february 2013 77101 Investment Climate Global Investment Promotion Best Practices 2012 Seizing the Potential for Better Investment Facilitation in the MENA Region Investment Climate l World Bank Group In partnership with Global Investment Promotion Best Practices 2012 Seizing the Potential for Better Investment Facilitation in the MENA Region Investment Climate l World Bank Group In partnership with  C © 2013 The World Bank Group 1818 H Street, N.W., Washington D.C., 20433 All rights reserved February 2013 Available online at www.wbginvestmentclimate.org and www.globalinvestmentpromotion.com This work is a product of the staff of the World Bank Group with external contributions. The information included in this work, while based on sources that the World Bank Group considers to be reliable, is not guaranteed as to accuracy and does not purport to be complete. The World Bank Group accepts no responsibility for any consequences of the use of such data. The information in this work is not intended to serve as legal advice. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of the Board of Executive Directors of the World Bank or the governments of the countries which they represent. The denominations and geographical names in this publication are used solely for the convenience of the reader and do not imply the expression of any opinion whatsoever on the part of the International Finance Corporation, the World Bank, or other affiliates concerning the legal status of any country, territory, city, area, or its authorities, or concerning the delimitation of its boundaries or national affiliation. Rights and Permissions The material in this work is subject to copyright. Because the World Bank Group encourages dissemination of its knowledge, this work may be reproduced, in whole or in part, for noncommercial purposes as long as full attribution to this work is given. Any queries on rights and licenses, including subsidiary rights, should be addressed to the Office of the Publisher, the World Bank, 1818 H Street, NW, Washington, DC 20433, USA; telephone 202– 522–2422; email: pubrights@worldbank.org. About the Investment Climate Department of the World Bank Group The Investment Climate Department of the World Bank Group helps governments implement reforms to improve their business environments and encourage and retain investment, thus fostering competitive markets, growth, and job creation. Funding is provided by the World Bank Group (IFC, MIGA, and the World Bank) and over 15 donor partners working through the multidonor FIAS platform. Acknowledgments The Investment Climate Department wishes to thank the Government of Spain for its support and funding for this GIPB 2012 MENA Report. This report has been produced by the consulting firm Economisti Associati and a core World Bank Group team comprising Robert Whyte, Valeria Di Fiori, Francisco Alvarez-Roca, and Bin Zhai. We would like to express our gratitude to Economisti Associati for their great work. The Investment Climate Department gratefully acknowledges the feedback and contributions of a number of peer reviewers who helped customize the GIPB data to the specific circumstances of this complex and rapidly changing region: Magdi M. Amin, Manager, Investment Climate Advisory, Middle East and North Africa, The World Bank Group; Najy Benhassine, Manager, Business Regulation, Investment Climate Department, The World Bank Group; Sammar Essmat, Operations Officer, Women in Business, IFC Sustainable Business Advisory Department; Jana Malinska, Economist, Finance and Private Sector Development, Middle East and North Africa, World Bank; and Celia Ortega Sotes, Economic Affairs Officer, Investment Promotion Section, Division on Investment and Enterprise, United Nations Conference on Trade and Development (UNCTAD). We would like to extend a special thanks to Cecilia Sager of the Investment Climate Department for providing valuable comments and advice. Acknowledgments 1 Table of Contents Acknowledgments ...............................................................................................................................................1 Acronyms ...............................................................................................................................................................6 Executive summary...............................................................................................................................................7 Chapter 1: Overview of mena results..............................................................................................................11 MENA region has had difficulties recently in attracting foreign direct investment ...............................................11 Foreign investors remain cautiously confident in MENA and there is some long-term optimism assuming a return of political stability ...............................................................................................................................11 Investment Promotion Intermediaries (IPIs) have a key role to play .....................................................................13 GIPB 2012: A timely, useful source of information .............................................................................................14 Improvements in GIPB performance against all odds..........................................................................................16 IPIs in MENA resource-poor countries do better at investment facilitation...........................................................18 A few, increasingly adopted key features characterize best-performing IPIs in the MENA region ........................18 Chapter 2: analysis of ipi online facilitation services across the mena Region ....................................21 MENA IPI Web sites heading to the top..............................................................................................................21 Despite general improvements, some key areas need further attention .............................................................22 Sector content is the key remaining gap ...........................................................................................................24 Generating and maintaining high-quality content requires committed resources and appropriate internal procedures .................................................................................................................24 Promotional effectiveness is improving, but more can be done ..........................................................................24 Summary: Key recommendations for improving online investment promotion ...................................................26 Chapter 3: Analysis of IPIs’ Direct Interactions with Potential Investors across the MENA Region .........................................................................................................................................................29 IPIs worldwide are doing poorly in handling investors’ inquiries, but the IPIs of the MENA region may not be seizing this opportunity to catch up ................................................................................................29 Inquiry-handling performance: Much more to do in all respects ........................................................................30 Despite poor inquiry-handling assessments, some MENA IPIs report having adequate internal systems in place to assist potential investors .........................................................................................32 GIPB 2012 coincided with challenging times for MENA .....................................................................................33 Work in progress to improve responsiveness, benefits may be expected soon ....................................................34 Summary: Key recommendations for handling inquiries more effectively............................................................35 Table of Contents Acknowledgments 3 Chapter 4: MENA IPI Facilitation Services at Sector Level ............................................................................37 Sector targeting is crucial to attract FDI .............................................................................................................37 Agribusiness and tourism, key sectors for the MENA region ..............................................................................37 Despite the high relevance of the tourism and agribusiness sectors, MENA IPIs offer little sector-specific information ................................................................................................................................39 Without the required sector information, the chances of satisfactory handling of investor inquiries are few ..............................................................................................................................40 Sector prioritization is not backed up by inquiry-handling performance .............................................................40 Summary: Key recommendations for improving investment promotion in targeted sectors ................................42 appendices ............................................................................................................................................................43 Appendix A: Assessment methodology for Web sites and inquiry handling ......................................................43 Appendix B: Description of the inquiries submited to IPIs...................................................................................45 Appendix C: The IPI characteristics survey..........................................................................................................47 Appendix D: List of national IPIs assessed, MENA region ...................................................................................53 Boxes Box 1.1: MENA—An Extremely Heterogeneous Region .....................................................................................12 Box 1.2: FIPA (Tunisia)—Multifaceted Support During a Challenging Period .......................................................14 Box 1.3: GIPB—Key Facts and Methodology .....................................................................................................15 Box 1.4: Investment Facilitation Performance and FDI Inflows—A Positive, Empirically Proven Link ....................16 Box 1.5: Turkey—A Good Practice IPI Just Beyond MENA Boundaries.................................................................17 Box 1.6: Yemen—Translating Recommendations Into Practice ...........................................................................19 Box 2.1: AMDI (Morocco)—Most Improved Web Site in MENA Region in GIPB 2012 .........................................22 Box 2.2: Tunisia’s FIPA—A Best Practice in Providing Sector Information ............................................................25 Box 2.3: Interactive Investment Maps ................................................................................................................26 Box 3.1: GIPB Approach Reflects How Foreign Investors Actually Send Inquiries to MENA IPIs ............................32 Box 3.2: Yemen—Unfortunate Timing for an Assessment .................................................................................34 Box 3.3: Inquiry-Handling System in the MENA Region—Steps in the Right Direction ........................................34 Box 4.1: Egypt’s GAFI—Good Practice in Providing an Agribusiness Sector Profile ..............................................40 Box 4.2: A Wealth of Information Cannot Make Up for Poor Inquiry Handling ..................................................41 Tables Table 1.1: Evolution of GIPB for MENA Subregions ............................................................................................18 Table 2.1: Best Practice Web Sites in the MENA Region......................................................................................22 Table 4.1: Sector Profiles Provide Little Information ...........................................................................................39 Table 4.2: GIPB Inquiries and IPI Sector Profiles—An Information Gap................................................................41 4 GIPB 2012: Table Seizing the Potential for Better Investment Facilitation in the MENA Region of Contents Figures Figure 1.1: The Largest Share of FDI Goes to Resource-Rich Countries ...............................................................12 Figure 1.2: Huge Disparities in Terms of GDP Per Capita and Population.............................................................12 Figure 1.3: The Positive Correlation between FDI Inflows and GIPB Assessments ................................................16 Figure 1.4: GIPB 2012 MENA is the Only Region Recording a Real Improvement since 2009...............................16 Figure 1.5: Steady Improvement, but Best Practice IPIs Yet to Emerge in the MENA Region................................17 Figure 2.1: MENA Web Sites above the Global Average.....................................................................................21 Figure 2.2: MENA Web Sites Make Breakthrough to Best Practice......................................................................22 Figure 2.3: A Closer Look at MENA IPI Web Site Performance Over Time ..........................................................23 Figure 2.4: MENA IPI Web Site Assessment by Subtheme ..................................................................................23 Figure 3.1: MENA Inquiry-Handling Performance—The Situation Remains Critical .............................................29 Figure 3.2: MENA Inquiry-Handling Performance—All IPIs Remain in the Two Lower Categories ........................30 Figure 3.3: A Closer Look at MENA IPI Inquiry-Handling Performance over Time ................................................30 Figure 3.4: MENA IPIs’ Inquiry-Handling Assessment by Subtheme ....................................................................31 Figure 3.5: The AMDI Centralized Inquiry-Handling System ...............................................................................33 Figure 4.1: Tourism’s Economic Impact in the MENA Region, 2011 ....................................................................38 Figure 4.2: Few Sector-prioritizing IPIs Provide Sector Profiles on Their Web Sites................................................39 Figure 4.3: Correlation Between Inquiry-Handling Performance and Assessment of Web Site Content ..............41 Table of Contents Acknowledgments 5 Acronyms AMDI Agence Marocaine de Développement de l’Investissement (Morocco) EAP East Asia and the Pacific ECA Europe and Central Asia EIAI Espace d’Information et d’Accueil des Investisseurs EIU Economist Intelligence Unit FDI foreign direct investment FIAS Foreign Investment Advisory Service FIPA Tunisia’s Foreign Investment Promotion Agency GAFI Egypt’s General Agency For Investment GDP gross domestic product GIA Yemeni General Investment Authority GIPB Global Investment Promotion Best Practices IFC International Finance Corporation INSEAD Institut Européen d’Administration des Affaires (European Institute for Business Administration) IPI investment promotion intermediary ISO International Organization for Standardization JIB Jordan Investment Board KFIB Kuwait Foreign Investment Bureau LAC Latin America and the Caribbean MIGA Multilateral Investment Guarantee Agency MENA Middle East and North Africa OECD Organisation for Economic Co-operation and Development PE private equity PIPA Palestine Investment Promotion Agency PwC PricewaterhouseCoopers SA South Asia SSA Sub-Saharan Africa UNCTAD United Nations Conference on Trade and Development UNWTO United Nations World Tourism Organization WTTC World Tourism & Travel Council 6 Acronyms Executive Summary The “Arab Spring� negatively affected foreign direct be a significant challenge for a region whose institutions investment into the Middle East and North Africa are known more often for their bureaucratic handling of region, but prospects may be more positive for the investors in the past. medium term assuming a return of political stability Among the different functions that IPIs perform, the The drop in foreign direct investment (FDI) flows to the provision of information to support and influence investor Middle East and North Africa (MENA) region over the past decision making, commonly known as investment three to four years1 stems in part from the aftermath of facilitation, will be important to catalyze potential investor the recent global economic crisis, and in part from the interest and lower perceived country risk—investors’ uncertainties created by the political and social changes perceptions of risk are heightened when there is limited in the region that have characterized the so-called Arab information. Therefore, providing information on both Spring. Most recently, probably due to some extent to investment opportunities and key competitiveness factors, the continued uncertainty in parts of the region, FDI along with regular and credible updates on the evolution data show that the number of private sector investment of the operating environment that are backed by success projects announced for the MENA region has dropped story testimonials, will make potential investors more further, by one fifth during the first nine months of 2012 comfortable and more likely to consider MENA countries compared with the same period in 2011.2 These more as investment locations. recent trends suggest strongly the need for the region to regain stability to underpin recovery in FDI attraction. The Global Investment Promotion Best Practices (GIPB) 2012 report presents well-timed and useful insights However, the medium-term outlook may be more into the capacities of IPIs to perform their investment positive as greater governmental transparency and less facilitation function. Thus a careful analysis of GIPB cumbersome business environments are expected to findings can be important in helping MENA IPIs introduce foster FDI, stimulate entrepreneurship, and create jobs. targeted improvements that will enable them to increase As stability is critical for persuading investors to resume FDI flows into the region. A recent study by the University investing, FDI prospects will depend on the speed of of Oxford confirms this point by demonstrating that IPIs’ resolving the political situation in various countries in the facilitation performance, as measured by GIPB, has a region. positive and statistically significant influence on FDI flows into a country.3 Effective investment facilitation: A critical element in attracting FDI into the region GIPB replicates the decision-making process commonly followed by foreign companies at the first stage of a Once it regains political stability, the MENA region has possible location-screening process, a practice known the potential to become an attractive destination for as “long listing.� Through an objective and rigorous foreign investment. Besides the ability of the region’s methodology (described in Box 1.3 of Chapter 1), GIPB governments to improve the investment climate, evaluates the two most important sources of information investment promotion intermediaries (IPIs) can play a provision at the long-listing stage to assess the extent to significant role in helping to win such investment, but only which countries are maximizing their chances of staying if they are willing to significantly “improve their game,� on investors’ “short lists�—namely, IPI Web sites and their adopt best practices to present their countries’ image ability to handle investor inquiries. The GIPB assessment as a safe investment destination with a level playing is presented as an index with a value between 0 and 100 field for investors, and facilitate prospective new foreign percent, and is a simple average of the two components. investment. Nevertheless, it should be noted that this will According to the United Nations Conference on Trade and Development 1 (UNCTAD), in 2011, total FDI inflows in the region declined by more than 35 percent, from US$66 billion to less than US$43 billion (see UNCTAD, World Investment Report 2012: Towards a New Generation of Investment Policies, Geneva, 2012). 2 Data on FDI announcements obtained from fDi Markets database at T. Harding and B. Javorcik, “Investment Promotion and FDI Inflows: 3 www.fdimarkets.com. Quality Matters,� CESifo Economic Studies, 2012. Executive Summary 7 Web sites and inquiry responses are categorized as follows in downward global trend. However, this increase is almost entirely order to identify good and best practice examples as well as key driven by improvements in Web site performance, with only areas for improvement: negligible improvements in inquiry handling from a very low level. • Best practice 81–100 percent • Good 61–80 percent Overall, no good or best practice IPIs have yet emerged in MENA, and the gap between MENA performance and the top- • Average 41–60 percent performing region (the OECD high-income economies) remains • Weak 21–40 percent significant in terms of both Web site and inquiry-handling components (19 and 27 percentage point gaps, respectively). • Very weak 0–20 percent The situation looks even less positive for IPIs in resource-rich GIPB 2012: MENA IPIs fared better despite the difficult MENA countries. In most of MENA’s oil-exporting countries, times, but still lag behind in meeting potential investors’ which attract the bulk of FDI inflows to the region, IPIs made information needs little progress in making their Web sites really informative tools, and lack adequate facilitation services to attract new The timing of the GIPB 2012 exercise, which ran between investments. This translates into a missed opportunity to February and July 2011, coincided with some of the most diversify their economies and create more jobs through the critical events of the Arab Spring for a number of MENA attraction of non–resource-based investment. Conversely, countries. Nevertheless, on average, IPIs in the MENA region however, IPIs in countries lacking large natural resource show improved facilitation performance as measured by GIPB endowments have shown more progress in enhancing the relative to IPIs in other regions, as illustrated in Figure 1. promotional value of their Web sites to attract FDI in a range of different sectors. Figure 1: GIPB 2012—MENA is the Only Region Recording a Real Nevertheless, there are outstanding opportunities to improve Improvement since 2009 the quality of facilitation services offered to prospective investors in the short term, driven, not least, by the pressures to regain investor confidence following the upheavals of the Arab Spring. MENA IPIs run functional, above-average Web sites, but they provide little sector-specific information online All IPIs in the MENA region have a properly functioning English version of their Web sites, easily identifiable from an Internet search. Since GIPB 2009, Web sites have become easier to navigate and read; with texts better suited for Web format and more effective use of visual contents, most of the region’s IPIs have increased their Web site performance. In fact, MENA has achieved the largest regional improvement (9 percentage points) of all regions since 2009. More than two-thirds of the region’s IPI Web sites are now in the good or best practice category (based on the performance bands described above). However, most of the region’s IPIs do not seem to recognize that investment location decisions worldwide are primarily influenced by sector or business line–related factors. There is evidence that sector-targeting IPIs are the most successful promoters.4 Global trends notwithstanding, IPI Web sites in the MENA region have largely failed to provide the detailed, up-to- date, and credible sector-specific business information required by potential foreign investors. The situation has even worsened over time. Celia Ortega and Carlos Griffin, “Investment Promotion Essentials: What 4 The MENA region shows an overall gain in performance of Sets the World’s Best Facilitators Apart from the Rest,� Investment Climate 6 percentage points since 2009, an exception to an overall IN PRACTICE note, no. 6, Investment Climate Advisory Services, World Bank Group, Washington, D.C., September 2009. 8 GIPB 2012: Seizing the Potential for Better Investment Facilitation in the MENA Region Only a slight majority of the region’s IPIs have clearly identified Conclusions and key recommendations priority sectors on their Web sites and developed relevant information for each sector. Furthermore, IPI claims of sector Following the recent upheavals experienced in the region, prioritization are not matched by the provision of good MENA IPIs should take full advantage of the outstanding quantitative and qualitative sector information. In fact, only four opportunities offered by online and offline communication MENA IPIs offer an adequate amount of well-researched tools to mitigate investors’ risk perceptions and influence their information at sector level on their Web sites. Without decisions through the provision of accurate and up-to-date good-quality sector information, investors will generally opt for information on the investment location. other locations where better information is available. To improve the quality of their investor facilitation services, and In short, since investors are likely to begin their research for thus to increase the region’s prospects for attracting more FDI, potential investment locations on the Internet, if the Web MENA IPIs are strongly encouraged to adopt the following site does not provide credible, sector-specific, and up-to- main recommendations (more detailed recommendations are date information, it may well fail to capture the interest of presented in the main chapters of this report): potential investors without the IPI ever knowing about the lost opportunity. • Focus on a select number of sectors: Government development of a national investment strategy that identifies sectors in which countries have competitive advantages is MENA IPIs often do not respond, or respond very poorly, encouraged. Based on this national strategy, IPIs should then to investor inquiries forge well-crafted value propositions to attract investors into those sectors. On average, inquiry-handling performance for IPIs in the MENA region has been assessed as very weak, and no IPI assessed as • Be serious about sector priorities—develop sector any better than a weak performer, primarily because of the lack Content: Building on the previous recommendation, MENA of substantive responses. The timing of the GIPB assessment IPIs should consider the development and strategic use of may have had an effect on performance—investor inquiries sector-specific information for targeted sectors a top priority. were submitted between March and June 2011, a critical Many IPIs in the region clearly lack such information, as transition period for some of the MENA countries most affected evidenced by the GIPB 2012 results. by the Arab Spring. However, only a minority of IPIs will have • Develop partnerships to gather key information: IPIs been affected in this way and it is clear that the region’s IPIs should seek to form partnerships and join forces with other will have to make much greater efforts to meet the information government agencies, private sector associations, specialized needs of foreign investors in the future. promotional agencies, and technical bodies in order to help source some of the necessary sector-specific information. Out of the 19 IPIs contacted in GIPB 2012, only three provided responses to both inquiries. Another six responded to only • Make the Web site the key promotional and one of the two inquiries, while 10 IPIs did not respond at Facilitation Tool: It is better to reach many investors all to either inquiry. The rate of IPI responsiveness does not simultaneously at one low cost than to approach each one improve even for those IPIs that prioritize the two sectors on individually and incur the high costs of foreign travel. This which the GIPB inquires focused—tourism and agribusiness, is what an IPI achieves by effectively presenting crucial and suggesting that sector prioritization may be a hollow claim. As up-to-date information on the Web site. inquiries represent a source of zero-cost leads to prospective • Prepare responses to obvious Investor questions in investors and the acquisition of services, this finding translates Advance: To increase the capacity to provide high-quality into an alarmingly high share of projects potentially lost from responses in a timely manner, IPIs should have on hand unresponsiveness. Moreover, in the few instances where IPIs did preprepared materials on key issues for investors, such as respond, replies failed to properly address all questions raised labor costs, the regulation and competition environment, and were rarely customized to the investor’s needs. and the advantages of their investment location. • Be accessible to investors: On a more practical note, it is The GIPB 2012 assessment also detected a number of imperative that investors be able to reach IPI staff easily and procedural hitches, such as difficulty in contacting an IPI or a that every inquiry from a legitimate investor be processed relevant project manager in spite of repeated attempts, failure and promptly answered in the form of a tailored response to provide acknowledgment of inquiry receipt, and problems matching the investor’s specific needs and highlighting locating investor e-mails. All of these impediments—which the location’s advantages. This is even more important for are not difficult or costly to resolve—convey a sense of poor inquiries in priority sectors. To minimize the risk of losing professionalism and are likely to discourage potential investors potential investments because of inquiries left unanswered, and risk losing their interest. setting up internal inquiry-handling systems should be a priority for IPIs. Executive Summary 9 Chapter 1: Overview of MENA Results MENA region has had difficulties recently in FDI inflows to countries most directly affected by the attracting foreign direct investment events of the Arab Spring largely dropped because of diminished confidence by foreign investors, which The global financial crisis starting in mid-2008 abruptly translated into the postponement or the cancellation halted the unprecedented upward surge of foreign direct of investment deals and their subsequent relocation investment (FDI) inflows that had begun in 2004 and to perceived safer destinations. In 2011, according to peaked in 2007 at US$1.97 trillion worldwide. After the UNCTAD data, Tunisia suffered a 24 percent decline, dramatic decline recorded in the 2008–09 period, global while in Egypt and Libya (the two major FDI recipient FDI inflows increased moderately in 2010, and exceeded countries in the North African subregion) the level of FDI US$1.5 trillion in 2011. UNCTAD estimates that while inflows fell dramatically to negligible levels. Other less- FDI will continue to rise marginally in 2012, with flows affected countries, such as Saudi Arabia and Qatar, still leveling off at slightly below US$1.6 trillion, the possibility suffered when project finances dried up following the of matching the 2007 level remains distant because global financial crisis and new uncertainties about global of the fragility of the global economic recovery.5 As economic prospects. The rise in uncertainty associated political leaders and policymakers, especially in emerging with Arab Spring transitions has also affected FDI inflows economies, have long recognized that FDI brings with it in many other countries in the region. All in all, in 2011, capital, jobs, technology, and know-how, the competition total FDI inflows to MENA are estimated to have declined to attract foreign capital has intensified worldwide. by more than 35 percent, from US$66 billion to less than US$43 billion. In recent times, the Middle East and North Africa (MENA) region6 has been at a disadvantage in this global competition to attract FDI. In 2010, the postponement Foreign investors remain cautiously confident or cancellation of a number of large-scale projects, in MENA and there is some long-term optimism particularly in Saudi Arabia and Qatar (the major FDI assuming a return of political stability recipients in the region), largely explained the 14 percent On a more positive note, a number of studies carried decline in FDI inflows in the region. However, the situation out in 2011 and 2012 reveal a confident attitude among has deteriorated further since late 2010; the MENA many foreign investors toward the MENA region. A survey region has experienced a period of unparalleled political of 316 senior executives from multinational enterprises and social change that originated in the wave of popular investing in developing countries performed between protests demanding more social equity and stronger June and August 2011 by the Multilateral Investment economic development. Guarantee Agency (MIGA) and the Economist Intelligence Unit (EIU) revealed the remarkable resilience of investor Following the events in Tunisia and the Arab Republic interest in the region despite recent challenges. Although of Egypt, social unrest spread rapidly to several other it confirmed that the upheavals in MENA had a negative countries in the region. The pro-democracy movements impact on FDI inflows—over 10 percent of investors that characterized the Arab Spring resulted in varying cancelled plans for future investments, with an additional degrees of political change in different countries and 18 percent reconsidering investing in the region7—it culminated in the resignation of the ruling presidents of also suggested that the majority of corporate investors both Tunisia and Egypt, and the overthrow of the regimes interviewed had either not changed their investment in Libya and the Republic of Yemen. As of mid-2012, the plans (about one-third) or had adopted a “wait and see� situation remains critical in some countries, for example approach (one quarter) over the following twelve months, the Syrian Arab Republic, and the progress of transition opting to cancel their investment plans only if political processes in some other countries far from determined. instability intensifies or persists. UNCTAD, World Investment Report 2012. 5 6 According to the World Bank’s 2011 geographic classification, the MENA region includes 19 countries: Algeria, Bahrain, Djibouti, Arab Multilateral Investment Guarantee Agency (MIGA), World Bank’s World 7 Republic of Egypt, Iraq, Islamic Republic of Iran, Jordan, Kuwait, Investment and Political Risk Survey, Washington, D.C., 2011. The survey Lebanon, Libya, Morocco, Oman, Qatar, Saudi Arabia, Syrian Arab focused on developing countries; accordingly, it did not cover MENA Republic, Tunisia, West Bank and Gaza, United Arab Emirates, and region high-income countries, namely, Bahrain, Kuwait, Oman, Qatar, Republic of Yemen. Saudi Arabia, and the United Arab Emirates. Chapter 1: Overview of MENA Results 11 Box 1.1: MENA—An Extremely Heterogeneous Region The rough portrait of the region depicted in the above text obscures important cross-country differences. High-income oil exporters receive the bulk of FDI inflows (Figure 1.1), and large disparities exist across individual countries in terms of both GDP per capita (from about US$1,000 to US$60,000) and population size (fewer than 1 million to around 80 million people) (Figure 1.2). Figure 1.1: The Largest Share of FDI Goes to Resource-Rich Countries Figure 1.2: Huge Disparities in Terms of GDP Per Capita and Population 12 GIPB 2012: Seizing the Potential for Better Investment Facilitation in the MENA Region A similar, high level of investor confidence was found the same period in 2011). The drop in the investment value of in another 2011 study jointly conducted by INSEAD and these projects was slightly larger (28 percent) during this same PricewaterhouseCoopers (PwC) that aimed at assessing the period.12 short-/medium-term outlook for the private equity industry in the region.8 Assuming a gradual political stabilization, general In summary, in recent times the region has undergone a series partners from leading private equity firms investing in the MENA of momentous events likely to have a considerable bearing region reported that they plan to resume investing as early as on the fortunes of its countries’ economies and societies. possible. Such a confident attitude was more recently confirmed Whatever its fluctuations and setbacks, the effects of the Arab by the Deloitte Private Equity Confidence Survey carried out Spring have the potential to act as a catalyst for economic in 2012. The results of this survey reveal a bounce back in expansion in the long term, based on an expectation of confidence among the private equity community from 2010; improved governance systems and less cumbersome business over 75 percent of respondents expected investment activity to environments. FDI prospects will depend on the speed of increase in the region over the next 12 months.9 resolving the political situation, as stability is critical for persuading investors to resume investments.13 These studies suggest that, in the medium and long term, economic and demographic factors—an average GDP per capita Investment Promotion Intermediaries (IPIs) have a key role of some US$5,500 and a combined population of about 370 to play million people (almost twice the size of Brazil)—will continue to attract foreign investors (see Box 1.1). Moreover, the medium- Assuming that the region regains political stability, unleashing term outlook for the region looks brighter in light of the its potential and recasting the region as an attractive destination expected changes in governance and regulatory frameworks. for foreign investment will depend on two main factors. First Investors interviewed in the INSEAD/PwC study anticipate that is the governments’ ability to improve the overall investment more equitable wealth distribution and greater transparency climate by addressing regulatory uncertainties and constraints. will relax the key constraints to growth and pave the way The second factor is how well IPIs can influence foreign investor for further FDI, entrepreneurship, and job creation. Indeed, decisions. IPIs have a crucial role to play both in building the almost 80 percent of the interviewees strongly or moderately region’s image as a safe investment destination with a level agreed that, while the current regional political instability will playing field for investors, and in facilitating prospective new have a short-term negative impact, it will benefit the region’s FDI that matches developmental priorities in their countries. economy over the next five years. These expectations are largely corroborated by a body of accepted research10 highlighting the Investment promotion can be defined as “activities that sizable positive economic returns typically associated with the disseminate information about, or attempt to create an image establishment of better and more accountable institutions as of, the investment site and provide investment services for well as with deep regulatory reforms.11 the prospective investors.�14 This definition highlights the importance of IPIs’ role in communicating and disseminating Prospects for the immediate future, however, are less information.IPIs must be able to provide not only information encouraging. Data from FDI Markets, an online database on investment opportunities and key competitiveness factors, tracking cross-border greenfield investment announcements but also regular and credible updates on the evolution of the covering all sectors and countries worldwide, suggests that the operating environment, backed by success story testimonials. number of investment projects announced during the first nine These data will make potential investors far more comfortable months of 2012 dropped by 21 percent compared with those and prone to considering a country as a potential investment announced during the first nine months of 2011 (656 new location: investors’ perceptions of risk are heightened when investment announcements between January and September of information is limited, especially in the risk-adverse atmosphere 2012 compared with 826 announcements during that prevails today. 8 P. Balze and S. Mezias (INSEAD Abu Dhabi), and Y. Bazian (PwC), The Next Five ata obtained from fDi Markets database at www.fdimarkets.com. D 12 Years: MENA PE, September 2011. he importance attributed to political stability and security among factors T 13 9 Deloitte, MENA Private Equity Confidence Survey 2012. influencing companies’ site selection in the global arena has been pointed ee, for instance, D. Rodrik and R. Wacziarg, “Do Democratic Transitions S 10 out by several studies in past years. For instance, a 2002 MIGA survey found Produce Bad Economic Outcomes?,� American Economic Review, Papers a stable social and political environment to be the second most-cited factor, and Proceedings 95, no. 2 (2005): 50–55; E. Papaioannou and G. Siourounis, while a similar survey by UNCTAD and the World Association of Investment “Democratization and Growth,� Economic Journal 118 (October): 1520–51; Promotion Agencies in 2007 found that CEOs reported macroeconomics and C. Freund and L. Mottaghi, “Transition to Democracy,� World Bank, and political stability were the most important factors. See also Stephan Washington, D.C., 2008, unpublished. Dreyhaupt, Ivan Nimac, and Kusi Hornberger: “Political Risk: The Missing Link in Understanding Investment Climate Reform?,� Investment Climate IN 11 s the MENA region is not homogeneous, the general commentary applies A in varying degrees to individual countries. For a detailed analysis and growth PRACTICE Note, no. 20, Investment Climate Advisory Services, World Bank Group, Washington, D.C., March 2012. forecasts in MENA countries, please refer to World Bank, Middle East and North Africa Region, Economic Developments & Prospects, September 2011, 14 Louis Wells and Alvin Wint, “Marketing a Country, Revisited,� FIAS Occasional MENA Investing for Growth and Jobs, Washington, D.C. Paper, no. 13 (2001). Chapter 1: Overview of MENA Results 13 IPIs commonly perform a wide range of activities to attract GIPB 2012: A timely, useful source of information FDI, including focused advertising and public relations events aimed at influencing investors’ perception of a country, the Timely provision of credible and well-crafted information in the organization of direct investor forums, individual presentations location-selection process plays a key role not only in lowering to targeted investors, the provision of information and investor perceptions of country risks and transaction costs, but assistance to prospective and current investors, and policy also in achieving a competitive advantage over other locations. advocacy to improve the quality of the investment climate. The time is ripe for MENA IPIs to evaluate their activities in this While all of these actions are important for IPIs to perform well, regard and, if necessary, to rethink their strategies in order to be this report specifically focuses on one critical function of IPIs: in a more positive position in the fierce, global competition to the provision of information to facilitate and influence investor attract FDI. decisions, commonly known as investment facilitation. The Global Investment Promotion Best Practices (GIPB) 2012 The case of the Tunisian Foreign Investment Promotion Agency report presents well-timed and useful insights into the capacities (FIPA) clearly illustrates not only the range of supportive of IPIs to perform their investment facilitation function— initiatives an IPI can implement to improve the country’s image providing information and assistance needed by potential and attract investment during a difficult period, but, more investors to make an informed location decision. To evaluate specifically, the role that information can play (Box 1.2). how IPIs provide information and manage investor relationships, GIPB replicates the decision-making process commonly followed Box 1.2: FIPA (Tunisia)—Multifaceted Support During a Challenging Period Tunisia built its growth strategy on low-skilled sectors that rely on inexpensive labor. Accordingly, its national Code d’Incitations aux Investissements (the Investment Incentives Code), which dates back to the early 1990s, gives priority to supporting sectors with low technology content but high employment potential (for unskilled workers). However, even if the level of education of the labor force has substantially increased over the last decade, this fundamental change has not yet been matched by a similar trend in the demand for skilled labor. Indeed, the high rate of youth unemployment, especially among university graduates, lay at the heart of the recent protests. As a result, Tunisia’s FIPA is seeking to spur economic growth and address the problems of high youth unemployment by targeting and channeling FDI into high value-added sectors. FIPA has undertaken various promotional initiatives to attract foreign investors to sectors such as the aerospace supply chain and offshoring/nearshoring, including the posting of dedicated sector profiles on its Web site of what the country has to offer. From an operational point of view, changes to FIPA’s promotion strategy include: (i) an expansion of the scope of direct promotional efforts (démarchage direct); (ii) the targeting of a few, select investor countries that are less likely to be discouraged by uncertainty in Tunisia based on their comprehensive knowledge of the country (staffing of FIPA offices in the three priority countries—France, Germany, and Italy—has doubled); and (iii) the implementation of a communication and information campaign aimed at changing negative perceptions held by foreign investors and restoring confidence in the level of security and stability of the country. Testimonials by well-known investors with reassuring, positive messages were featured during country presentations, as well as on the FIPA Web site. The Agency’s communication campaign has managed to turn apparent threats into credible opportunities with effective slogans (for example, “The Tunisian revolution has succeeded thanks to the mobilization of a young and dynamic Tunisia....�); moreover, it is backed by hard data (for instance, by highlighting the high ranking of the national education system). FIPA also emphasized the new, emerging system of values, based on fighting corruption and nepotism, which will finally allow a level playing field and thereby unlock the country’s full potential. According to the latest data disclosed by FIPA, these efforts seem to have been rewarded. Indeed, despite the recent upheavals experienced by the country, the amount of FDI in the service sector increased by 11.5 percent in 2011. 14 GIPB 2012: Seizing the Potential for Better Investment Facilitation in the MENA Region by foreign companies at the first stage of a possible long-listing stage to assess the extent to which countries are location-screening process, a practice known as “long listing.� maximizing their chances of staying on investors’ “short lists.� These sources are IPI Web sites and their handling of investor At this stage, investors cut down a long list of potentially inquiries. suitable investment locations to a considerably shorter list of the most appealing by collecting information; they do so through While the importance of such an institutional assessment online research and direct requests for information from of the IPIs’ strengths in investor facilitation is self-evident, a relevant investment promotion bodies. Through an objective recent study by the University of Oxford confirms the point by and rigorous methodology described in Box 1.3, GIPB evaluates demonstrating that IPIs’ facilitation performance, as measured the two most important sources of information provision at the by GIPB, has a positive and statistically significant influence on Box 1.3: GIPB—Key Facts and Methodology Issued triennially since 2006, GIPB provides a detailed and quantified assessment of IPI effectiveness in the early information-gathering stages, as foreign investors screen locations while seeking to expand their business abroad. Over time, the geographical coverage of GIPB has expanded significantly. In 2012, GIPB assessed 189 national IPIs, including those of all 19 MENA countries. In practice, GIPB evaluates IPI capacity to provide investor information both online (via their Web sites) and offline (in response to direct inquiries). More specifically: 1. Web Site Assessment (accounting for 50 percent of overall performance) aims at evaluating how IPIs present country and sector information to prospective foreign investors online. IPI Web sites are tested and assessed according to four key “themes,� namely: (i) information architecture, (ii) design, (iii) content, and (iv) promotional effectiveness; these themes are, in turn, broken down into 17 “subthemes� for a more granular assessment.15 2. Inquiry-Handling Assessment (accounting for 50 percent of overall performance) aims at measuring how effectively IPIs respond to inquiries from potential foreign investors. On behalf of an unnamed potential investor, requests for information are submitted in English to IPIs regarding two “real� investment projects (the so-called “mystery shopper� approach)—one in the agribusiness sector, and one in tourism in GIPB 2012.16 IPI responses are evaluated for the quality of information provided and for the IPI’s management of relations with foreign companies according to four key “themes�: (i) availability and contactability, (ii) responsiveness and handling, (iii) quality of response, and (iv) customer care; the themes are further broken down into 13 “subthemes.�17 The GIPB assessment is presented as an index with a value between 0 and 100 percent for ease of comparison. The assessment treats each component as a combination of the above-mentioned themes and subthemes, using a weighting system aimed at reflecting their importance from the investor’s perspective (based on survey and focus group evidence). Web sites and inquiry responses are categorized as follows in order to identify good and best practice examples as well as key areas for improvement: • Best practice: 81–100 percent • Good: 61–80 percent • Average: 41–60 percent • Weak: 21–40 percent • Very weak: 0–20 percent GIPB comprises two types of reports: (i) publicly available global and regional reports, providing an analysis of the global and regional results, regional trends, and best practice examples from top performers18 and (ii) a customized, confidential evaluation report for each IPI assessed, with insights into their performance and tips for improvement. or the complete list of “subthemes� related to the Web site assessment, see Appendix A. F 15 or more detailed information about investor inquiries submitted to IPIs, see Appendix B. F 16 or the complete list of “subthemes� related to the inquiry-handling assessment, see Appendix A. F 17 or the complete list of “subthemes� related to the Web site assessment, see Appendix A. F 18 Chapter 1: Overview of MENA Results 15 providing information to potential investors and gauging future trends.20 Box 1.4: Investment Facilitation Performance and FDI Inflows—A Positive, Empirically Proven Link Improvements in GIPB performance against all odds A 2012 study carried out by the University of Oxford compares The timing of the GIPB 2012 exercise, which ran between average annual FDI inflows from 2000 to 2010 in 156 countries February and July 2011, coincided with critical events associated with the average GIPB performance obtained in the three editions with the Arab Spring for a number of MENA countries. In spite of GIPB.19 The study found a strong, positive, and statistically of this, the region’s IPIs managed to improve their overall GIPB significant correlation between the quality of IPI facilitation performance by 6 percentage points relative to GIPB 2009, as performance and the level of FDI inflows, as illustrated by Figure illustrated in Figure 1.4. Even more interesting is the fact that 1.3. This means that a 1 percentage point increase in GIPB this positive trend represents an exception to the global trend, performance leads to a 1.5 percentage point increase in FDI as all other regions either remained almost stationary (in Latin inflows. In other words, an economy whose IPI is assessed at 60 America and the Caribbean, as well as in Sub-Saharan Africa, percent on GIPB receives on average 25 percent more FDI than an where improvements in Web sites were offset by poorer inquiry- economy whose IPI is assessed at 45 percent. The study controls handling services), or they showed a net deterioration of their for average level of GDP per capita, GDP growth, population size, performance (between -3 and -6 percent in South Asia, inflation, political stability, and quality of the business climate. East Asia and Pacific, Europe and Central Asia and OECD high-income countries).21 Figure 1.3: The Positive Correlation between FDI Inflows and GIPB Assessments Figure 1.4: GIPB 2012 MENA is the Only Region Recording a Real Improvement since 2009 . Harding and B. Javorcik, “Investment Promotion and FDI Inflows: Quality T 19 Matters,� CESifo Economic Studies, 2012. FDI flows to a country (see Box 1.4). Therefore, a careful analysis of GIPB findings can contribute to a better understanding of how IPI facilitation services can be an effective way to increase FDI inflows into the MENA region. For the purpose of this report, the analysis of GIPB data has been complemented with qualitative and quantitative information collected through a survey of MENA IPI institutional and operational characteristics (“the IPI Characteristics Survey�), The survey was carried out in February 2012; 12 out of 19 MENA IPIs 20 including a number of in-depth telephone interviews with participated. Key findings as well as the adopted methodology are presented in selected IPIs across the region. This survey proved particularly Appendix C. useful for an enhanced understanding of IPI operating or the purpose of regional comparison, GIPB groups IPIs into seven categories. F 21 In addition to MENA, regions include East Asia and Pacific (EAP), Europe and conditions and adopted procedures, with particular reference to Central Asia (ECA), Latin America and the Caribbean (LAC), South Asia (SA), Sub-Saharan Africa (SSA), and OECD high-income countries (OECD). For a complete list of IPIs assessed in each region, please see Appendix C of the GIPB 2012 Global Report available at www.globalinvestmentpromotion.com. 16 GIPB 2012: Seizing the Potential for Better Investment Facilitation in the MENA Region As a result of this improvement, the GIPB 2012 MENA assessment closed the gap with regard to the world average IPI performance.22 Yet the distance to the top-performing Box 1.5: Turkey—A Good Practice IPI Just Beyond MENA group, the OECD high-income economies, remains significant Boundaries in relation to both the Web site and the inquiry-handling Given the progress that has been made by MENA IPIs from a component (19 and 27 percentage points, respectively). low base, opportunities clearly exist for further improving the provision of facilitation services to prospective investors in the Although MENA was the only region that improved its IPI short term. These are driven, not least, by the pressures that each performance for both Web site and inquiry handling since 2009, IPI will experience in needing to distinguish itself from its region’s this improvement was not balanced between both components, competitors and to regain investor confidence following the thus widening the gap between online and offline facilitation upheavals of the Arab Spring. Toward this end, lessons can be performance. drawn from successful case studies elsewhere, including the case of the Investment Support and Promotion Agency of Turkey, just Indeed, significant gains were particularly notable in terms of beyond MENA boundaries. Web site performance (9 percentage points); the majority of MENA IPIs performed at good or best practice levels. While Currently, Turkey’s investment promotion intermediary has improvements in inquiry handling were much more modest one of the top 10 IPI Web sites in the world.23 In addition, in (only 1 percentage point overall, albeit from an already very low terms of inquiry handling, when contacted, the IPI provided a level in 2009), and the overall situation remains rather critical, comprehensive and highly credible response to both of the GIPB on average, performance was very weak, and no single MENA sector inquiries. IPI provided competent inquiry-handling services. IPI effectiveness in investment facilitation services—coupled with the shift of an FDI promotion policy toward a more sector-specific approach aiming directly at high value-added, high-tech, and export-oriented projects—have paid off. In 2011, Turkey recorded Figure 1.5: Steady Improvement, but Best Practice IPIs Yet to a strong recovery of FDI; inflows rose by more than 75 percent, Emerge in the MENA Region from US$9 billion to almost US$16 billion. 23 For more information, see Chapter 2 of the GIPB 2012 global report and visit the IPI Web site at www.invest.gov.tr. As shown in Figure 1.5, and based on the performance bands shown in Box 1.3, GIPB 2012 found that the number of MENA IPIs with average performance more than doubled (rising from 5 to 11) compared with 2009, while the number of weak or very weak performers significantly diminished (from 13 to 8).24 Most of the IPIs have achieved moderate progress, and a majority of them are now providing at least a reasonable level of investment facilitation services to prospective investors. Nevertheless, two key aspects need to be highlighted. First, no good or best practice IPIs have yet emerged in MENA, although significant improvement is indeed possible, as shown by the case of neighboring Turkey (see Box 1.5). Second, what looks like a fairly uniform GIPB performance across the region masks important intraregional differences, attributable to Since the first round of GIPB, the number of national IPIs surveyed has 24 increased from 96 in 2006, to 181 in 2009, to 189 in 2012. This trend is visually illustrated by the growing bar charts above. For comparison of performance across the three different rounds of GIPB, this report follows the World Bank Group’s 2011 regional classifications, whereby a number of economies (namely, All region-wide averages have been calculated on the basis of the scores of 22 Estonia, Israel, Poland, and Slovenia) that were previously classified by their national IPIs only. geographic region have now been included in the OECD high-income group. Chapter 1: Overview of MENA Results 17 huge disparities in terms of the IPIs’ different organizational For resource-rich countries, ignoring the potential benefits and operating modalities, as will be discussed in the next two of winning additional, non–resource-based investments may sections. prove to be shortsighted. This would especially be the case for economies seeking to diversify their economic base into newer, perhaps high-technology or job-rich sectors such as IPIs in MENA resource-poor countries do better at manufacturing or services. investment facilitation In geographical terms, a distinctive pattern has emerged since A few, increasingly adopted key features characterize the first GIPB assessment in 2006: IPIs from resource-poor best-performing IPIs in the MENA region countries outperform IPIs from resource-rich countries, and the gap between these two IPI groups has continued to widen IPIs in the MENA region are a diversified group. They include a over time (the difference now stands at around 10 percentage very old ministerial organization established in the mid-1970s points—see Table 1.1). Since 2009, IPIs from oil-importing (the Organization for Investment Economic and Technical countries have improved, particularly in their online investment Assistance of Iran) and a brand new agency with just three years promotion. They have achieved an almost best practice average of service-life (the Agence Marocaine de Développement des for Web site assessment (76 percent) and outpaced IPIs from Investissements). There are large organizations with a staff of oil-exporting countries (which have an average performance over 200 employees and a budget in excess of US$20 million, of about 60 percent) by 16 percentage points. As far as inquiry as well as much smaller entities with around 50 employees handling is concerned, the difference is much less marked (a and budgets at or below US$2 million. The small size and few percentage points only), suggesting that significant work is heterogeneity of the MENA IPI sample makes it hard to establish still needed to service investment inquiries professionally in both clear links between their structural characteristics and GIPB subgroups. performance. Nevertheless, this kind of analysis corroborates the following findings of previous studies conducted by the World Bank Group on a much larger scale.26 Table 1.1: Evolution of GIPB for MENA Subregions SUBREGIONs GIPB 2006 GIPB 2009 GIPB 2012 CHANGE FROM GIPB 2006 CHANGE FROM GIPB 2009 IPIs from resource-poor countries 31% 39% 47% +16% +8% IPIs from resource-rich countries 31% 31% 37% +6% +6% MENA average 31% 35% 41% +10% +6% The importance of natural resource availability as an FDI determinant in developing countries is well known. In the • Fully dedicated investment promoters provide superior MENA region, the appeal of natural resources largely explains facilitation services. The large majority of MENA IPIs carry the historical, uneven breakdown of FDI across the region. out a wide range of functions in addition to investment The resource-rich countries, whose revenues are virtually all promotion including, in most cases, the management of a generated by hydrocarbon resources, have secured on average one-stop shop and, to a lesser extent, the administration more than 75 percent of FDI inflows to the region over the past of other regulatory procedures, such as granting fiscal and decade.25 Accordingly, GIPB results seem to suggest that this parafiscal exemptions. Only two MENA IPIs can be regarded may have reduced incentives for IPIs in these countries to set up as fully focused on investment promotion, and both of them promotional and informative Web sites and provide adequate are among the top five GIPB performers in the region. facilitation services to attract investments that would have come • Autonomy is generally a precondition to effective in any event (for instance, six out of seven Web sites featuring operation. While all MENA IPIs are public bodies, as indeed no sector profiles are run by IPIs located in oil-exporting is the case around the world, the majority of them enjoy countries). Conversely, IPIs lacking large natural resource financial and administrative autonomy. Only a tiny minority endowments have worked harder to enhance the promotional of the region’s IPIs are ministerial subunits and these IPIs nature of their Web sites by offering a large assortment of invariably performed less effectively. useful investment-related information in order to attract foreign investments in a different range of prioritized sectors. • Private sector skills are important in assisting foreign investors. The ability to understand the needs of private companies, as measured by the share of internal staff 25 UNCTAD, World Investment Report, Geneva, various years. 26 Ortega and Griffin, “Investment Promotion Essentials.� 18 GIPB 2012: Seizing the Potential for Better Investment Facilitation in the MENA Region with prior private sector experience, is associated with better GIPB performance. Indeed, MENA IPIs that have a greater percentage of employees with private sector Box 1.6: Yemen—Translating Recommendations Into Practice experience (above 30 percent, on average) tend to perform The new Investment Law, passed in August 2010, has comparatively better. strengthened the main functions of the Yemeni General Investment Authority (GIA) to attract strategic investment, set A number of governments in the region already seem to be well aside regulatory functions, and separate actual investment aware of good practices in institutional design and have taken, incentive policies from core activities. The new law gave the or are now taking, significant steps in these directions: GIA broad authority and independence, both financial and administrative, to carry out its tasks, and it introduced a significant • In Morocco, the Agence Marocaine de Développement change in the board of directors. Previously for ministers only, 40 de l’Investissement (AMDI) was established in February percent of the board of directors now comprises members from 2009 as a financially autonomous public institution to the private sector. replace the Investment Directorate. Its board of directors includes representatives of business associations, such as In addition, the law established an ad hoc human resource the Fédérations des chambres professionnelles and the policy. This policy will ensure both a higher margin of flexibility Confédération générale des entreprises du Maroc. and competitive wages and salaries that will help the GIA attract talented resources from the private sector. Article 24 of the new investment law states: “GIA shall have, under this law and with • In Kuwait, at the time this report was produced, the respect to specialized and qualitative positions, a special cadre cabinet was considering the draft of a new law for foreign system based on competitive recruitment. This system shall enjoy investments, which includes the establishment of an flexibility in recruitment, selection of the staff, and a human independent investment promotion agency. resources management system. Such a system shall include technical standards and criteria for performance assessment to set wages and termination of contracts. The special cadre system shall • Finally, comprehensive changes have also recently been be enacted by a decree from the Prime Minister after the approval introduced in Yemen following the enactment of a new of the Board of Directors.� investment law, as discussed in Box 1.6. However, it remains to be seen what will be the effects on GIA operations of the events that have swept the country throughout 2011 and 2012. Chapter 1: Overview of MENA Results 19 Chapter 2: Analysis of IPI Online Facilitation Services across the MENA Region MENA IPI Web sites heading to the top potential investors. Today it is standard practice across the world for an IPI to run a Web site that provides a first look In the context of increased competition for FDI, emerging at the country as an investment target. GIPB 2012 found economies can no longer neglect the outstanding that more than 95 percent of the 189 IPIs assessed hosted opportunities that online communication provides for a Web site. reaching potential investors around the globe and closing information gaps in a cost-effective manner. Information As illustrated in Figure 2.1, since 2006, MENA IPIs have provision is crucial, especially for countries perceived consistently increased their capacity to operate functional as high-risk investment destinations. As argued in the and informative Web sites. In 2012, MENA IPIs recorded previous chapter, risk perceptions in the MENA region the largest regional improvement globally since 2009 (9 are high and will remain so in the short term as a result percentage points), and, for the first time ever, achieved of Arab Spring events. IPI Web sites are a major means an overall good Web site assessment. to channel accurate information, which can help correct misperceptions, reduce uncertainty, and increase a Worldwide, IPIs in OECD high-income countries continue country’s chances of being considered a viable investment to lead the pack, but the MENA region has managed to destination. reduce the gap considerably (by 11 percentage points since 2009, and by 15 percentage points since 2006). Since investors are likely to begin their research for potential investment sites on the Internet, the In the last three years, MENA almost caught up with the presentation of a country on an IPI Web site plays a critical performance of the LAC and ECA regions, respectively role in shaping investors’ perceptions. Web sites that do ranked as second and third best-performing regions in the not use in-depth information, credible data, and eye- world. MENA is now only 1.9 percentage points behind catching elements to clearly highlight the advantages of a LAC and 0.4 percentage points behind ECA. location may well fail to capture and hold the interest of Figure 2.1: MENA Web Sites above the Global Average Chapter 2: Analysis of IPI Online Facilitation Services across the MENA Region 21 Figure 2.2: MENA Web Sites Make Breakthrough to Best Practice Box 2.1: AMDI (Morocco)—Most Improved Web Site in MENA Region in GIPB 2012 Established in February 2009, Morocco’s new investment promotion intermediary, AMDI, has made outstanding progress in its Web site performance. At the beginning of 2011, as part of the intensive effort to become an effective investment promotion agency, AMDI developed a brand new Web site. It adopted two main approaches: (i) an in-depth review of IPI best practice Web sites both within and outside the MENA region was undertaken and used as a template, and (ii) recommendations included in the previous version of the GIPB report were largely factored in. AMDI’s new Web site was upgraded from a site that was previously unavailable in English to an effective promotional instrument with rich content, presenting visitors with a detailed overview of the investment environment in Morocco. The overall design and navigability were completely changed, and the entire content was rewritten. A large set of materials and tools was added, including downloadable newsletters (keeping investors up-to-date on what is happening in their preferred location), promotional videos, and an interactive map displaying national infrastructure that allows for the visualization of detailed information on specific investment zones—all at the click of a mouse. The site is updated almost daily based on the research activities conducted by six of its staff. AMDI’s efforts have paid off: the new Web site provides an invaluable promotional tool that is attracting around 300 foreign visitors per day. The outstanding improvements in Web site performance seen in Yemen and Morocco (see Box 2.1)—an increase of over 60 percent between 2009 and 2012—were the most significant Since 2009, the number of best practice Web sites in the MENA recorded in MENA. Other examples of best practice Web sites in region increased from three to five, while good Web sites the MENA region are detailed in Table 2.1. doubled from four to eight (as detailed in Figure 2.2).27 As a result, over two-thirds of the region’s IPIs are now in the good Conversely, poor Web sites have almost disappeared from the or best practice category. region. In GIPB 2012, there is no MENA IPI Web site in the very weak category. Table 2.1: Best Practice Web Sites in the MENA Region IPI LOCATION WEB ADDRESS SELECTED AREAS OF BEST PRACTICE • Data and statistics fully sourced and dated Egypt, Arab Rep. www.gafinet.org • Downloadable information in PDF format, also for targeted sectors • Interactive, user-friendly Web features Jordan www.jordaninvestment.com • Thorough detail on the location, including data and statistics • Simple Web site with attractive graphics enhancing user experience Saudi Arabia www.sagia.gov.sa • Clear presentation of IPI assistance to investor and provision of live online support • Web site available in eight international languages Tunisia www.investintunisia.tn • Detailed sector information, including success stories and potential business opportunities • Testimonials by sector, including quotations from investors Yemen www.giay.org • Contact details of relevant staff (e-mail addresses and telephone numbers in international format) 27 Since the first round of GIPB, the number of national IPIs surveyed has increased from 96 in 2006, to 181 in 2009, to 189 IPIs in 2012. 22 GIPB 2012: Seizing the Potential for Better Investment Facilitation in the MENA Region Despite general improvements, some key areas need More light can be shed on the remaining areas for improvement further attention by looking at the evolution of the most important subthemes that constitute the foundation for the overall Web site The analysis of GIPB results, using the main themes of the Web site assessment, reveals that IPIs now run well-designed and Figure 2.3: A Closer Look at MENA IPI Web Site Performance highly functional Web sites in almost all regions of the globe Over Time (with the exception of Sub-Saharan Africa). In 2012, MENA IPIs surpassed global performance on all four assessment themes.28 Nevertheless, notable differences in performance persist across themes. As illustrated in Figure 2.3, GIPB 2012 assessed MENA IPI Web sites very positively in terms of their design and information architecture. All MENA IPIs have a properly functioning English version of their Web sites, easily identifiable from an Internet search. Web sites have become easier to navigate and read, with an improved use of images and graphics. Significant areas for improvement include both content (the most heavily weighted theme) and, to a lesser extent, promotional effectiveness (the second most heavily weighted). Figure 2.4: MENA IPI Web Site Assessment by Subtheme See Appendix A for more detailed information on themes and the weighting 28 system. Chapter 2: Analysis of IPI Online Facilitation Services across the MENA Region 23 assessment.29 Figure 2.4 shows MENA IPI performance at Generating and maintaining high-quality content requires subtheme level in descending order of performance by committed resources and appropriate internal procedures comparing GIPB 2012 and GIPB 2009.30 Populating Web sites with in-depth, updated information is a more challenging task than Web site design and maintenance, Sector content is the key remaining gap which can be easily outsourced,31 but even the best-designed Web sites will be useless promotional tools without it. The While general country information is important, investment collection, generation, and updating of high-quality content location decisions worldwide are primarily influenced by requires a heightened focus and dedicated resources to analyze sector, or business line, related factors. Yet MENA IPI Web sites and systematize country and sector information. Indeed, generally fail to provide the amount of detailed, updated, and the IPI Characteristics Survey suggests that all IPIs with best credible sector-specific information required by potential foreign practice Web sites have at least five people performing market investors. The situation has deteriorated over time: more than research to gather information that will help investors in their half of MENA IPIs performed worse regarding the provision of decision-making process. Although not specifically devoted to sector information in 2012 compared with that in 2009. carrying out Web site content development activities, these resources contribute to enhancing the quality of sector-related Only a slight majority of the region’s IPIs (12 out of 19) have information on the Web site. clearly identified priority sectors on their Web sites along with pertinent information for each sector. Such a situation often reflects the lack of a well-defined national development plan; In the case of the Yemeni GIA, the IT department includes, among other staff, a Webmaster and an IT expert responsible this would include identification of the strategic economic sectors for development and investment promotion based on for routinely retrieving information in collaboration with staff an in-depth benchmarking of the country’s actual and potential from other departments. One employee within each of the four sector departments is assigned to update and collate relevant competitiveness. Since sector-specific information is required materials periodically to be uploaded on the Web site. The to convince investors of the region’s suitability for their projects, these shortcomings are likely to turn even the best-designed IPI same applies to other IPI departments (Marketing & Events, Information Research, and Statistics & Studies), which provide Web sites into ineffective promotional tools. relevant information concerning market trends, events, and best practices/news from around the world. This approach Sector categorization varies greatly between MENA IPIs, ranging has produced the desired results. Since the revamping of the from the extremely generic “industry and manufacturing� Yemeni GIA Web site and the adoption of these procedures, the sector to very detailed lines of business/products, such as solar number of Web site visits and inquiries submitted has grown by energy or salt production. Overall, MENA IPI Web sites portray close to 40 percent. information on over 25 different sectors, or lines of business. The average number of priority sectors per MENA IPI is 10, a figure that seems high for these typically low-capacity IPIs, given Promotional effectiveness is improving, but more can be the significant resource and attention that prioritized sectors done require. Since 2009, IPIs in the MENA region have taken important steps Both the quality and the quantity of sector information vary to send clearer messages to potential investors concerning: significantly among the region’s IPIs, with most sector profiles (i) the location advantages of their country as an investment offering only basic information on a few structural aspects. All destination, and (ii) the kind of support investors can expect in all, only four out of 19 MENA IPIs offer an adequate amount to receive from the IPI. The vast majority of IPI Web sites now of well-researched information at sector level on their Web comprise: (i) a “Why [Country name]?� page, providing a sites; that is, they achieved a score for the “sector information snapshot of the key advantages of setting up a business in provision� subtheme above 60 percent. A huge margin for a given country, ranging from a concise list of “13 reasons improvement region-wide remains. Some useful lessons in to invest� in Djibouti, to a comprehensive drop-down menu providing sector information can be drawn from Tunisia’s FIPA allowing navigation through a range of advantages for those Web site (see Box 2.2). establishing a business in Saudi Arabia; and (ii) a page labeled “About [IPI name],� summarizing the services offered to investors. See Appendix A for more detailed information on subthemes and the 29 weighting system. Credibility of information� and “Sector information provision� are by far the “ 31 Figure 2.4 shows only the 9 (out of 17) most important subthemes, namely, 30 worst-assessed subthemes at the global level, with an average score of 33% those with a weight of at least 5%. and 38%, respectively. 24 GIPB 2012: Seizing the Potential for Better Investment Facilitation in the MENA Region Box 2.2: Tunisia’s FIPA—A Best Practice in Providing Sector Information FIPA’s strong performance regarding sector content can largely be attributed to the sector-based promotion strategy adopted since the early 2000s. The agency’s Web site features content in eight different languages (Arabic, Chinese, English, French, German, Italian, Japanese, and Spanish) and offers several tiers of specific information about doing business in the country. These include details on incentives, operating costs, existing investors, and profiles for a limited number (6) of carefully selected, prominent sectors (food, mechanical, leather & shoes, electronic/ electric, ICT, and textiles). Sector profiles outline industry-related factors and reflect the agency’s deep understanding of the range of costs and conditions important to investors in specific industries. For instance, an investor engaged in software development learns that Tunisia ranks 38th on the Network Readiness Index, a much higher position than, for example, Italy and China. More specifically, for each of its six priority sectors, FIPA has developed a profile structured in four areas. A snapshot presentation of the sector includes key A summary list of key advantages of the location hard data and figures (production level, employment, (the “assets�) emphasizes the competitiveness FDI, exports, and so on). of Tunisia when compared with other possible investment destinations. These advantages are based on different critical factors, such as operating costs or suitability of the regulatory framework, which make use of hard data provided by both national and international sources. An online inventory alerts potential investors of A list of all major investors currently present in investment opportunities existing in different the country is also included, with a direct link to business lines and market niches, including links to quotations highlighting some positive features of the privatization projects. national operating environment. Chapter 2: Analysis of IPI Online Facilitation Services across the MENA Region 25 Despite this progress, MENA IPIs can improve their capacity to “sell the location� by making better use of investor testimonials. For an IPI to credibly demonstrate the investment track record Box 2.3: Interactive Investment Maps of a location, third-party endorsements from companies play a The Web site of the Moroccan IPI (AMDI) includes an investment significant role in attracting foreign companies into the country. map that allows access with the click of a mouse to key information on various investment zones (including agropoles), The Yemeni GIA provides a good example of how to successfully such as the zone manager, the sector, and the overall surface. promote a location. More specifically, the GIA Web site: (i) lists all recent successful projects in each sector, including the invested amount and the investor name; (ii) provides direct contact references for sector experts within the organization, thereby allowing potential investors to get in touch with the most appropriate person; and (iii) reports positive comments from investors explaining how GIA helped them in different sectors. On the Jordan Investment Board (JIB) Web site, an investment Another example is that of Morocco, where AMDI has made map tool allows for the identification of potential project extensive use of foreign testimonials to conduct a “veille opportunities by sector, business model, and value of investment. positive� by posting, for example, favorable messages from Project opportunities can be identified from three main sources: the chairmen of foreign chambers of commerce and foreign (i) a database of joint venture opportunities; (ii) a list of potential ambassadors to minimize the concerns of potential investors. (around 150) investment project ideas and 75 prefeasibility studies Following the restoration of the political situation, investor developed by JIB; and (iii) governmental entities and development testimonials should be adopted more broadly across the region. zone projects available for investments. Together with the online provision of accurate and updated information on the operating environment, these will be crucial in mitigating investors’ risk perceptions. In addition, MENA IPIs could, if resources were available, further enhance the promotional effectiveness of their Web sites by using interactive Web features, such as online mapping tools, which facilitate the investors’ retrieval of specific information. These, however, can be costly innovations and the number of IPIs in MENA using such IT solutions is still limited. Nevertheless, the following examples from Morocco and Jordan illustrate what is possible (see Box 2.3). Summary: Key recommendations for improving online investment promotion In an increasingly competitive arena with an uncertain global economic outlook, more IPIs are hunting for a shrinking number of investment projects. IPIs that post well-crafted, carefully researched and relevant information on their Web sites stand a better chance of attracting the interest of potential investors. MENA IPIs have made progress in this direction, but to reach a higher level of competency, they should take the following steps: 26 GIPB 2012: Seizing the Potential for Better Investment Facilitation in the MENA Region • Make the Web site the key promotional and facilitation • Addressing the few remaining technical problems, tool. The presentation of up-to-date investor information such as dead links or downloadable documents failing to on the Web site offers outstanding opportunities to attract open. These failures could be regarded as signs of a lack many investors simultaneously at low cost. IPI Web sites of professionalism by Web site visitors. First impressions can help correct misperceptions, reduce uncertainty, and are important. Therefore, these technical problems must increase chances of a country being considered a viable be resolved immediately, especially given the relatively low investment destination. An IPI Web site visit is often a marginal costs to do so. foreign investor’s first interaction with the country, and if the • Upgrading the promotional effectiveness of the Web site is weak or out of date, it could also be their last. site, by making more extensive use of case studies and • Develop and maintain high-quality, sector-specific investor testimonials, possibly grouped by sector of activity. content matching investors’ information needs. Detail • Adopting more innovative Web features, such as on the crucial factors of cost and quality in key sectors, interactive maps, cost calculators, project databases, and as well as information on the location’s comparative so forth. These IT solutions deliver messages quickly and advantages, are at the forefront of investment decisions. effectively to the visitor. However, the majority of MENA IPIs provide only limited or outdated information at the sectoral level online. • Making the most of the customized GIPB 2012 reports, which include detailed analysis of IPIs’ online performance • Form information partnerships. To gain access to a large and suggest specific steps for improvement. set of relevant information matching the needs of foreign companies, IPIs should establish partnerships with both public entities (such as relevant ministries and sector-specific With the possible exception of the development of promotion agencies), and private organizations (for instance, new interactive web features, the majority of the other chambers of commerce and sector associations). recommendations can be undertaken very cost-effectively. In fact, none of them is particularly expensive, involving potentially • Commit resources to Web site maintenance. An IPI a few hundreds of US$ equivalent of expenditure and some Web site is not a one-off effort that can be outsourced to dedicated staff time to work through the needed improvements. consultants. IPIs need to allocate dedicated resources to What is more important are the time and effort expended by building in-house capacity for gathering and fashioning dedicated IPI staff to make improvements and to make sure business and promotional information into an appealing upgrades are maintained. One common problem is that IPIs sales proposition, as well as for tailoring and updating it as often make a short-lived effort to upgrade their Web site, and necessary. then fail to maintain the improvements, which go out of date Specifically for MENA IPIs, taking a few quick steps to showcase very quickly. the location online more effectively could pay dividends in convincing investors that this location deserves a second, deeper look, namely, by: Chapter 2: Analysis of IPI Online Facilitation Services across the MENA Region 27 Chapter 3: Analysis of IPIs’ Direct Interactions with Potential Investors across the MENA Region IPIs worldwide are doing poorly in handling investors’ As illustrated in Figure 3.1, globally, most IPIs have seen inquiries, but the IPIs of the MENA region may not their inquiry-handling performance weaken over time. be seizing this opportunity to catch up According to GIPB 2012 results, global inquiry-handling performance deteriorated by 6 percentage points since 2009 (from 28 percent to 22 percent). First impressions often shape long-term perceptions and relationships. Handling initial investor inquiries as MENA is the regional exception to this downward trend, professionally and effectively as possible helps IPIs create although the improvement is marginal (only 1 percentage a positive and lasting reputation with investors. In an point) and from a very low base. environment characterized by limited and decreasing public funds and by the omnipresence of the Internet, Indeed, GIPB 2012 found that MENA IPIs achieved a very “reactive� inquiries—that is, those direct requests for weak average inquiry-handling score of only 16 percent, country and sector information that IPIs receive from well below global performance and significantly less than investors—represent an increasingly common source of half the performance of IPIs from OECD high-income low-cost investment leads. They are much more efficient economies. This finding suggests that an alarmingly high than more traditional, costly, proactive activities (such share of projects may be lost from a lack of responsiveness as organization of promotional inbound and outbound by the region’s IPIs. missions and advertising campaigns). However, the fact that IPIs are not managing these first interactions with Even though the global trend has been declining over prospective investors as effectively and competitively as time, the gap between MENA and other regions remains they should is evidenced worldwide. significant (for example, 13 percentage points below Figure 3.1: MENA Inquiry-Handling Performance—The Situation Remains Critical Chapter 3: Analysis of IPIs’ Direct Interactions with Potential Investors across the MENA Region 29 LAC and 7 percentage points below the ECA region). Major Figure 3.3: A Closer Look at MENA IPI Inquiry-Handling improvements are needed for the MENA region to catch up. Performance over Time The slight positive change recorded in the MENA region since 2009 is a story of two parts: good improvements by five IPIs (between 13 and 20 percentage points) were largely offset by the worsening performance of others. Nevertheless, because the improvements achieved by the region’s IPIs start from a very low base, their comparative performance remains poor; all MENA IPIs remain in the weak or very weak categories (as defined in Box 1.3)—see Figure 3.2.32 In this regard, MENA IPIs are a particularly negative case. While most regions cluster their scores in the very weak category (0–20 percent), some examples of good or best practice can be found in all regions except MENA, SA, and SSA. This means that there are no regional peers from which IPIs can learn. Figure 3.2: MENA Inquiry-Handling Performance—All IPIs Remain in the Two Lower Categories Inquiry-handling performance: Much more to do in all respects A deeper analysis—examining the evolution of themes and subthemes that constitute the foundation for the inquiry- handling assessment—reveals a number of specific areas for improvement; see the breakdown provided in Figures 3.3 and 3.4. Across the MENA region, the general underperformance in inquiry handling is mainly attributable to the high concentration of very weak performers in two of the most heavily weighted assessment themes, namely: (i) quality of response (9 percent, against a world average of 17 percent), and (ii) the extent to which the IPI took action to follow up on the information sent to potential investors (3 percent, against a world average of 9 percent).33 Below-average performance was also found in responsiveness and handling, which measures how well IPIs interacted by telephone and e-mail with the potential investor. By contrast, MENA IPIs were favorably assessed regarding how available and easy to contact their officers were from a client perspective, a performance in line with that achieved globally. Responsiveness and Handling: In many cases, contacting an IPI and/or a project manager took repeated attempts over several days. Nevertheless, the attitude displayed by frontline staff was helpful, and language barriers (where IPI staff was not able to speak in English) were detected only in a limited number of cases. However, getting in touch with a project 32 Since the first round of GIPB in 2006, the number of national IPIs surveyed has See Appendix A for more detailed information on themes and the weighting 33 increased from 96 in 2006, to 181 in 2009, to 189 in 2012. system. 30 GIPB 2012: Seizing the Potential for Better Investment Facilitation in the MENA Region Figure 3.4: MENA IPIs’ Inquiry-Handling Assessment by Subtheme manager was often problematic and, even when available, only investors represented by far the major source of investor a few project managers knew the targeted sector well enough inquiries (see Box 3.1). to discuss investment projects in detail. Many e-mail addresses also proved to be dead ends as they almost invariably produced Furthermore, in those rare cases where MENA IPIs answered no reply (only a handful of inquiries were acknowledged within a GIPB-initiated investor inquiry, they failed to provide a 24 hours).34 Even more troubling, IPIs lacked proper internal satisfactory, professional response. On average, those who systems to receive and process investor inquiries effectively. In responded scored 40 percent for quality of answer and 31 most cases, for instance, IPI staff could not confirm receipt of percent for answer credibility. IPIs in MENA often responded by the e-mail and requested it be re-sent to a different address. way of a short e-mail, failing to properly address all questions raised and rarely customizing responses to the investor’s specific Responses: Any time an investor knocks at the door, an IPI needs. The general impression this conveys is that MENA IPIs should stand ready to provide an answer. But this appears are not committed to undertaking active research in response to not to be the case in the MENA region. Out of the 19 IPIs investor inquiries. contacted in GIPB 2012, only three provided responses to both inquiries. Another six IPIs responded to only one of the two Follow-up: In the very few instances where MENA IPIs did inquiries, while 10 IPIs did not respond to either inquiry. Poor provide information to investors, only one IPI actually followed performance, and outright failure, in responding to potential up on its reply. This occurred regarding an agribusiness inquiry opportunities are even harder to understand in light of the when the IPI checked to see whether the response had been results of the IPI Characteristics Survey, which reported that received and whether further information or assistance was English-written e-mail spontaneously sent in by potential needed. Again, lack of follow-up can be a lost opportunity to engage investors further and persuade them to visit the country. It is interesting to note that one of the few IPIs that provided an immediate 34 answer, the Yemeni GIA, stated that this positive attitude is largely attributable to the “silent-consent� provision of the previous investment law, which states: “The Authority shall decide acceptance or rejection of investment project applications within (15) days following the date on which the application was presented complete with all documents and information required. Lack of a reply within the periods specified shall be considered approval� (art. 38, Investment Law #22 of 2002). Chapter 3: Analysis of IPIs’ Direct Interactions with Potential Investors across the MENA Region 31 Box 3.1: GIPB Approach Reflects How Foreign Investors Actually Send Inquiries to MENA IPIs The IPI Characteristics Survey investigated the most common sources of inquiry, the preferred communication channels, and the language used by potential foreign investors when contacting IPIs in the MENA region. Overall, 12 MENA IPIs out of 19 participated in the survey. Spontaneous inquiry from foreign Foreign investors prefer using e-mail for English is the global language of investors is the most common source communicating with MENA IPIs. For all business. All IPIs surveyed report that of an initial information request. When 12 IPIs responding to the IPI Characteristics English is the language used most often asked to indicate the two main sources of Survey, e-mail is one of the two most in the investor inquiries they receive. Only inquiries from potential foreign investors, important channels through which IPIs 3 IPIs indicated other foreign languages, MENA IPIs declared that inquiries are receive inquiries from potential foreign namely, French (2 IPIs) and Arabic (1 IPI). spontaneously received from investors in investors. Half of IPIs also receive inquiries two-thirds of the cases (8 IPIs), followed by telephone. In only one-fourth of cases, by those referred by embassies (6 IPIs) or requests are submitted directly by walk-in the private sector (4 IPIs). In a few cases, investors (3 IPIs). While, for only two IPIs, inquiries are self-generated by the IPI (3 IPIs) requests are submitted through the IPI Web or referred by other government bodies (3 site. IPIs). Despite poor inquiry-handling assessments, some MENA revealed that some have more or less sophisticated internal IPIs report having adequate internal systems in place to systems to effectively provide offline information to potential assist potential investors investors: The poor performance in inquiry handling indicates that MENA • The Tunisian FIPA has been certified ISO 9001 since IPIs are struggling to come to grips with how to effectively and 2003. ISO certification implies that strict and standardized consistently respond to investors. However, somewhat at odds procedures for quality management must be followed by with these findings, information recently collected through the all departments and for different types of services provided. IPI Characteristics Survey and in-depth interviews with selected These procedures range from the collection of standardized IPIs seems to suggest a somewhat different situation. evaluation sheets from foreign investors participating in promotional events, to the preparation of activity plans Many of the region’s IPIs reported a widespread application of by each department setting targets and objectives at the detailed procedures for swift inquiry handling; for instance, all beginning of the year. 12 IPIs that participated in this side survey indicated that they They also apply to inquiry-handling activities. Indeed, FIPA follow fixed-time parameters for the submission of inquiry is attempting to apply a dedicated customer care approach responses. IPIs also reported having a sizable and well-trained by: (i) assigning a single investment officer to assist investors staff employed in this critical function, and several IPIs indicated from the pre-decision phase all the way through to the that internal staff had undergone training in customer service implementation of investment projects, and (ii) setting and/or investment facilitation services in the last few years. different fixed-time parameters to address external inquiries, Moreover, in-depth interviews conducted with selected IPIs 32 GIPB 2012: Seizing the Potential for Better Investment Facilitation in the MENA Region Figure 3.5: The AMDI Centralized Inquiry-Handling System Source: Consultant’s elaboration based on Web site, AMDI Annual Report 2010, and telephone interview. depending upon the nature of the e-mail (for example, • In Morocco, AMDI developed an integrated approach requests for land and premises, and interest in participating to handling investor inquiries, which entails a centralized in outbound promotional missions). management of all requests for information received through a dedicated structure (Espace d’Information et Regarding requests for general or sector information, d’Accueil des Investisseurs—EIAI), whose functioning is Tunisia’s FIPA sets a maximum of two days to send an summarized in Figure 3.5. AMDI also adopted written initial reply acknowledging receipt of a request and five procedures, specifying fixed-time parameters for all steps days to send a final and detailed reply. In line with FIPA’s of the handling process (as learned from best practices that sector-based organization, inquiries are handled directly other IPIs applied). In 2010, AMDI handled on average 40 by 20 cadres sectoriels, grouped into four different teams requests for information per month. Three out of four came that are charged with all promotional activities falling under from foreign investors, mainly from France and Spain. their sectors/lines of business. All answers sent via e-mail To ensure the highest quality of service, AMDI set up a by internal staff are copied to a Central Registry (Bureau documentary database drawing on a targeted collection of d’Ordre Central) for archiving purposes. published materials and specialized studies. Chapter 3: Analysis of IPIs’ Direct Interactions with Potential Investors across the MENA Region 33 GIPB 2012 coincided with challenging times for MENA best practice Web site performance were proved “average� in the inquiry-handling assessment. Conversely, all five best The discrepancies between the negative inquiry-handling practice providers of online information in the MENA region performance shown by MENA IPIs in GIPB 2012 and the were assessed as weak, at best, in terms of offline information countervailing information collected on the resources devoted provision. to and the procedures adopted in answering investor inquiries need further investigation. One obvious explanation is that IPIs do not apply these procedures consistently—in other words, the Work in progress to improve responsiveness, benefits may inquiry-handling system is not watertight. be expected soon The cross-analysis of GIPB results with the information Another important issue, however, relates to the timing of the collected from the IPI Characteristics Survey helps identify some GIPB 2012 survey. The GIPB inquiries were submitted to MENA interesting aspects regarding IPI capacity to handle investor IPIs between March and June 2011, a critical transition period inquiries. First, a larger staff is not always associated with a for some MENA countries most affected by the Arab Spring higher rate of responsiveness to inquiries. Second, the larger (see Box 3.2). During such a difficult period it seems likely that the volume of foreign inquiries received, the more difficulties IPI capacity to respond to investors’ inquiries may have been the IPI encountered to properly manage them. MENA IPIs that affected. While most IPIs managed to remain operational, their achieved a comparatively more positive assessment of inquiry attention was largely diverted to other priorities—among others, handling from GIPB typically received a fairly limited number of the provision of assistance to existing investors. For instance, requests for information from potential foreign investors, two in Tunisia, the Ministry of Investment established a crisis group to three on a weekly basis. This fact is perhaps surprising in that charged with promptly handling priority problems that high- one would have thought that a larger volume of requests would level investors active in the country faced. This may partly have led to a better practical approach to handling them. explain the poor performance in a handful of countries most affected by the Arab Spring. All of the evidence underlines the urgency for MENA IPIs, especially those coping with a large number of investor inquiries, GIPB 2012 noted a significantly larger gap between the Web to set up internal inquiry-handling systems, rather than simply site and inquiry-handling performances of MENA IPIs (a 50 seeking to increase the number of dedicated staff. If the system percentage point difference) when compared with those of of information management is well designed, it could ensure other regions. This gap was broader than that reported in GIPB that the data gathered to respond to one inquiry is easily 2009. Such an evolution suggests two considerations. First, IPIs accessible by staff responding to the next. in the MENA region have been paying more attention to online facilitation than to direct interactions with prospective investors. Interestingly, some MENA IPIs seem to have recently realized Such a short-sighted approach may translate into losing the importance of “reactive� promotional actions, and they are investment opportunities and wasting the efforts deployed to introducing substantial changes to seize these opportunities. make their Web sites effective promotional tools. Second, it Indeed, both the Egyptian and Kuwaiti IPIs are gradually getting seems to corroborate the fact that the timing of GIPB 2012 may on the right track to cope better with the significant number have negatively affected the inquiry-handling performance of of inquiries (between 9 and 14) received weekly from foreign some IPIs, especially those receiving an extremely positive Web investors (see Box 3.3). site assessment. Indeed, 42 percent of global IPIs that achieved Box 3.2: Yemen—Unfortunate Timing for an Assessment Since the late 2000s, the Yemeni GIA has been undergoing a substantial institutional-strengthening project, benefiting from the advisory and capacity-building support extended by development partners (the World Bank, International Finance Corporation, Investment Climate Department, Department for International Development, and Gesellschaft für Technische Zusammenarbeit). Many positive results have been achieved, such as the preparation of the National Investment Promotion Strategy and the revamping of the Web site. However, the envisaged improvements of investment promotion techniques—including the preparation of an operating manual clearly defining the Authority’s modus operandi under different areas, inquiry handling included—could not be initiated when external support was temporarily suspended in the political and security upheaval. As clearly explained by Mr. Salah Mohamed Al Attar, the chairman of GIA: “The timing of the crisis was even more unfortunate as it happened in the middle of the agency’s transition period as a result of the new law and institutional strengthening project, leaving the agency in a sort of vacuum.� 34 GIPB 2012: Seizing the Potential for Better Investment Facilitation in the MENA Region there should be no excuse—an IPI that is hard to contact by investors is clearly failing in a most fundamental way. Box 3.3: Inquiry-Handling System in the MENA • Ensuring that every inquiry is processed and receives Region—Steps in the Right Direction a response. To minimize the risk of losing potential investments because of unanswered inquiries, setting up In Egypt, GAFI has undergone a full reorganization of the staff internal inquiry-handling systems should be a priority for responsible for handling inquiries since early 2011. The 19 most MENA IPIs. This is especially true of IPIs dealing with people previously responsible for replying to investor inquiries large volumes of inquiries from foreign investors (over 10 per were reallocated under the responsibility of three team leaders week). The introduction of efficient internal systems should supervising specific regions (Africa, Asia, and Europe). When a also help IPIs solve other procedural hitches detected by foreign investor contacts GAFI (either by telephone or e-mail), the GIPB 2012 assessment. These include failure to provide the inquiry is forwarded to the dedicated team leader. If the acknowledgement of inquiry receipt, as well as difficulty in team leader is not in a position to answer the request directly, locating investor e-mails (as required, for instance, at the he/she either gathers additional information with the help of follow-up stage). These problems convey a sense of poor other staff members or, in case of very specific or technical professionalism; more important, they hinder the provision requests, contacts GAFI’s research department; the department, of a complete answer within a given timeframe. in turn, collects the requested information (if necessary, with • Tailoring the response to investor needs and answering the support of other institutions, such as ministries or relevant all questions fully, with supporting evidence. Having business associations). efficient internal systems to manage incoming inquiries is In Kuwait, at the time of writing the KFIB was in the process not a guarantee of a good-quality response. According to of setting up an Investor Services Centre. As a first step, GIPB 2012, no single reply from MENA IPIs answered all the process involved the transformation of the telephone questions in good detail, and only two responses provided switchboard with only two operators into a call center with by different IPIs were assessed at an average level; all more adequately trained personnel. It also included introducing others fell in the weak or very weak categories. Poorly a mechanism for forwarding calls after business hours to drafted and noninformative replies are likely to discourage ensure 24/7 coverage. Furthermore, the KFIB set out to have potential investors; MENA IPIs must make substantial staff dedicated exclusively to the handling of investor inquiries efforts to provide replies that incorporate project-specific received via e-mail. The launching of the Investor Services information and benchmarked data, and that clearly show Centre was planned for mid-2012; gradually both the call the locational advantages. In order to increase the capacity center and dedicated staff responding to e-mail inquiries will be to provide quality responses in a timely manner, it is crucial transferred under its responsibility. for IPIs to have on hand prepared materials on the key issues for investors, such as labor costs, the regulation and competition environment, and the advantages of their investment location. Summary: Key recommendations for handling inquiries • Following up any information submission to check that more effectively responses have been received and to verify whether or not additional assistance is required. On the one hand, this The inquiry-handling performance of MENA IPIs has been action ensures customer satisfaction and generates useful assessed, on average, as very weak. Essentially, the region’s feedback on the information and support provided; on the IPIs seem unable to effectively respond to investor inquiries. other hand, it gives IPIs the opportunity to facilitate the Performance may have been affected by the timing of the investor’s transition to the next step—be it an in-person GIPB 2012 inquiries, which coincided with a critical transition meeting, a site visit, or an introduction to key officials. period for some MENA countries during the Arab Spring upsurge. Nevertheless, there is little doubt that the region’s IPIs need to dedicate much greater effort to meeting the As with the recommended improvements for the Web sites, business expectations of foreign investors. Key preconditions to these recommendations can be addressed in a very cost- attracting and retaining investor interest at the long-listing stage effective manner. The development of an internal system to include: ensure that all inquiries get answered can be as simple as allocating clear responsibilities to staff for key functions (such • Ensuring that the IPI is easily reachable and that an as receiving and acknowledging incoming inquiries, drafting appropriate project manager can be contacted with no replies, following up with the investor). Introducing professional effort. This means posting correct and complete contact business standards (for instance, promised response times, information on the Web site, including sector-specific telephone answering, and e-mail drafting) is neither costly nor contacts, making it easier for potential investors in priority does it require external assistance. sectors to be in touch with the most relevant staff. Evidence collected during GIPB 2012 shows clearly that establishing contacts with MENA IPIs is not always an easy task. And yet, Chapter 3: Analysis of IPIs’ Direct Interactions with Potential Investors across the MENA Region 35 Chapter 4: MENA IPI Facilitation Services at Sector Level Sector targeting is crucial to attract FDI of the FDI-related jobs in the region (55 percent) are generated in the manufacturing sector, which attracted As implied in previous chapters, investment promotion only about one-fifth of total FDI inflows.36 efforts tailored to the needs of investors operating in a particular sector are more effective than broad attempts This chapter investigates how effective IPIs in the MENA to target all potential investors. Countries can not, and region were in providing online and offline information should not, try to compete in all sectors indiscriminately. that matched the needs of potential investors in the two Indeed, while certain general factors in host countries— specific sectors on which GIPB 2012 focused: tourism market size, growth prospects, resource and infrastructure and agribusiness. Tourism and agribusiness are generally availability, and political stability—consistently determine considered to be sectors where developing countries which countries attract the most FDI, what determines have competitive niches and opportunities that enable the most suitable investment location differs significantly them to gradually move to more lucrative activities and across economic sectors. markets. Tourism is among the world’s top job creators accounting, both directly and indirectly, for around eight A highly targeted investment promotion strategy percent of the global workforce. For its part, agribusiness, that concentrates efforts on sectors where countries by combining agriculture and industry, creates both have a clear comparative advantage and a strong downstream and upstream linkages that may engender value proposition is regarded as best practice among multiplier effects in job creation. On average, overall GDP investment promotion professionals. This view has been growth originating in agriculture has proven to be two to recently confirmed by a study aimed at verifying whether four times as effective in raising incomes of the poor as sectors explicitly targeted by IPIs received more FDI than growth generated in nonagricultural sectors.37 nonpriority sectors during the same period.35 The results suggest that sectors targeted by IPIs receive on average Agribusiness and tourism, key sectors for the MENA more than twice as much FDI as nontargeted sectors. A region “back-of-the-envelope� calculation of FDI inflows against IPI budget by researchers at the University of Oxford Over the last decade, the MENA region has been the indicates that spending US$1 on investment promotion fastest-growing tourism destination in the world; in 2010, raises FDI inflows by US$189. it welcomed over eight percent of total tourist arrivals worldwide (close to 79 million). However, in the last year, The decision on which specific sectors to target should while the demand for international tourism continued flow from a national economic development plan. IPIs to rebound from the crises experienced in 2008–09 should never pick sectors in isolation from such national and international tourist arrivals grew by 4.6 percent priorities; indeed, these organizations are tools for worldwide (up to 983 million), MENA was the only region the effective implementation of a national investment to record a decline in arrivals. Passenger movement strategy. The adoption of an investment strategy that suffered an eight percent fall because of recent political targets carefully selected sectors closely matching national tensions deterring tourism. According to the United development priorities can also maximize the potential Nations World Tourism Organization (UNWTO), important benefits associated with FDI inflows. This consideration North Africa tourist spots such as Egypt and Tunisia appears extremely relevant to MENA countries. Indeed, experienced a more than 30 percent drop in arrivals. In according to a recent World Bank study, while the majority the Middle East, the situation was more balanced, as large of FDI received in the MENA region between 2003 and drops experienced by destinations directly or indirectly 2011 flowed into the real estate and mining sectors, most affected by social and political upheavals—Syria World Bank, Middle East and North Africa Region, Economic 36 Torfinn Harding and Beata S. Javorcik, “Roll Out the Red Carpet and 35 Developments & Prospects. They Will Come: Investment Promotion and FDI Inflows,� Economic World Bank, World Development Report 2008: Agriculture for 37 Journal 121, no. 557 (December 2011). Development, Washington, D.C., 2008. Chapter 4: MENA IPI Facilitation Services at Sector Level 37 (-41 percent), Lebanon (-24 percent), and Jordan (-13 percent)— Regarding the agribusiness sector, MENA is the most food- were largely offset by the growth recorded by Saudi Arabia dependent region in the world, importing approximately 50 (+60 percent) and, to a smaller extent, by the United Arab percent of regional food consumption. The situation is expected Emirates (+9 percent). According to the UNWTO World Tourism to worsen as a result of the widening gap projected between Barometer,38 the situation significantly improved in the first sagging supplies, challenged by severe natural resource half of 2012, and particularly promising results were recorded constraints, and increasing demand. By 2050, the MENA between January and May by both Egypt (+29 percent) and population is estimated to almost double, and the demand Tunisia (+48 percent). patterns are shifting from staples to higher value products. However, this broadly painted picture masks important These signs of recovery are particularly important since tourism intraregional differences. Some countries have important represents a major source of employment and revenue for a national agribusiness sectors that account for a sizable share number of MENA countries, where it has been a key driver of GDP (from 5 percent in Lebanon to over 25 percent in Syria) of economic growth over the past decade. As illustrated in and represent a major source of employment (in Morocco, an Figure 4.1, one out of three Lebanese works in the tourism estimated 60 percent of the population live directly or indirectly sector, and the total contribution of the travel and tourism on agriculture). industry to employment accounts for more than 10 percent in many other countries of the region, such as Bahrain, Egypt, Accompanied by a strong domestic demand for agribusiness Jordan, Morocco, Syria, Tunisia, and the United Arab Emirates. products, these conditions translate into higher odds for In almost half of the countries, the sector accounts for more MENA to become a global player in attracting more FDI to the than five percent of national GDP (that is, above world average) sector. Indeed, drawing in more foreign investments is a key and, in a few cases, it nears 10 percent. These countries have priority in the new agroindustrial strategies recently adopted a great potential for developing their international tourism by some MENA countries; these countries focus on developing industry further, given their tourist attractions and geographical competitiveness initiatives that are geographically concentrated, proximity to the European and Gulf Cooperation Council such as agroindustrial parks and agro-based clusters. A much markets. Promoting new investment opportunities and restoring smaller emphasis is placed on the sector by most of the Gulf international investor confidence are key challenges that must Arab States, however. Endowed with limited resources for be met by MENA IPIs in order to fully unleash this potential. agricultural production, this subgroup of countries is instead Figure 4.1: Tourism’s Economic Impact in the MENA Region, 2011 UNWTO, World Tourism Barometer, vol. 10 (July 2012). 38 38 GIPB 2012: Seizing the Potential for Better Investment Facilitation in the MENA Region promoting outward FDI in the agriculture sector to address food An examination of the information contained in these sector security.39 profiles reveals that most IPIs in the MENA region do not possess sufficient sector-specific market knowledge. For Despite the high relevance of the tourism and agribusiness instance, tourism profiles available from MENA IPI Web sites sectors, MENA IPIs offer little sector-specific information typically describe a host of opportunities across various sector segments, ranging from ecotourism (beaches, deserts, islands) IPIs in the MENA region have a key role to play in the and historical tourism (archaeological sites), to business and development of the tourism and agribusiness industries, as health tourism (therapeutic mineral water baths, for example). growing international competition makes investment promotion However, the sites commonly fail to provide information a crucial tool in attracting foreign investors to these sectors. crucial to foreign investors, neglect to back up information Consistently, the majority of the region’s IPIs claim to prioritize with reliable data from accredited sources, or else do not tourism (68 percent) and agribusiness (58 percent); a significant update their content regularly; this results in information that is number of IPI Web sites rank either or both sectors as “vital� or intermittent or dated (see Table 4.1). “priority.� Nevertheless, an assessment of the sector profiles of these Web sites reveals that claims of high sector prioritization Table 4.1: Sector Profiles Provide Little Information are not matched by the provision of quantitative and qualitative INFORMAtION INFORMAtION online information. ANd DAtEd REGUlARlY StRENGtHs StAtIstIcs SOURcEd UpdAtEd Figure 4.2: Few Sector-Prioritizing IPIs Provide Sector Profiles on SpEcIFIc SEctOR- ON KEY Their Web Sites DAtA Tourism 57% 57% 29% 14% Agribusiness 88% 75% 38% 13% Given the rapidly evolving situation in the MENA region, failure to display regularly updated information and statistics at the sectoral level represents a glaring omission and a missed opportunity for reducing risk perceptions. For instance, providing recent statistics highlighting the notable rebound of international tourist arrivals experienced by some countries would help restore confidence in the region. To build a strong case for investment in the tourism sector, an IPI should be able to demonstrate investment opportunities by providing evidence of: (i) a largely untapped market segment, as shown by high occupancy rates or the unmet demand of latent segments (backed by credible statistics); (ii) an adequate land tenure system and a number of potentially available and preidentified sites; and (iii) a large reservoir of credible local contractors and service providers (for example, by supplying contacts and an assessment of relevant local contractors, Indeed, as illustrated by Figure 4.2, only a narrow majority construction companies, and architects). of those MENA IPIs indicating tourism as a priority showcase a sector profile for tourism on their Web site. In the case of Similarly, in the case of agribusiness, specific information on agribusiness, of 11 MENA IPIs claiming to prioritize this sector, land issues is of crucial importance to potential investors; as many as eight feature a dedicated agribusiness sector profile. these issues encompass land rights, ownership and dispute resolution mechanisms, land purchase and leasing procedures, This is a worrisome shortcoming when compared with IPIs and securing of water rights for agricultural production. Apart elsewhere in the world, and especially in the OECD high-income from land and water, other important agricultural inputs include countries, which invariably provide a sector profile for each seeds, chemicals, fertilizer, and machinery, all of which, in many sector targeted. cases, must be imported. Therefore, potential investors are likely to look for information on import and export procedures, transport infrastructure, and local supply. Within this framework, it is interesting to note that some Gulf countries have 39 Based on an understanding of the key issues investors will most in recent years launched investment funds (such as the AgriCapital Fund) likely ask about, IPIs should gather, and make available online, targeting the farming sector and related areas on a global scale. Chapter 4: MENA IPI Facilitation Services at Sector Level 39 information on relevant topics, such as land access (ownership, transfer, titling, and leasing), the labor force, cost factors, and infrastructure. Regrettably, there is little evidence on the Web Box 4.1: Egypt’s GAFI—Good Practice in Providing an sites of MENA IPIs that they have conducted sufficient research Agribusiness Sector Profile on these topics. Information on supporting infrastructure, cost The downloadable profile for the agribusiness sector on GAFI’s data, and sector-relevant legislation were almost completely Web site stands out on several levels. It outlines industry-related absent in IPI Web sites. Lists of companies that have already factors and reflects the agency’s understanding of both the sector’s invested in the sector, information on how to access land, taxes, core features and the information needs of potential investors. incentives, and grants, are included in only a minority of sector One section of the profile is dedicated to explaining why Egypt’s profiles (between one-fourth and roughly two-fifths, depending agribusiness sector is worth investing in. This section delves into on the topic and the sector covered). Among the very few the sector’s strengths and untapped potential. It describes the MENA IPIs that include a strong agribusiness sector profile on sector’s core areas of investment and their respective added value their Web sites, Egypt’s GAFI stands out as a good practice in terms of, for example, diversity, climate, preferential access, example (see Box 4.1) location, infrastructure, and the local workforce. This profile is a well-organized presentation of key information sought by sectoral Without the required sector information, the chances of investors. satisfactory handling of investor inquiries are few Over and above the standard information categories investors The sector-specific market presentations of MENA IPIs are far would look for (namely, those relating to costs, workforce size, and below foreign investors’ expectations. This fact is illustrated potential for exports), the sector profile displays inputs with high in Table 4.2, which compares the information available in value added. Notable is the section on New Ventures, which sheds the sector profiles of IPI Web sites and the project-specific light on expected sector developments based on already existing information requested through the GIPB 2012 inquiries. foundations. In addition, there is a list of core sector drivers, their outlook in Egypt, and what’s in it for investors. This mismatch suggests that even in the sectors that they showcase, IPIs are poorly prepared to adequately respond to investor inquiries. Only one out of all MENA IPIs answered all questions for each investor inquiry. In the case of the tourism inquiry, no more than two IPIs answered the question on regulatory aspects, and the information offered was not complete. A slightly higher number of IPIs (between five and seven) provided answers on the other three topics, although only a few IPIs answered in good detail. Only one answer included some benchmarking data. As for agribusiness inquiries, the situation is even more negative—a maximum of four IPIs offered answers to one of the four questions (specifically, operating costs)—but even for this question, all answers were partial. As for the remaining three questions, only between two and three IPIs gave answers, and in half of these cases, answers A separate section of the profile (“Leading Agribusiness Firms were incomplete. Working in Egypt�) comprises a list of the multinational operators already active in the sector, giving prospective investors a picture of Market intelligence must not only be expanded, but also the potential partners and competitors they are likely to face. The fully mastered by IPI staff responsible for managing incoming sector profile ends with a selection of five testimonials. Thus, in inquiries. Indeed, as illustrated by Box 4.2, it seems that, in addition to “hard data,� GAFI successfully integrates the real-life, some instances, the IPI inquiry-handling performance was first-hand experiences of past investors with whom prospective also negatively affected by the limited capacity of IPI staff to investors can relate. effectively deliver the available information. Sector prioritization is not backed up by inquiry-handling performance In light of the above analysis, only very limited differences in inquiry-handling performance were detected between IPIs specifically targeting the sector concerned and those not prioritizing it. Actually, in the case of agribusiness, MENA IPIs that did not indicate it as a priority sector scored comparatively 40 GIPB 2012: Seizing the Potential for Better Investment Facilitation in the MENA Region Table 4.2: GIPB Inquiries and IPI Sector Profiles—An Information Gap COsts / OpERAtING REGUlAtORY StRUctURAl DAtA POtENtIAl SItEs ENVIRONMENt FRAMEwORk GIPB 2012— Macro- and sector-level key A list of potential locations Labor cost for the hospitality Construction regulations, Requested data (such as GDP, FDI flows, for the project, including sector and utilities, process for obtaining Information tourism-related statistics) information on associated regulations or quotas for permits (Tourism) development incentives (if expatriate workers, taxes in A list of major local hotels any) the hospitality sector and specialized construction companies GIPB 2012— A list of potential local A list of potential locations Availability and estimated Overview of the intellectual Requested partners (farmers and for the project, including the salaries of technical staff property rights legislation Information cooperatives) average cost of land (either local or foreign) and and regulatory trade (Agribusiness) manual workers restrictions Information on the availability and average cost Information on process for of water for direct use on securing land (for example, the land purchase, rent, concessions, or other customary means) MENA IPI Web Some sector data are There are practically Information about labor Limited information is Site—Available generally available, but both none, but, in a few cases, costs is generally available, available on the above Information level of detail and frequency investment maps are but rarely for different regulatory aspects, especially of updating vary widely included professional profiles and/or in the case of land tenure for different sectors system and construction Only a few Web sites permits provide a list of leading firms in operations Box 4.2: A Wealth of Information Cannot Make Up for Poor Inquiry Handling As illustrated in Figure 4.3, all IPIs recording comparatively better inquiry-handling performance (in the green circles) have already accumulated a substantial amount of data and information on key aspects of the location, from macroeconomic data to labor market statistics. Indeed, these IPIs are almost invariably assessed as good practice in terms of the GIPB Web site “content� theme. While the existence of a wealth of information is a precondition for providing timely, informative answers to potential investors, it is not always sufficient. Many IPIs with content-rich Web sites have performed very weakly with regard to sector-specific inquiry handling (in the red circles), suggesting that they fail to make good use of the information they make available online. This weakness represents a major missed opportunity, especially for those countries attaching a high priority to the development of the tourism and agribusiness sectors. Figure 4.3: Correlation Between Inquiry-Handling Performance and Assessment of Web Site Content Chapter 4: MENA IPI Facilitation Services at Sector Level 41 better in inquiry handling, even if their overall performance transfers or leases; and (iii) join forces with private sector remained poor. In other words, prioritization seems to associations (chambers of agriculture, hotel associations), mean little to MENA IPIs given their poor inquiry-handling promotional agencies (tourism boards), and technical bodies to performance in priority sectors. As a consequence, MENA IPIs source specific information about the sectors. are likely losing investors’ interest even in sectors identified as priorities. Maintain contacts with sector promotion agencies, preferably establishing long-term collaborations with them, in Summary: Key recommendations for improving investment order to guarantee world-class customer service for foreign promotion in targeted sectors investors. For instance, in the case of Tunisia, responsibility for attracting investors into the tourism and agriculture sectors is in Given the importance of industry-specific location factors in the hands of the Office National du Tourisme Tunisien and the swaying investment decisions, and the fierce competition to Agence de Promotion des Investissements Agricoles, respectively. attract FDI, sector targeting is regarded as best practice for While the presence of these two bodies clearly reduces the core investment promotion. IPIs in the MENA region do not responsibility of the IPI, it should not be a justification for appear well positioned to compete in this race. Indeed, sector limited effectiveness in handling inquiries. Indeed, even for prioritization does not seem to be a focus for most MENA nonprioritized sectors, an IPI should be able to offer professional governments, as evident from: (i) the small number and the assistance, at least in terms of disclosing preliminary information, overall low quality of sector profiles included in IPI Web sites, establishing direct contacts with people within relevant sector and (ii) the poor management of investor inquiries by IPIs, even agencies, and following up with potential investors to verify when concerning targeted sectors. To improve this situation whether or not they actually received the required assistance and increase their capacity to attract FDI in sectors identified from the relevant sector agencies. as priorities, MENA IPIs are strongly encouraged to adopt the following recommendations. Consider joining efforts to restore confidence in the region. In addition to the cost and quality of sector-specific Improve understanding of key evaluation criteria for factors, political stability and security are two of the most investment location and specific market conditions in important issues influencing site selection. Some commentators selected sectors. To effectively promote their locations as FDI argue that the severe image problems created by Western destinations, national governments should develop national media through news reports on the MENA region have had economic development strategies that focus on attracting a very negative impact on FDI flows, especially in the tourism FDI into sectors for which their countries offer competitive sector. In the face of this challenge, individual IPI efforts to advantages vis-à-vis the requirements of international investors. modify foreign perceptions may only be partially effective, Identifying these sectors requires in-depth research and analysis according to officials at AMDI, the Moroccan IPI. In a phone of costs and conditions relative to competing locations. The interview, one official stated, “French and Spanish investors, efforts and resources required to fill this information gap are who have [long familiarity with] Morocco were easy to convince not negligible, and IPIs have a key role to play in gathering the about the stability of country conditions, whereas investors from necessary information. The resulting wealth of information other countries tended to consider all Arab countries as a single, is crucial and a precondition to developing well-crafted value insecure investment destination.� propositions for potential investors. While investment promotion remains a fundamentally In addition, the information resulting from such research and competitive business, and there is a limit to how far IPIs might analysis will: (i) allow IPIs to develop comprehensive sector collaborate, there would still appear to be scope for some kind profiles, incorporating benchmarking data, to highlight the of joint regional or, more likely, subregional marketing efforts location’s comparative advantages, and (ii) raise IPIs’ ability to to address the current image difficulties. Earlier experiences in respond effectively to direct inquiries from investors in a timely the Western Balkans, following a prolonged period of war in manner, provided that the staff responsible for managing the 1990s, suggest that there may be benefits for all from such incoming inquiries is adequately trained to locate and make an approach. For example, a regional investment forum could effective use of sectoral intelligence. be an effective launching pad to encourage increased flows of FDI into tourism, and an efficient way of promoting sustainable Expand resources and foster partnerships to develop growth in the sector. By identifying and highlighting specific sector-specific knowledge. To satisfy the above national assets and opportunities, such a forum could well recommendation as well as to offer constantly updated sector improve the region’s image abroad. knowledge to potential investors, IPIs should expand their range of information sources. Specifically, MENA IPIs should: (i) exploit external data sources, such as the United Nations’ Food and Agriculture Organization and the World Tourism & Travel Council; (ii) establish collaborations with national, regional, and local governments and communities to identify appropriate land and ensure that proper procedures are followed for land 42 GIPB 2012: Seizing the Potential for Better Investment Facilitation in the MENA Region Appendices APPENDIX A: ASSESSMENT METHODOLOGY FOR WEB SITES AND INQUIRY HANDLING The assessments of IPI Web sites and of IPI responses to inquiries were conducted by a professional site selection company on behalf of the Investment Climate Department of the World Bank Group. Both the Web sites and the inquiry responses were evaluated, in English, against a fixed list of objective, best practice features. These features fall under various themes, which are weighted for relative importance and combined to produce a single Web site assessment and a single inquiry- handling assessment for each IPI. Web sites were judged for their technical strength, design quality, promotional effectiveness, and supply of information needed by investors when they are first compiling a long list of possible investment locations. The assessment methodology is unchanged from GIPB 2009. While GIPB 2006 did employ a slightly different methodology, GIPB 2006 results cited in this edition have been adjusted according to the current weighting. The assessment themes are listed below with their share of the total assessments noted in parentheses: WEB sItE AssEssMENt THEMEs Information architecture (10%)—the layout and organization of information in a Web site and the extent to which the site was 1 designed using a consistent and logical structure that allows users to quickly identify key pieces of information 1a Web-friendly structure (1%)—home page setup and appearance on standard PC screens and whether extensive scrolling is required to see information 1b Navigation ease (7%)—whether the site uses navigation bars or prompts and whether it is easy to move from page to page 1c Web site functionality (2%)—whether the site signposted key topics, is downloadable in a standard time, and whether its graphics and links worked 2 Design (10%)–the general appearance and readability of a site. 2a Look and feel (1%)—industry terminology for the visual appeal and visual consistency of pages 2b Use of graphics (3%)—whether the site uses graphics that enhance the IPI’s image for business, and the use of maps to showcase key infrastructure in the location 2c Reading ease (6%)—whether the choice of color or text supports readability, whether font sizes are consistent and headings short and “web friendly� Content (50%)—the extent to which the site contains content that is relevant, accurate, current, and easily accessible to potential 3 investors 3a Clarity of purpose (7.5%)—whether the Web site sets out its location as a destination for foreign investment and the IPI’s services for investors on the home page 3b Core information provision (10%)—provision of key information for foreign businesses that is both relevant and useful 3c Sector information provision (17.5%)—provision of sector information online and whether this information is consistent in terms of its depth and quality across multiple target sectors 3d Credibility of information (5%)—use of statistics to support claims and whether these statistics are well sourced, dated, and from credible origins 3e Currency of information (5%)—use of up-to-date information on business events and investor-related news 3f Downloads (2.5%)—ability to download investor reports or presentations from the site and the comprehensiveness of this information for inward investors Appendices 43 3g IInternational accessibility (2.5%)—use of English and other frequently used (relevant) business language options that are accurate and consistent in terms of the level of information provided in each language option Promotional effectiveness (30%)—the extent to which the Web site is effective in its primary aim of selling the location and IPI services 4 to inward investors 4a Web prominence (4.5%)—whether the Web site was easy to identify from an Internet search 4b Corporate roles and support (4.5%)—whether the Web site clearly sets out the role of the organization and the services provided, including clear methods for accessing further information and advice 4c Contact information (7.5%)—whether the Web site clearly sets out a good range of detailed contact options for site visitors 4d Promotional effectiveness (13.5%)—the effectiveness of the Web site at selling the location to business, and use of comparative data Inquiry handling was judged for IPI contactability, responsiveness and handling of communications, information quality, and follow-up, each theme representing a part of the typical experience that an investor goes through when contacting an IPI for more information to assist their more detailed short-listing evaluations. Each component is sequenced to reflect the chronological order of the steps to contact an IPI. Because of the sequenced nature of the inquiry-handling assessment themes, an IPI being assessed as zero for a particular stage would normally be assessed as zero for every stage thereafter. For example, an IPI that is not contactable cannot handle communications, provide a response, or follow up. The assessment themes are listed below with their share of the total assessment noted in parentheses: INqUIRY-HANdlING THEMEs Contactability (10%)—defined as the extent to which an investor can identify the IPI and officers within the IPI that they can contact in 1 their search for information and also whether the IPI was easy to contact from a client perspective. 1a Web site availability (3%)—whether the IPI had a Web site and the ease of finding that Web site 1b Quality of contact details (7%)—the level of contact details available to a potential inward investor from the Web site, including whether they were clearly set out, easy to identify, and accurate Responsiveness and handling (15%)—defined as the ease with which an investor can communicate with an IPI and the IPI’s ability to 2 engage with the investor in a professional and informed manner 2a E-mail and phone responsiveness (6%)—whether the IPI had good internal systems at first contact level for dealing with investor inquiries from the Web site, and whether it was effective at handling clients who contacted the organization directly 2b E-mail handling (1.5%)—the way in which the IPI responded to initial e-mail inquiries to the Web site, and whether e-mail correspondence was well linked to the original client project inquiry and projected a clear and professional image of the IPI for the client 2c Call handling (1.5%)—whether the IPI demonstrated that their first-level communication channels and project officers were competent and thorough at taking client inquiries 2d Inquiry-handling competence and responsiveness (6%)—whether the IPI showed that their project officers were aware of the original client e-mail inquiry and were willing and able to provide a timely inquiry response. Also, whether they provided good coordinated management of the inquiry and completed work to deadline 3 Response (55%)—refers to the actual response that the IPI provided to the investment inquiry 3a Response format (2.75%)—whether the IPI provided a final response that was presented in a clear manner, preferably as one document in an appropriate business software package 3b Response branding (2.75%)—whether the response was well branded, ensured good consistency, and projected a strong image to the client 3c Response organization (2.75%)—whether the response included a cover letter as well as a contents page, introduction, and other relevant headings relating to the project, and whether the IPI addressed each of the issues the client raised 3d Answer quality (30.25%)—whether the IPI addressed each client issue in turn and customized their response to the client’s particular needs, thereby providing information that has real value in the long-listing process 3e Answer credibility (5.5%)—whether the response made good use of comparative data, relevant and well-referenced case studies, and testimonials. Also whether the IPI response was accurate in terms of grammar and spelling 3f Business case (11%)—whether the IPI set out why their location was good for the client project Follow-up (20%)—the extent to which the IPI took action to follow up on the information sent to the client as well as to establish 4 whether they could offer more help or arrange to move the project on 44 GIPB 2012: Seizing the Potential for Better Investment Facilitation in the MENA Region APPENDIX B: DESCRIPTION OF THE INQUIRIES SUBMITTED TO IPIS GIPB created typical investor inquiries for an agribusiness investment and a tourism investment, each with a description of the project size and purpose and a list of information requested. To ensure the realism of the inquiry and its response, the inquiries were designed with the help of sector-expert focus groups. The agribusiness focus group included Syngenta, Monsanto, Pannar, Higgins, and Bayer, while the tourism focus group included The Rezidor Hotel Group, HTI Consulting, KnightConsult, DGA Business Development, W Hospitality Group, Marriott Hotels, Mövenpick, Serena Hotels, and DTZ. Each IPI was presented with the two inquiries by e-mail, using different site selection consultant names and organized differently to avoid suspicion that the same party was behind both. Inquiries needed to reflect high-end projects to pique the interest of IPIs, but they also needed to seem attainable for the level of development in each IPI’s country. Therefore, two versions of each inquiry were developed, one for OECD high-income economies and the other for all other economies. Although the sophistication of the investment project varied, the information requested of IPIs was exactly the same in all cases. Table B.1. Investment Projects Adjusted for Development Level IPI TOURIsM AGRIBUsINEss OECD high-income Luxury resort hotel development R&D center, with small plot of land for testing Land for growing / production with small facility for scientific All other IPIs Four star business hotel testing The initial inquiries were submitted by e-mail, and, if no response was received after 48 hours, followed up by telephone. It was requested that complete responses be submitted by 12 days from the initial e-mail. Information requested included a sector profile, labor skills and availability, employment regulations, and potential sites. When there was no reaction to the initial e-mail or the initial follow-up call, two final call attempts were made to allow for any temporary staff shortages or system failures. In those cases where an IPI indicated that the mandate for tourism or agribusiness was with another organization, the consultant sent the project inquiry to that alternative organization. GIPB methodology favors IPIs that are proactive in coordinating a dialogue between the contacting consultant and the third party. Below are examples of the two project inquiries. Tourism Inquiry (OECD high-income version) Project Details The client is an investor from an emerging economy, who is currently in discussion with various hotel operators, all of which have in place a significant portfolio of international hotel developments, which include several high-profile luxury resorts. It is estimated that the new ultra-luxury resort hotel will be around 120,000–200,000 square feet in size, providing approximately 300–400 deluxe rooms and suites, and offer a full range of leisure activities, amenities, and services. The hotel will generate a capital investment of US$100–150 million. The market strategy of the hotel chain that will manage the property will focus on high-end, trend-conscious leisure travelers, while also providing business meeting and conference facilities. Required Information 1. Background Macro Data. Provide data on the economy, demography, and the hospitality/hotel market in the city. Information should include, but not be limited to, GDP, FDI flows, tourism-related statistics (such as passenger volumes through local airports and average length of stay), and any recent infrastructural developments or any new drivers of demand that may have occurred in that city/region. In addition, provide a list of major local hotels and available information on new entrants to the local market that are either under construction or planned. Appendices 45 2. Potential Sites. Provide information on sites (greenfield, vacant, semivacant or distressed properties) that may be suitable for this project. In all cases these sites should be either close to a business demand generator or a tourist attraction. Indicate if there are any sites with associated development incentives including loan guarantees, tax incentives, waiving of import duties, and grants that might be available for training from the local/regional or national authorities. If your organization does not have information on sites, provide a profile on the best areas of your location to look for sites, based on current growth and urban development patterns, as well as contacts to other organizations, including brokers, that could provide site information. 3. Costs / Operating Environment. Provide an indication of the cost of labor for the hospitality sector and utilities (especially electricity). Indicate if there are special regulations or quotas for expatriate workers. Information on locally available training programs for the sector would be useful. In addition, provide a concise description of all the taxes that apply to the hospitality sector and a hotel project of these characteristics, as well as any fiscal incentives available. 4. Construction. Provide information on specialized local construction companies for the developer, including their availability and whether materials are readily available or need to be imported. Provide detail on construction regulations and the process for obtaining permits, as well as the support that your organization can provide in working through these processes with our client. Agribusiness Inquiry (non-OECD high-income version) Project Details The client is a specialized agribusiness client interested in acquiring an area of arable land that would be complemented by a small research and development facility. The company wishes to develop a land facility for the growing and testing of new varieties of various non-genetically-modified root and tuber crops, with a view to examining their potential to produce higher-than-average yields, adapt to different climatic conditions, resist disease, and their suitability for markets in either an unprocessed or processed form. As part of this, there should be some laboratory space for further testing and possibly developing of these new varieties. It is estimated that the land area required would total approximately 80 acres, including a small storage space, with an annexed laboratory of up to 1,000 square feet. Our client is currently in the process of defining the staffing strategy for the investment, but they have initially estimated up to 50 seasonal workers to work on the land, plus up to 10 science staff focusing on the properties of each new variety grown, such that the client can understand those that have greatest commercial potential. Required Information This stage of the process will focus on developing a list of potential locations with reference to a suitable cost profile, labor and land availability, and the permits and other legal procedures necessary for product development and export. Soil conditions will be evaluated in detail once a shortlist of sites has been identified, hence only general information on the quality of land is required at this stage. 1. List of Potential Locations. A list of potential locations for the project (space for a laboratory and suitable land for growing), including the average cost of land. It would be helpful to understand the process for securing the land (purchase, rent, concessions or other customary means, etc). Also include information on the availability and average cost of water for direct use on the land. 2. Information on Labor. In terms of the labor needs, we would be grateful for information on the availability and estimate salaries of technical staff (either local or foreign) and manual workers. It would also be helpful to know if there are any limits to extended stays for high-skilled foreign labor. 3. Legal Framework. Regarding the legal framework for a project with these characteristics, our client is especially interested in having an overview of the intellectual property rights legislation in your location. If there are any restrictions to the import of seeds, provide a brief description of these. Does your government provide any incentives for this type of project? 4. Future Production. As our client is a relatively small company, in order to better commercialize the new varieties for export and regional consumption, the company would like to work with local farmers and cooperatives. Therefore, provide a list of cooperatives and contract farmers close to the location that could work with our client as potential future production partners, and to understand the export procedures for unprocessed crops. 46 GIPB 2012: Seizing the Potential for Better Investment Facilitation in the MENA Region APPENDIX C: THE IPI CHARACTERISTICS SURVEY Survey Design In late 2011, the Investment Climate Department of the World Bank Group commissioned a survey on key characteristics of investment promotion intermediaries (IPIs) in the MENA region. The IPI Characteristics Survey was administered online to the region’s 19 IPIs in February 2012. Based on a structured questionnaire originally developed by FIAS and utilized at global level in 2008–2009, the IPI survey was designed to provide a first-hand understanding of MENA IPI structural features and operating conditions, with particular reference to the provision of information to potential foreign investors. The IPI Survey covered three main “areas� or “themes�: • The structural features of IPIs (nature of organization, year of establishment, governance, areas of activity), which encompassed six questions; • The availability of human, physical, technical, and financial resources, comprising six questions; • The experience gained and the capabilities displayed in implementing investment facilitation services, which covered 18 questions. Survey Implementation After a first round of telephone calls to inform IPIs about the upcoming survey and to identify the most appropriate person to answer the questionnaire, survey participants received personalized e-mail invitational messages providing information on the survey rationale and including the questionnaire. Out of the 19 IPIs contacted, 12 participated in the survey, with a response rate of more than 60 percent. Immediately upon completion of the survey period, data were inspected to check for accuracy. Critical data were corrected or, when correction was not possible, clarifications were requested directly from the IPI through follow-up email messages or brief telephone calls. Survey Respondents EcONOMY IpI Algeria National Agency for Investment Development Djibouti National Investment Promotion Agency Egypt, Arab Rep. General Authority for Investment Iraq National Investment Commission Jordan Jordan Investment Board Kuwait Kuwait Foreign Investment Bureau Morocco Moroccan Investment and Development Agency (MIDA) Oman The Public Authority for Investment Promotion & Export Development Syrian Arab Rep. Syrian Investment Agency Tunisia Foreign Investment Promotion Agency United Arab Emirates Dubai Foreign Investment Office—Department of Economic Development* West Bank and Gaza Palestinian Investment Promotion Agency * GIPB 2012 assessed the Dubai Development and Investment Authority, but this organization was later replaced by the Foreign Investment Office, Department of Economic Development. This latter organization responded to the IPI Characteristics Survey. Appendices 47 Survey Results Key results of the IPI Characteristics Survey are summarized below and illustrated in graphical format. Structural Features Year of Estab- The majority of MENA IPIs were established between 1991 and 2000, while four new IPIs were set up lishment in the region in the past decade Legal Status All MENA IPIs participating in the survey are governmental institutions. 48 GIPB 2012: Seizing the Potential for Better Investment Facilitation in the MENA Region Management Eleven out of 12 IPIs have a management board comprising mostly directors with public sector Board experience. Total Staff The majority of MENA IPIs’ total staff ranges from 10 to 100. (Full-time equivalent) About 80 percent of staff members are responsible for operational activities (such as investment officers, assistants and researchers), the rest for support activities (cleaning and maintenance, chauffeurs, and so on). Staff with Previous Private Sector Experience Appendices 49 Staff Respon- Almost all MENA IPIs have staff performing market research to gather information that will help sible for Market investors in their decision-making process, but only in two cases is their dedication exclusive. Research Total Budget for The budget of MENA IPIs varies widely: from US$276,000 to US$120 million. However, the majority FY 2011/2012 of IPIs have a budget falling between US$2 million and US$7 million. IT Equipment For each person employed, MENA IPIs have on average 0.8 computers with access to the Internet. Local & Interna- Although the majority of MENA IPIs have one single office, located in the country’s capital/main city, tional there are five IPIs with a subnational network and four IPIs with overseas offices. Presence Inquiry Handling Number of Inquiries from Foreign Inves- tors in a Typical Week 50 GIPB 2012: Seizing the Potential for Better Investment Facilitation in the MENA Region The Two Most Impor- tant Channels The Two Main Sources of Inquiries Language Used Most Often in the Investor Inquiries Appendices 51 Staff Responsible for The majority of MENA IPIs have staff responsible for responding to Web-based and/or telephone inquiries Inquiry Handling from investors, although not in a full-time capacity. In only two cases, IPIs have two people exclusively dedicated to handling inquiries from potential investors. Training Sessions Delivered to Staff Re- sponsible for Inquiry Handling Average Salary of No MENA IPIs offer salaries competitive with the private sector. In 50 percent of the cases, average salaries Staff Responsible for are above those in the public sector, but below those in the private; in the remaining 50 percent, average Inquiry Handling salaries are at par with the public sector. Written Guidelines Half of MENA IPIs have written guidelines or procedures to respond to investor inquiries. 52 GIPB 2012: Seizing the Potential for Better Investment Facilitation in the MENA Region APPENDIX D: LIST OF NATIONAL IPIS ASSESSED, MENA REGION EcONOMY IpI WEB sItE Algeria National Agency for Investment Development www.andi.dz Bahrain Bahrain Economic Development Board www.bahrainedb.com Djibouti National Investment Promotion Agency www.djiboutinvest.dj Egypt, Arab Rep. General Authority for Investment www.gafinet.org Iran, Islamic Rep. Organization for Investment Economic and Technical Assistance of Iran www.investiniran.ir Iraq National Investment Commission www.investpromo.gov.iq Jordan Jordan Investment Board www.jordaninvestment.com Kuwait Kuwait Foreign Investment Bureau www.kfib.com.kw Lebanon Investment Development Authority of Lebanon www.idal.com.lb Libya Libyan Investment Board www.investinlibya.ly Morocco Moroccan Investment and Development Agency (MIDA) www.invest.gov.ma Oman The Omani Centre for Investment Promotion and Export Development* www.ociped.com Qatar Ministry of Business and Trade www.mbt.gov.qa Saudi Arabia Saudi Arabian General Investment Authority www.sagia.gov.sa Syrian Arab Rep. Syrian Investment Agency www.investinsyria.org Tunisia Foreign Investment Promotion Agency www.investintunisia.tn United Arab Emirates Dubai Development and Investment Authority www.emiratesfreezone.com West Bank and Gaza Palestinian Investment Promotion Agency www.pipa.gov.ps Yemen, Rep. General Investment Authority www.giay.gov.ye *Subsequently re-named the Public Authority for Investment Promotion & Export Development. Appendices 53 Investment Climate Department of the World Bank Group The Investment Climate Department of the World Bank Group helps governments implement reforms to improve their business environment, and encourage and retain investment, thus fostering competitive markets, growth and job creation. Funding is provided by the World Bank Group (IFC, MIGA, and the World Bank) and over fifteen donor partners working through the multi-donor FIAS platform. In partnership with