other


This is what you
are going to do in
the area of
research in order
to achieve your
objectives.


This is what
you are going
to do in the
area of image
building in
order to
achieve your
objectives.


This is what
you are going
to do in the
area of lead-
generation in
order to
achieve your
objectives.


This is what
else you are
going to do in
order to
achieve your
objectives.




 


 


References

Dunning JH (1993). Multinational Enterprises and the Global
Economy. Wokingham: Addison-Wesley.

IMF (2009). Balance of Payments and International Investment
Position Manual, sixth edition. Washington, DC.

OECD (2008). Detailed Benchmark Definition of Foreign Direct
Investment, fourth edition.

Oxford Dictionary of Finance and Banking (2005). Oxford: Oxford
University Press.

UNCTAD (1998). World Investment Report 1998: Trends and
Determinants. United Nations publication. Sales No. E.98.II.D.5.
New York and Geneva.

UNCTAD (1999). World Investment Report 1999: Foreign Direct
Investment and the Challenge of Development. United Nations
publication. Sales No. E.99.II.D.3. New York and Geneva.

UNCTAD (2000). World Investment Report 2000: Cross-border
Mergers and Acquisitions and Development. United Nations
publication. Sales No. E.00.II.D.20. New York and Geneva.

UNCTAD (2007). Aftercare: A Core Function in Investment
Promotion. Investment Advisory Series. Series A, number 1. New
York and Geneva. United Nations publication
UNCTAD/ITE/IPC/2007/1. New York and Geneva.

UNCTAD (2008a). Investment Promotion Agencies as Policy
Advocates. Investment Advisory Series. Series A, number 2. New
York and Geneva. United Nations publication.
UNCTAD/ITE/IPC/2007/6. New York and Geneva.




References



 
 


64


UNCTAD (2008b). Evaluating Investment Promotion Agencies.
Investment Advisory Series A, number 3. United Nations
publication. UNCTAD/DIAE/PCB/2008/2. New York and Geneva.

UNCTAD (2009a). Promoting Investment and Trade: Practices
and Issues. Investment Advisory Series A, number 4. United
Nations publication. UNCTAD/DIAE/PCB/2009/9. New York and
Geneva.

UNCTAD (2009b). UNCTAD Training Manual on Statistics for
FDI and the Operations of TNCs. Volume I: FDI Flows and Stock
Data. United Nations publication. UNCTAD/DIAE/IA/2009/1.
New York and Geneva.

UNCTAD (2009c). World Investment Report 2009: Transnational
Corporations, Agricultural Production and Development. United
Nations publication. Sales No. E.09.II.D.15. New York and
Geneva.

UNCTAD (2011). World Investment Report 2011: Non-Equity
Modes of International Production and Development. United
Nations publication. Sales No. E.11.II.D.2. New York and Geneva.

UNCTAD (forthcoming). Non-Equity Modes of TNC Operations
and Development: A Survey of Investment Promotion Agencies.
United Nations publication. New York and Geneva.

World Bank (2009). Global Investment Promotion Benchmarking
2009: Summary Report. Washington, D.C.

Young S and Hood N (1994). Designing developmental after-care
programmes for foreign direct investors in the European Union,
Transnational Corporations, 3(2), pp 45-72, UNCTAD.




 


 


UNCTAD publications on TNCs and FDI


For more information on UNCTAD's publications on TNCs and
FDI, please visit www.unctad.org/en/pub



Other publications in


UNCTAD's Investment Advisory Series A and B


Series A

No. 5. Promoting Investment in Tourism. 68p.
UNCTAD/DIAE/PCB/2009/16
http://www.unctad.org/en/docs//diaepcb200916_en.pdf.

No. 4. Promoting Investment and Trade: Practices and Issues.
78 p. UNCTAD/DIAE/PCB/2009/9
http://www.unctad.org/en/docs/diaepcb20099_en.pdf.

No. 3. Evaluating Investment Promotion Agencies. 85 p.
UNCTAD/DIAE/PCB/2008/2
http://www.unctad.org/en/docs/diaepcb20082_en.pdf.

No. 2. Investment Promotion Agencies as Policy Advocates. 112
p. UNCTAD/ITE/IPC/2007/6
http://www.unctad.org/en/docs/iteipc20076_en.pdf.

No. 1. Aftercare: A Core Function in Investment Promotion. 82
p. UNCTAD/ITE/IPC/2007/1
http://www.unctad.org/en/docs/iteipc20071_en.pdf.



Series B

No. 7. Best Practices in Investment for Development. How to
Attract and Benefit from FDI in Mining. Lessons from Canada
and Chile. 141 p.
http://www.unctad.org/en/docs/diaepcb2010d11_en.pdf




UNCTAD publications on TNCs and FDI



 
 


66



No. 6. Best Practices in Investment for Development. How to
Attract and Benefit from FDI in Small Countries. Lessons from
Estonia and Jamaica. 110 p.
http://www.unctad.org/en/docs/diaepcb2010d4_en.pdf.

No. 5. Best Practices in Investment for Development. How to
Integrate FDI and Skill Development. Lessons from Canada
and Singapore. 82 p.
http://www.unctad.org/en/docs/diaepcb2010d5_en.pdf.

No. 4. Best Practices in Investment for Development. How to
Create and Benefit from FDI-SME Linkages. Lessons from
Malaysia and Singapore. 106 p.
http://www.unctad.org/en/docs/diaepcb200918_en.pdf.

No. 3. Best Practices in Investment for Development. How Post-
Conflict Countries can Attract and Benefit from FDI. Lessons
from Croatia and Mozambique. 139 p.
http://www.unctad.org/en/docs/diaepcb200915_en.pdf.

No. 2. Best Practices in Investment for Development. How to
Utilize FDI to Improve Transport Infrastructure – Roads.
Lessons from Australia and Peru. 113 p.
http://www.unctad.org/en/docs/diaepcb20092_en.pdf.

No. 1. Best Practices in Investment for Development. How to
Utilize FDI to Improve Infrastructure – Electricity. Lessons
from Chile and New Zealand. 92 p.
http://www.unctad.org/en/docs/diaepcb20091_en.pdf.




Investment Promotion Handbook for Diplomats



 
 


67


HOW TO OBTAIN THE PUBLICATIONS

The sales publications may be purchased from distributors of United
Nations publications throughout the world. They may also be obtained
by contacting:


United Nations Publications Customer Service
c/o National Book Network


15200 NBN Way
PO Box 190


Blue Ridge Summit, PA 17214
email: unpublications@nbnbooks.com


https://unp.un.org/

For further information on the work of the Division on Investment
and Enterprise, UNCTAD, please address inquiries to:


Division on Investment and Enterprise
United Nations Conference on Trade and Development


Palais des Nations, Room E-10052
CH-1211 Geneva 10 Switzerland


Telephone: +41 22 917 4533
Fax: +41 22 917 0498


web: www.unctad.org/diae




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