Investment promotion: towards best practices

FIAS Workshop to
Discuss Preliminary IPA Census Results
May 21, 2002

Anne Miroux
and
Kelly Andrews Johnson
FIAS
 IPA Research Project

 Project objectives:
describe the functions, activities and experiences
of IPAs; and
provide a limited analysis of IPAs’ internal
efficiency and external effectiveness

 Ultimate objective of this research is help

identify best practices and benchmarks
 Project carried out in three phases:

 Phase I consists of a census of IPAs to provide

an understanding of their experiences

 Phase II consists of an analysis of IPA

effectiveness

 Phase III consists of detailed case studies and

identification of benchmarks and best practices
 Phase I - The FIAS/MIGA Census

• Census objective is to collect information

relevant to IPAs’:
Institutional/organizational aspects
Resources
Functions and activities
Performance indicators

• Tools developed:
Questionnaire instrument
Database

• Output:
Doing?
Descriptive Study--What Are IPAs
  
  Investment Promotion Agencies in
2001

A descriptive analysis
 The FIAS/MIGA Census
 The questionnaire
 Institutional data
 Financial and human resources
 Functions and activities
 Performance indicators

 The population surveyed

 IPAs, institutions or parts of ministries for which FDI
promotion is a prime responsibility
 Focus on national IPAs in developing countries and transition
economies
 Sent to about 100 IPAs worldwide
 The FIAS/MIGA Census

Africa1 Asia 2 ECA3 LAC4 MENA5 West. TOTAL

Europe6
Quest.
sent 24 17 17 22 12 22 114

Resp.
rcvd 15 11 12 19 6 11 74

Answ.
Rate 63 66 71 86 50 50 65
(%)

1. Sub-Saharan Africa 4. Latin America and Caribbean

2. Asia and Pacific 5. Middle East and North Africa
3. Eastern Europe and Central Asia 6. Western Europe and Australia
 Institutional Features
Other
1. Modes of creation Decree only
Law
100

80
% of agencies

60

40

20

PE
C
A
IA

A
A

ALL
EC

LA

EN
AS
IC

O
R
R

U
AF

.E
W
 Institutional Features

2. Status
70
60
% of agencies

50
40
30
20
10

PE
IA

A
C
A
A

L
EN
LA
EC

AL
AS
IC

O
R
R

U
AF

.E
W
Unit of ministry Autonomous public body Semi-autonomous agency
Joint public/private Other Private entity
 Institutional Features
3. Reporting Mechanisms
100

80
% of agencies

60

40

20
A

IA

PE
C

A
A
IC

L
EN
EC

LA
AS

AL
R

O
AF

R
M

U
.E
Ministry Board W
Board only Other mechanism
 Mandate & Responsibilities
 About 60% of the IPAs surveyed in high income
countries work exclusively on FDI promotion

 11% of agencies in low income and middle income

countries work exclusively on FDI promotion

 Most commonly, agencies combine FDI promotion with:

 Domestic investment promotion (50% of cases)
 Export promotion (30% of cases)

 About 50% of agencies surveyed in low income and

middle income countries deal with registration, licensing
or investment incentives.
Of this group, 30% have decision making power
 Financial & Human Resources
1. Sources of funding

(in %) Africa Asia ECA LAC MENA West. ALL

Europe

Govt
73 96 70 63 100 85 76
Priv.S.
Contrib 1 0 0 14 0 3 3
Fees
8 2 0 6 0 0 4
Aid
17 0 28 12 0 9 14
Other
1 2 1 5 0 3 3
 Financial & Human Resources
2. Budget size

 55 agencies for which information was available

 In 2001, two-thirds of the agencies had an FDI promotion budget

below:
 $ 350 000 in Africa
 $ 450 000 in Asia
 $ 650 000 in Latin America and Caribbean
 $ 800 000 in Eastern Europe and Central Asia

 A wide dispersion of budget size between income groups as well

as within regions
 Financial & Human Resources

(Mn $) 3. Budget size (averages)

5

Low Income Lower Middle Upper Middle High Income

Income Income
 Financial & Human Resources
4. Staff Size and Profile
Average number of professionals employed in FDI promotion

Africa Asia ECA LAC MENA West. ALL

Europe

Mean
25(*) 13 9 7 14 33 16
Median
8 10 7 6 6 21 8
Stand.
Deviat. 42 11 6 4 18 30 23
No. of
agencies 9 9 8 14 5 7 52
(*) If one country is excluded, the mean is reduced to 10
 Financial & Human Resources
4. Staff Size and Profile (cont’d)

 70 % of the agencies surveyed employ staff as civil

servants
 20 % employ staff under private sector status only
 38 % have salaries in line with public sector, and 41 %
are competitive with those of the private sector
 60 % of staff have private sector experience, with the
highest percentage in Latin America and Caribbean
 Functions and Activities

The core functions of investment promotion

The focus of IPA activities

 Investment Promotion Functions
Agency Focus
POLICY
ADVOCACY
INVESTOR 100%
SERVICES
INVESTMENT
GENERATION 90%
IMAGE BUILDING
80%

70%
(based on budget allocation estimates)

60%

50%
% of activity

40%

30%

20%

10%

PE
A

IA

A
A
IC

L
O
EN
EC

LA
AS

AL
R

R
AF

U
.E
W
 Image Building - Activity Focus

100%
Promotional
Materials
Public Relations*

Advertising
(based on budget allocation estimates)

50%
% of activity

PE
A
A

L
C
IA

EN
IC

EC

AL
LA

O
AS
R

R
M
AF

U
.E
W
* Participation in fairs and conferences, organization of seminars, e.g.
 Investment Generation
Activity Focus
Receiving missions,
conducting studies,
matchmaking 100%

Proactive Contacts

80%
(based on budget allocation estimates)

60%
% of activity

40%

20%
A

PE
A

L
C
A
IC

IA

EN

AL
LA
EC

O
AS
R

R
AF

U
.E
W
 Functions & Activities (cont’d)

Agencies with targeting or other specific programs

% of agencies 100

80

60

40
program targeting
specific countries 20
programs targeting
specific sectors
A

special programs for

IA

PE
C

A
A
IC

L
EN
EC

LA
AS

AL
R

O
joint ventures
AF

R
M

U
programs focusing

.E
W
on expansion
 Investor Services - Activity Focus

100%
After care

Implementation 90%

Pre-investment 80%

70%
(based on budget allocation estimates)

60%
% of activity

50%

40%

30%

20%

10%

PE
A

IA

A
A
IC

L
O
EN
EC

LA
AS

AL
R

R
AF

U
.E
W
 Phase II – IPA Internal Efficiency
and External Effectiveness Analysis

 Internal efficiency

 Objective: help IPA managers allocate resources

 Measure inputs (staff time, budget) versus outputs (investors
contacted and assisted, advertisements, etc)
 Comparison across countries and by activity

 External effectiveness

 Objective: learn something about the performance of IPAs in

stimulating FDI inflows
 performance of IPAs in stimulating FDI flows, including factors
that are under the control of the IPA and external factors
• identification of key characteristics that are associated with
different levels of IPA performance
 Phase II – Internal Efficiency
Analysis: Indicator Definitions

Investor - Budget spent per visiting mission arranged

Servicing - Staff days spent per visiting mission arranged
- Budget spent per existing investor serviced (after-care services)
- Staff days spent per existing investor serviced (after-care)
Investment - Budget spent per investor proactively contacted
Generation - Staff days spent per investor proactively contacted

Image - Budget spent per public relation activity*

Building - Staff days spent per public relation activity*
- Budget spent per advertisement
- Staff days spent per advertisement
Policy - Budget spent per position paper on FDI issues
Advocacy - Staff days spent per number of position papers on FDI issues

* Public relations activity as defined in questionnaire includes organizing seminars/presentations and conferences at home and abroad.
 Phase II – Internal Efficiency Indicators

Investor Servicing

Budget spent per Staff days per Budget spent per Staff days per
visiting mission visiting mission existing investor existing investor
arranged arranged serviced serviced

Total 1,248 11.66 1,354 11.24

LIC 647 10.54 823 10.26

LMC 1,802 16.47 1,566 17.69

UMC 1,056 3.19 1,769 2.18

 Phase II – Internal Efficiency Indicators

Investment Generation
Budget spent per Staff days spent
investor per investor
proactively proactively
contacted contacted

Total 169 0.86

LIC 89 0.38

LMC* 321 1.64

UMC 61 0.14

*2 countries are responsible for bringing the average above $141and 1.62 staff days
 Phase II – Internal Efficiency Indicators

Image Building

Budget spent per Staff days spent Budget spent per Staff days spent
PR activity per PR activity advertisement per advertisement

Total 2,329 8.44 4,784 22.20

LIC 3,446 7.67 3,266 33.41

LMC 1,850 10.43 5,637 12.07

UMC 2,641 6.34 6,135 14.97

 Phase II – Internal Efficiency Indicators

Policy Advocacy
Budget spent per Staff days spent
position paper on per position paper
FDI issues on FDI issues

Total 12,572 76.56

LIC 4,659 76.06

LMC 13,629 95.92

UMC 19,643 17.50

 Phase II – IPA External
Effectiveness Analysis

What we have done so far:

Developed some options on methodology and approach

Problems/challenges:

 Defining effectiveness—FDI proxy

 Lags—policy / outcome
 Incomplete data from survey, especially performance
indicators, budget
Thank you

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