TRADE, INVESTMENT AND COMPETITIVENESS TRADE, INVESTMENT AND COMPETITIVENESS EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT Planning for Success: Strategies of Investment Promotion Agencies Technical Note Lina Sawaqed and Carlos Griffin © 2023 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW Washington DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org This work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. 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Photo credits: Illustration Contributor: Lightspring, Shutterstock Photo Contributor: Golden Dayz, Shutterstock Photo Contributor: Gorodenkoff, Shutterstock Photo Contributor: fizkes, Shutterstock Illustration Contributor: Olivier Le Moal, Shutterstock Photo Contributor: fizkes, Shutterstock Photo Contributor: LookerStudio, Shutterstock >>> Abbreviations CRM customer relationship management FDI foreign direct investment IPA investment promotion agency KPI key performance indicator M&E monitoring and evaluation OECD Organisation for Economic Co-operation and Development PPP public-private partnership RD&I research, development, and innovation SDG Sustainable Development Goal SEZ special economic zone SME small or medium enterprise SOP standard operating procedure UNCTAD United Nations Conference on Trade and Development WAIPA World Association of Investment Promotion Agencies WBG World Bank Group >>> Acknowledgments Lina Sawaqed is a Private Sector Specialist with the Global Investment Climate (IC) Unit of the Equitable Growth, Finance, and Institutions (EFI) Global Practice of the World Bank. Carlos Griffin is a Senior Investment Promotion Consultant with the IC Unit. The note was prepared under the guidance of Armando Heilbron, Investment Promotion Workstream Leader in the IC Unit, with the support and input of Asya Akhlaque, Practice Manager, Ivan Nimac, Global Lead for Investment Policy and Promotion and David Bridgman, Senior Advisor, all within the IC unit. The authors would like to thank World Bank peer reviewers Lukasz Marek Marc, Senior Private Sector Specialist with the Finance, Competitiveness, and Innovation (FCI) Global Practice in Europe and Central Asia, Zenaida Hernandez Uriz, Senior Private Sector Specialist with FCI in Eastern and Southern Africa, and Harald Jedlicka, Senior Private Sector Specialist with the IC Unit, for their advice and valuable comments. Special thanks to Robert Whyte, Senior Investment Promotion Consultant, who provided valuable review and comments to the note. Our thanks also go to the senior investment promotion experts that provided valuable details, including Paul Lewis, Sérgio Costa, Henry Loewendahl, and David O’Donovan. The team is also grateful to Rachel Rosalee Almeida, Private Sector Consultant at the IC Unit, for her work in getting the document through the institutional review process. Lastly, thanks to Richard Crabbe for editing support and Bruna Sofia Simoes for design and production services. This publication was made possible through the financial support of the United Kingdom’s Foreign, Commonwealth and Development Office. >>> Contents Abbreviations Acknowledgements Executive summary 1 Introduction 5 Section 1. Essential Elements of an IPA Strategy 11 1.1. Vision and Mission 12 1.2. A Focus on Internationally Competitive Sectors 13 1.3. Setting Strategic Objectives and Targets 15 1.4. Strategic Actions 18 1.5. Tailored Services 18 1.6. Organizational Structure 20 1.7. Time-bound Implementation Plans 22 1.8. Resource Allocation 24 1.9. Internal Tools and Systems 24 1.10. Monitoring and Evaluation Framework 25 Section 2. How to Develop an IPA Strategy 29 2.1. Prerequisites for Strategy Development 30 2.2. Defining the Process 30 >>> Contents 2.3. Evaluation of Past Efforts 31 2.4. Competitiveness Assessment 31 2.5. Drafting the Strategic Document 35 2.6. Consulting with Stakeholders 37 2.7. Getting the Strategy Approved 38 2.8. Ensuring Effective Implementation 39 2.9. Building Staff Capacity for Implementation 39 2.10. Building Partnerships for Implementation 39 2.11. Developing a Feedback Loop for Policy Reform 40 2.12. Communications, Media and Public Outreach 40 2.13. Tracking Strategy Implementation Progress and Post- 41 Implementation Evaluation Conclusion 43 References 44 >>> Figures Figure 1: National Strategies Cascade into IPA Strategies 6 Figure 2: Scotland’s and Ireland’s Cascading Strategies 8 Figure 3: Essential Elements of an IPA Strategy 11 Figure 4: Number of Priority Sectors among Responding IPAs 14 Figure 5: IPA Services to Investors Along the Stages of the Investment Lifecycle 19 (the World Bank’s Comprehensive Investor Services Framework (CISF)) Figure 6: Organizational Structure of Austrade’s Investment Department 21 Figure 7: Implementation Work Plan for Caribbean Regional Investment 23 Promotion Strategy (RIPS) Figure 8. Summary of Selected SDG-Related Results from CINDE’s 2020 27 Annual Report Figure 9: How to Develop an IPA Strategy 29 Figure 10: Sources that Inform the IPA Strategy 31 Figure 11: Benchmarking Canada’s strong cost advantage over US and 33 European competitors for the grain & oilseed processing sector Figure 12: Benchmarking Canada for location decision-drivers in the grain 33 & oilseed processing sector >>> Boxes Box 1: Strategy for Invest India Transformation 9 Box 2: Glossary of Key Terms 10 Box 3: InvestSA Sectoral Focus 13 Box 4: Targeting Sectors and Markets 15 Box 5: Examples of Government Articulation of IPA Roles 16 Box 6: IDA Ireland’s Strategic Objectives and KPIs 17 Box 7: InvestPenang’s Tailored Investor Services 19 Box 8: Summary of IDA Ireland’s M&E Framework, 2021 26 Box 9: Sector Identification and International Benchmarking – Canada 33 Example Box 10: Attributes of High-Performing IPAs 41 >>> Tables Table 1: Examples of IPA Vision and Mission Statements 12 Table 2: CINDE’s Year-on-Year Efficiency Gains 27 Table 3: Recommended Sequence for Drafting Strategy Elements 36 >>> Executive Summary Governments establish investment promotion agencies (IPAs) as part of the larger framework fostering private sector development and contributing to achieving national development objectives. IPAs do this by attracting and supporting investments that will translate into more and better jobs; higher wages; more revenue for local businesses; and the skills, technologies, and new economic activities which will, in turn, lead again to more jobs, wages, and local revenue. In order to do this, the IPA must identify its own strategic objectives and chart a path towards the achievement of these objectives. Cascading from national strategies and plans, the IPA’s strategy is a key tool that helps it succeed by guiding it to focus on the investors most likely to invest and generate the desired impacts, engage in the most suitable activities to cater to investors along the investment lifecycle, and make the best use of its resources, capabilities and partnerships. This note serves as a guide to IPAs and policy makers in the development, adoption, and implementation of IPA strategies, drawing on World Bank Group experience and examples of good practices around the world. It presents the essential elements of an investment promotion strategy and the critical steps for its development and implementation. The main elements of an IPA investment strategy are the following (some can be developed fully in subsequent documents): 1. Vision and mission: The IPA strategy should set out a clear idea of what investment promotion success will look like, how it will positively impact the IPA’s location, and the role of the IPA in achieving it. This statement of vision and mission should inspire IPA personnel and guide their work. 2. A focus on internationally competitive sectors: No investment location can be equally attractive to all investors. Attracting an investor to a certain location is likely to be easier and more successful when the location is a good fit for that specific investor’s plans and projects. The IPA’s role is to ensure that investors are aware of their location as an option for the investment, undertaking targeted promotion and providing information, assistance, and advocacy that can make the most impact on the investor’s location decision. The IPA EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 1 must prioritize the sectors, subsectors, and segments on the individual capabilities of staff, and the strategy where its location has the characteristics that investors should identify the profiles and number of staff needed for are looking for. implementation. 3. Strategic objectives: Based on the IPA’s mandate, its 9. Internal tools and systems: The right systems and vision and mission for contributing to national development tools adapted to the IPA’s needs would greatly improve objectives, and its location’s competitive sectors, the the IPA’s ability to implement its strategy, and the strategy IPA’s strategy should set out SMART objectives – that is, should address whether the IPA’s existing systems and objectives which are specific, measurable, achievable, tools should be upgraded, or whether some of these relevant, and time-bound – and key performance tools are missing and would need to be established at indicators (KPIs) by which to track results. the IPA. Among the tools used by IPAs around the world 4. Strategic actions: These deal with how strategic are a shared investor information system, a customer objectives are to be achieved, turning them into specific relationship management (CRM) system, standard programs of activities that can serve as an operational operating procedures (SOPs), and communication tools work plan for IPA personnel. They may entail activities such as the IPA’s website. such as marketing the location to investors to diversify into 10. Monitoring and evaluation (M&E) framework: This is high-potential segments, working with training institutions essential to capturing progress in strategy implementation, to develop the skills that investors need, and advocating securing funding from government, and justifying the for investment climate reform to increase the international autonomy of the IPA’s decision-making. M&E entails competitiveness of a certain sector. routine checks of the IPA’s effectiveness in meeting 5. Tailored services: IPAs provide many services to objectives, the larger impact of those outcomes, and the investors along the different stages of the investment IPA’s efficiency in their achievement. lifecycle. Taking into consideration the IPA’s limited resources, the strategy will articulate the mix of services How does an IPA develop its strategy and set itself up for that it will offer to attract, retain, and expand the types successful implementation? The prerequisites for developing of investments that are likely to contribute to achieving a successful strategy, the steps involved in developing strategic objectives. the strategy, and the basic factors impacting strategy 6. Organizational structure: Once an IPA’s objectives implementation are as follows: and planned activities are determined, its organizational structure should be optimized for the implementation of its 1. Prerequisites to strategy development: A minimum strategy. The IPA’s organizational structure should reflect level of conditions that are conducive for strategy the IPA’s strategic focus and the mix of services it intends implementation needs to exist; otherwise, the strategy to provide to investors. may go partially or entirely unimplemented. These include 7. Time-bound implementation plans: Achievement of the strategy’s impact orientation, a willingness to monitor any strategic objective requires many smaller steps. An and evaluate performance, an agreement with key implementation plan articulates these steps, assigns stakeholder on the strategy’s scope, and sincere buy-in responsibility for each to specific personnel, and sets from implementing partners. reasonable time frames for their completion. This clarity 2. Defining the process: The IPA must think of who will allows managers to ensure that implementation proceeds actually draft the strategy: is it a task group or a designated as needed to meet objectives in line with planned time unit within the IPA, or will the process be outsourced to a frames and resource expenditures. firm or external expert? This will depend on the level of 8. Resource allocation: Implementing the strategy’s experience and investment promotion expertise that the activities over multiple years will require considerable IPA has, as well as the available resources. Each option human and financial resources that must be planned for presents a set of pros and cons for the IPA that must also and articulated explicitly in the strategy document. The be assessed. IPA must have funding continuity over a period of at least 3. Evaluation of past efforts: Unless an IPA is newly three to five years. Strategy execution will also depend established, any strategy exercise needs to consider EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 2 what has happened in the past period. Understanding the engaging them through performance incentives and successes and shortcomings of the previous strategy (if regular implementation status meetings. one existed) is a good starting point for the design of a 9. Building staff capacity for implementation: A new new one that improves the IPA’s effectiveness. strategy is likely to require a higher level of staff skills to 4. Competitive assessment: The IPA strategy should implement. Investing in staff development should be an prioritize a small number of high-potential, highly integral part of the IPA’s strategy. The implementation attractive sectors, subsectors, and segments based on an phase should offer opportunities for learning by doing, objective assessment of the location’s competitiveness practical training, and hands-on coaching by international and a benchmarking against comparator locations on experts and through exposure to other agencies and the national and sectoral levels. Identifying the IPA’s global events. sectors, subsectors, and segments of strategic focus 10. Building partnerships for strategy formulation and requires an objective, data-driven ranking of each sector’s implementation: Strategy implementation requires attractiveness to investors and its desirability from the interaction with and inputs from many parties. The development perspective. This “sector scan” typically strategy should address ways for the IPA to strengthen identifies sectors, subsectors, and segments which and maintain partnerships with relevant stakeholders. respond to these attractiveness and desirability criteria. The IPA should seek to strengthen its partnerships with 5. Drafting the strategic document: With the foregoing stakeholders to collaborate purposefully on overlapping political, institutional, and analytical prerequisites in place, mandates and ensure that investors’ needs are met. drafting the strategy can begin. The substantive elements 11. Developing a feedback loop for policy reform: Insights of a strategy flow from one another in a sequence with from strategy implementation activities could inform and different key inputs, processes, and stakeholder feedback enrich national policy formulation. They can be conveyed at each step, even if some steps require more iteration. through the IPA’s management and board to policy makers 6. Consulting with stakeholders: The IPA’s strategy so that they can be taken into account when formulating should be formulated in a consultative and collaborative relevant policies and plans. The IPA can also channel manner involving the IPA’s public and private stakeholders these insights and suggestions on a continuous basis and IPA staff. Stakeholder consultations take place at through its formal policy advocacy function or through its different points during strategy development. They also board and management’s regular contacts with policy- serve to build synergies and strengthen collaboration making government entities. with IPA partners. 12. Communications, media, and public outreach: 7. Getting the strategy approved: Once the strategy Many IPA departments and activities will engage in development process is concluded, it is likely that the communications with external parties. Publicizing the final draft would need to be approved by government – IPA’s services and successes is indispensable to winning the IPA’s parent ministry, council of ministers, president’s deeper engagement from companies and extracting office, etc. Submitting the strategy document for approval greater benefits for the local economy. Similarly, it buys gives the strategy further exposure, whereas obtaining the IPA greater cooperation from stakeholders and approval from government gives it further legitimacy. The partners who want to share in that success. IPA should plan for the approval process ahead of time. 13. Tracking strategy implementation progress and post- 8. Ensuring implementation: Many strategies get implementation evaluation: Monitoring and evaluation developed but falter at the implementation stage. IPAs (M&E) of progress on the strategy’s objectives will can give their strategy a higher chance of implementation help improve the chances of implementation success in a number of ways, such as immediately developing by acting as a motivator, enabling the tracking of an implementation plan covering at least the first year, progress toward attaining goals, and allowing for course holding the IPA accountable to the government for correction if needed. M&E will also facilitate transparent, strategy implementation, clarifying the roles of staff, recurring reporting on the strategy’s success to the IPA’s management, and board, and motivating staff and stakeholders, which will, in turn, help to elevate the IPA’s EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 3 profile as a capable agency and support its claims to activities. This may come from previous strategies having needed funding in the future. An honest assessment of proven fruitless or newly established or reorganized IPAs the IPA’s performance will also help with the formulation wanting to show quick results. However, a strategy is a of future IPA strategies and plans. powerful tool when properly developed and implemented, leading to better, more sustainable results and recognition of IPAs sometimes rush through strategy development as the IPA’s value to the country. a formality or forgo it altogether, favoring quick launch of EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 4 >>> Introduction This note aims to provide investment promotion agencies (IPAs) and their partners and stakeholders with guidance and information regarding the central role of IPA strategies, the elements of an effective IPA strategy, and the process of strategy development and implementation.1 Governments have a major role to play in creating the right environment for the private sector to thrive and generate more jobs and economic growth. Governments must encourage the private sector to invest as well as ensure that they have in place a policy environment for those investments to translate into increased prosperity in the form of jobs, higher wages, more revenue for local businesses, and the skills, technologies, and new economic activities which will lead to more jobs, wages, and local revenue. IPAs typically lead their governments’ efforts to attract, retain, and grow foreign direct investment (FDI) as part of the larger framework fostering private sector development.2 World Bank Group (WBG) research and operational experience indicate that IPA success depends on the following three pillars3: 1. Strong institution: An IPA properly mandated, designed, resourced, and managed for successful delivery of strategic results. 2. Effective strategy: An IPA’s plan to attract, retain, and expand investment as a way to foster jobs and other benefits targeted by national development strategies. 3. Well-targeted, investor-focused services: High-quality IPA services provided to investors, which effectively help or encourage them to make investments with the development impacts targeted by the IPA strategy. The IPA’s strategy will reflect the nature and scope of its mandate, which should focus primarily on investment promotion. Having very few or no other responsibilities would allow the IPA to concentrate on attracting, retaining, and expanding private, productive investment. The IPA’s strategy will also be influenced by its investment policy context, that is the framework governing foreign business entry, as well as investment incentives and protections in its location.4 1. IPA strategies may go by other names, such as strategic roadmap, corporate plan, or business plan. 2. Heilbron, Armando, and Robert Whyte. 2019. “Institutions for Investment: Establishing a High-Performing Institutional Framework for Foreign Direct Investment (FDI).” InFocus Note, Investment Climate Unit, Washington, DC: World Bank. https://openknowledge.worldbank.org/handle/10986/35198. 3. Heilbron, Armando, and Hania Kronfol. 2020. “Increasing the Development Impact of Investment Promotion Agencies.” In Global Investment Competitiveness Report 2019/2020, 170 – 207. https://doi.org/10.1596/978-1-4648-1536-2. 4. For further information on these investment policy areas, please consult the World Bank Group Investment Climate Unit publications on this link: https://www.worldbank. org/en/topic/investment-climate#3. EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 5 As illustrated in Figure 1, there are at least three types of complemented by a policy or strategy for the role of private national strategies related to investment and relevant to IPAs: sector investment, and sometimes even a strategy for the role of FDI, in the achievement of those goals. An IPA’s strategy 1. National development strategies articulate national should derive from these plans, setting explicit, quantified development objectives and ways to achieve them. impact objectives showing how the IPA’s activities might 2. Private sector development strategies or narrower contribute to the achievement of the national development industrial policies clarify the role of the private sector in goals, and identifying the path toward attracting and fostering furthering national development objectives. the types of investments that would help attain those goals. 3. FDI strategies specify the role the government expects This will ensure that different parts of government are working foreign investors will play and how the government plans together for the achievement of one set of cohesive and to make that happen. rational economic goals and also, importantly, that the IPA is seen as a central part of the government’s overarching efforts The IPA’s strategy should cascade down from and align with and thus has wide support and buy-in within government. national economic plans and policies. Governments typically devise national economic development plans, setting goals Subnational strategies should cascade in this way as well, such as economic growth and diversification, job creation, flowing through the subnational IPA’s strategies and goals but sector development, technology transfer, skills development, focusing on its specific region’s competitiveness factors and and market connectivity. These plans could include or be development goals. >>> Figure 1: National Strategies Cascade into IPA Strategies National National Development Strategy Level Private Sector Development Strategy National FDI Strategy IPA Level IPA Strategy Source: World Bank Group. EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 6 According to the University of Manchester’s Strategic Network nine priority opportunity areas, where Scotland’s strengths on New National Planning, in 2018, 134 countries had a match global demand, that will be the focus of the country’s national development plan “with a set of coherent economic investment promotion efforts. SDI’s fully linked business plan and socio-political objectives that transcends sectors and (strategy) will reflect the focus of the national plan by aligning articulates a vision for national development.” For many SDI’s global resources and footprint to these nine priority developing countries, these plans appear to be driven at least areas, and focusing its proactive promotion in the locations in part by planning and monitoring for the 2030 Agenda for where it can maximize access to relevant investors.6 Sustainable Development and its 17 Sustainable Development The strategy of Ireland’s IPA, the Industrial Development Goals (SDGs). Seventy-four percent of these had time frames Agency (IDA Ireland), for the period 2021-2024, titled ‘Driving of four to six years, and 16 percent had time frames of 15 or Recovery and Sustainable Growth’, builds on Ireland’s more years. Some countries, such as Saudi Arabia and South National Enterprise Policy 2015-2025 (Enterprise 2025), Africa, have both.5 developed by the Irish Department of Enterprise, Trade and Employment (DETE) and revised in 2018, which outlines the A comprehensive FDI strategy would indicate sectors in which country’s strategic objectives for economic development and FDI is desired, express policies for the treatment of FDI, growth for 2015–2025. IDA’s strategy also cascades from assign institutions for the handling of FDI and related functions the DETE’s 2020 report titled “Working to Progress Ireland’s (including promotion and aftercare), direct public coordination Trade and Investment Objectives”, which outlines how IDA for whole-of-government implementation of the strategy, Ireland will attract foreign direct investment (FDI) to Ireland in and outline measures for the strengthening of public-private the context of the COVID-19 pandemic. The Enterprise 2025 collaboration on future strategic direction. Strategy itself cascades from the Irish Government’s 2014- 2020 Medium-Term Economic Strategy (MTES) that set out an Scotland’s 2022 National Strategy for Economic Transformation overarching framework for social and economic policies being comprises a specific national Inward Investment Plan (the developed across Government over the strategy’s period.7 national investment strategy), which was developed by a These two examples of cascading strategies from Ireland and multiagency project team that included Scottish Development Scotland are shown in Figure 2. International (SDI), the Scottish IPA. This plan identified 5. Admos O. Chimhowu, David Hulme, and Lauchlan T. Munro. 2019. “The ‘New’ national development planning and global development goals: Processes and partnerships.” World Development, Volume 120, pages 76-89. https://doi.org/10.1016/j.worlddev.2019.03.013. 6. The team that developed the national plan also included members from Skills Development Scotland, Highlands and Islands Enterprise, South of Scotland Enterprise, Scottish Enterprise, Scottish Funding Council, and the Scottish Government. The plan was also developed in consultation and collaboration with key investors and business organizations. Source: Scottish Government, “Scotland’s Inward Investment Plan: Shaping Scotland’s Economy.” Sources: Scottish government website: https://www.gov.scot/publications/scotlands-national-strategy-economic-transformation/pages/3/, and https://www.gov.scot/binaries/content/documents/govscot/publications/strategy-plan/2020/10/shaping-scotlands-economy-scotlands-inward-investment-plan/ documents/scotlands-inward-investment-plan-shaping-scotlands-economy/scotlands-inward-investment-plan-shaping-scotlands-economy/govscot%3Adocument/ scotlands-inward-investment-plan-shaping-scotlands-economy.pdf. 7. Please refer to these documents on the websites of IDA Ireland (https://www.idaireland.com/driving-recovery-and-sustainable-growth-2021-2024); the Department of Enterprise, Trade and Employment (Enterprise 2025: https://enterprise.gov.ie/en/publications/enterprise-2025.html, Enterprise 2025 Renewed, 2020 report “Working to Progress Ireland’s Trade and Investment Objectives”: https://enterprise.gov.ie/en/publications/working-to-progress-irelands-trade-and-investment-objectives.html); and the Irish Department of Foreign Affairs (https://www.dfa.ie/media/dfa/alldfawebsitemedia/ourrolesandpolicies/tradeandpromotion/strategy-for-growth-2014-2020.pdf) EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 7 >>> Figure 2: Scotland’s and Ireland’s Cascading Strategies National Level Medium Term Economic Strategy Ireland’s Enterprise National Strategy for Policy “Making it Happen: Scotland Ireland Economic Transformation Growing Enterprise for Ireland” Department of Jobs Enterprise and Inward Investment Plan Innovation’s Policy Statement on FDI IPA Level SDI’s Corporate Plan IDA Ireland FDI Strategy Sources: Websites of (i) IDA Ireland; Ireland’s Department of Enterprise, Trade and Development; (ii) Scottish Government. National development plans should also cascade within the or contradictions. The IPA can still address in its own strategy different elements of the IPA’s strategy. Such plans provide some of the high-level strategic areas where there are gaps the basis of the IPA’s vision, which helps define the IPA’s legal or confusion, especially through the strategy’s consultative functions or mandates. The IPA’s strategic objectives are development process which involves the IPA’s multiple intended as a way for the IPA to ensure the execution of its stakeholders. This could be part of the IPA’s contribution to mandates, and they are then translated into service programs. policy formulation, which is typically one of its roles. Subsequently, implementation plans are devised to guide the execution of the IPA’s mandate and the achievement of its It is also important to note that the IPA’s strategy can be a key objectives. All of these elements will be discussed in Section 1. feature in an existing IPA’s restructuring and reshaping. IPAs should be dynamic entities that continuously seek improvement But what if there are gaps in national policies or multiple and can adjust to changing circumstances. A newly-devised overlapping strategies when it comes to the role of investment strategy can accompany and guide these transformations. and FDI, in particular? This could create confusion as to what Invest India and the Foreign Investment Promotion Agency the priorities and goals are. Ideally, the IPA should have such of Tunisia are examples of IPAs that went through significant national-level strategies and policies at its disposal when overhauls and in the process followed expressly-developed devising its own strategy, but this may not be always the case. strategies to guide their transformations.8 Box 1 summarizes The IPA’s location could experience strategic gaps, overlaps, the case of Invest India. 8. India: Phillips, Joe, Armando Heilbron, and Priyanka Kher. “Lessons in Investment Promotion: The Case of Invest India” (English). Equitable Growth, Finance and Institutions Note. Washington, DC: World Bank Group. https://openknowledge.worldbank.org/handle/10986/36024 Tunisia: Sabha, Yassin, Mouna Hamden, and Armando Heilbron. 2020. “Attracting Foreign Direct Investment into Tunisia through Outreach Campaigns” (English). Washington, DC: International Finance Corporation. https://openknowledge.worldbank.org/handle/10986/34443 EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 8 Box 1: Strategy for Invest India Transformation Invest India was established in 2009 but was not empowered and fully resourced until 2015. The IPA did not have an actual investment promotion strategy, its specific objectives were not fully articulated, and the agency did not have clarity on its priorities and focus sectors. This also made it difficult to align and develop strong relationships with relevant private and public stakeholders. In 2015, Invest India developed a new, practical strategy to chart a path towards its institutional strengthening, which positioned it to be highly targeted in its activities and its relationships with other institutions. Invest India’s strategy has a strong sectoral focus. To identify competitive sectors, the agency uses parameters that look at its recent successes in terms of FDI project wins, jobs, and inquiries; and the country’s competitive strengths in terms of raw material availability, skill availability and existing clusters. The agency also advocates policy changes to the business environment in specific sectors when needed. There was also a strong emphasis on aligning the IPA’s goals and activities with the SDGs from United Nations Conference on Trade and Development (UNCTAD). This meant proactively targeting sectors and investors that clearly contribute to some of these 17 goals, such as gender equality and climate action. This commitment has been recognized, as the agency won the United Nations’ award for excellence in promoting investments in sustainable development for the collaboration with Vestas on the Ahmedabad Blade factory in 2018. Having a target-focused investment promotion strategy was one of the critical success factors that enabled the agency to respond to challenges and deliver sustained success evidenced by having facilitated $31 billion of FDI and direct creation of nearly 303,900 jobs. In part, Invest India has contributed to India’s stellar FDI performance in 2020, when the country reached another record of $64 billion, against a global drop of 35 percent. While some challenges remain, Invest India’s journey guided by a clear strategy that is sector-focused and geared towards institutional strengthening provides valuable lessons for other IPAs that are undergoing a phase of review and reform. Source: Phillips et al. 2021. Seventy percent of national IPAs responding the 2020 WAIPA- by the WBG based on available literature and the WBG’s WBG global IPA survey claim to have such a multiyear strategy,9 extensive experience working in the areas of investment but the World Bank’s operational experience indicates that policy and promotion in developing countries. Section many of these are ineffective and remain unimplemented, for 1 describes the essential elements of an IPA strategy, a variety of reasons. and Section 2 covers the main steps in effective strategy formulation and implementation.10 This note is one of a series of related policy notes prepared 9. Sanchiz, Alex, and Ahmed Omic. 2020. State of Investment Promotion Agencies: Evidence from WAIPA-WBG’s Joint Global Survey. Washington, DC: World Bank. Geneva: WAIPA (World Association of Investment Promotion Agencies). https://documents1.worldbank.org/curated/en/499971594008431029/pdf/State-of-Investment- Promotion-Agencies-Evidence-from-WAIPA-WBG-s-Joint-Global-Survey.pdf 10. The World Bank Group has previously issued various publications dealing with different aspects covered in this note, many of which are cited in this publication. Several of the key concepts and good practices previously published will be restated in this note so that all the important information on IPA strategies is covered for the reader in a comprehensive manner. EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 9 Box 2: Glossary of Key Terms Some fundamental terms in the field of investment promotion can mean very different things to different people, with consequential implications for the practice of investment promotion and discussion of its best practices. This note uses the terms as is typical among the most well-regarded IPAs and as described here: • Investment: Originates from private sources, often foreign. The money used to directly acquire assets (equipment, machinery, land, buildings, non-tangible assets) to establish and operate a business which will undertake commercial activities such as design, production and assembly, testing, maintenance, marketing, distribution, and the sale of goods and/or services. For the purpose of investment promotion, investment does not refer to portfolio investments or government investments. • Investor: The business that makes the investment, regardless of the business’ size. It can be an enterprise with the owner as the single employee or a multinational with 100,000 employees. An investment can be made by a single or multiple investors, including joint ventures between foreign and domestic investors. • Investment promotion: Marketing, information, assistance, and advocacy that is used by an agency to get the attention of foreign investors, service them, and persuade them to invest, operate, and grow in a particular country. It does not refer to the regulation of investment – for example, licensing projects or granting incentives – or policy making. Promotion of domestic investment generally falls under the terms “SME development,” “export promotion,” and “outward investment promotion.” • Investment promotion agency (IPA): An institution, usually public, mandated to promote foreign direct investment (FDI) in a location (country, region, city, etc.), whether or not it has other mandates, for example, regulation, SME development, or export promotion. These definitions are intended for the purposes of IPA organization and are not legal definitions which appear in countries’ investment laws. EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 10 1. >>> Section 1. Essential Elements of an IPA Strategy This section describes the main elements that typically form a core part of an IPA’s investment strategy. Figure 3 presents these elements. >>> Figure 3: Essential Elements of an IPA Strategy Internal Tools and Systems Monitoring and Evaluation (M&E) Framework Vision and Mission Essential Elements of an IPA Strategy A Focus on Internationally Competitive Sectors Setting Strategic Objectives and Targets Resource Strategic Allocation Actions Time-bound Tailored Implementation Plans Services Organizational Structure EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 11 The strategy must be explicit and detailed in defining some of 1.1. Vision and Mission the main strategic elements, such as the vision and mission, target sectors and markets, and strategic objectives and Well-articulated visions and missions define success for an actions. A discussion of the remaining elements should be organization in a way that usefully helps staff achieve it. The part of the high-level strategic document, but they can be fully IPA strategy should set out a clear vision of the success and fleshed out at a later stage. The strategy may only define the impact that the IPA aspires to achieve in the future through main aspects of these elements, including a reflection on how the implementation of the strategy, ideally stemming from the they should be built or strengthened as they are a critical part National Development Plan – for example, becoming a world- of the strategy’s success, and stipulate that these elements class IPA, positioning its location as a favored investment be developed in separate exercises and documents shortly destination, contributing to substantial growth in key economic following strategy completion and approval. For example, sectors, or the diversification of the economy into new sectors. implementation plans and budgets will be tackled in deeper The strategy should also define the IPA’s mission – the role detail; a project to endow the agency with the needed tools that the IPA will play in achieving the vision and the objectives and systems can be planned; and if a staff audit has not been that will measure that achievement – for example, providing undertaken before strategy development, it can be done top-notch investor services that would attract additional afterward to inform the specifics of staff hiring and capacity investments in established or new sectors or retain existing building. The strategy may also refer to preceding analysis, investments, thus creating and maintaining new and better such as sector scans that would have been undertaken to jobs. Table 1 presents five different examples of vision and underpin the strategy’s focus on competitive sectors and mission statements. target markets; or a staff audit to help in refining the agency’s structure and its human resource and capacity building needs. >>> Table 1: Examples of IPA Vision and Mission Statements IPA Vision Mission Promote exports and the internationalization of Brazilian companies and foreign direct To be recognized as the best export, ApexBrasil (Brazil) investments, in support of national public policies internationalization, and investment promotion and strategies, in order to contribute to the agency by 2023. sustainable growth of the Brazilian economy. Malaysian Investment Malaysia as the preeminent preferred investment We build dynamic and sustainable investment Development destination. ecosystems. Authority To position Costa Rica as a sustainable country, To contribute to the country’s economic and highly connected with the global economy, sustainable development, its economic impact, reliable to investors; fostered by its growth in CINDE (Costa Rica) and its social progress by attracting foreign direct modern, high-tech, and knowledge intensive investment and nurturing the right investment industries which drive employment on a national climate to do so. scale and promote productive linkages. We create for Singapore, sustainable economic Singapore Economic A Global Leader, A Great City, A Home in Asia for growth with vibrant business and good job Development Board Business, Innovation, and Talent. opportunities. For the benefit of the people of Ireland, IDA will IDA partners with multinational companies to win be the best and most successful Investment and develop foreign direct investment, providing IDA Ireland Promotion and Development Agency (IPDA) in jobs, economic impact, and opportunity for the the world. people of Ireland. Sources: APEXBrasil website, https://apexbrasil.com.br/br/pt/sobre-a-apex-brasil.html; MIDA website, https://www.mida.gov.my/about-mida/our-principles/; CINDE website, https://www.cinde.org/en/about; EDB website, https://www.edb.gov.sg/en/about-edb/who-we-are.html; and IDA website, https://www.idaireland.com/driving-recovery-and-sus- tainable-growth-2021-2024. EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 12 1.2. A Focus on Internationally It is therefore important for an IPA to prioritize those sectors, subsectors, and specific segments and/or products = within Competitive Sectors these sectors, for which the location has the characteristics to attract investors. Different segments within the same Locations worldwide compete for FDI. However, there is sector may have widely-varying degrees of attractiveness no investment location that can be equally attractive to all to investors as well as development impact for the location. investors. Each location has a unique mix of strengths and Moreover, successful investment promotion requires specific weaknesses for FDI and, while some investors will come to sectoral knowledge which will permeate the sectoral value and thrive in a given location, others will not be persuaded to propositions and marketing messages that the IPA will prepare come, no matter how hard the IPA tries to attract them. to promote. These should be sufficiently detailed when it comes to showcasing the business case for these segments. Attracting an investor to a certain location is likely to be Undertaking detailed sector research – for example, in the form easier and more successful when the location is a good fit of a sector scan and international benchmarking – can help for that specific investor’s plans and projects. The IPA’s role the IPA to identify those sectors, subsectors, and segments, is to make sure that such investors are aware of their location where there appears to be the best match between investor as an option for the investment, undertaking preparatory needs and the location’s strengths. High-performing IPAs research and targeted promotion, and providing information, undertake this kind of sectoral analytics aimed at identifying assistance, and advocacy that can make the most impact on and presenting their location’s advantages to investors.12 the investor’s location decision. Studies have shown that IPAs that target specific sectors, Investors are likely to respond to factual, relevant, and up- subsectors, and segments attract more FDI than those that do to-date information that speaks to the business fundamentals not. One study found that sector targeting increased the growth in their specific sector of operation, and even in the specific rate of FDI inflows into that sector by 41 percent.13 Another subsector and segment11 of their investment project. This found that, in developing countries, targeted sectors received requires the IPA to display strong knowledge of that sector 155 percent more FDI than non-targeted sectors.14 As such, and its relevant subsectors and segments, both globally and an IPA set up and managed for the purpose of delivering on a in its location. sector-focused strategy will have appropriately focused staff, information sources, partners, and activities. Box 3: InvestSA Sectoral Focus Up until 2020, InvestSA, the South African IPA, had 28 target sectors, diluting its resources without clear prioritization or measure of the promotion-readiness of these sectors. Its overall effectiveness needed to be enhanced and investor satisfaction improved by focusing on fewer sectors, chosen for being both highly attractive to investors and beneficial for South Africa. InvestSA’s Corporate Plan 2020–2022, the IPA’s strategy, shifted towards a strong emphasis on identifying fewer sectors of strategic focus. The promotion-readiness of sectors was assessed through a sector scan to define a more focused targeted promotion plan. This assessment took into consideration the disruptions brought about by the COVID-19 global pandemic and arrived at 10 high-potential sectors. These were agribusiness; automotive; cleantech; digital technology and business services; healthcare and life sciences; high tech; mining and energy; textiles, clothing, leather, and footwear; and transport and industry. This is allowing InvestSA to have a more focused and proactive engagement with existing and new investors. Source: InvestSA 11. See description in Heilbron and Kronfol. 2020. Box 5.2. p. 182. A focus on segments (industry and activity, such as “assembly of electronics components”) mirrors the evolution of global value chains and make IPA targeting more precise, thus more effective. However, most IPAs and practitioners continue to talk about “sectors.” When “sectors” is mentioned in this note, it is implied in the more specific sense of “segments”. 12. Steenbergen, Victor. Forthcoming. What makes an investment promotion agency effective: findings from a structural gravity model. Washington DC. World Bank Group. Please refer to Box 10. 13. Charlton, A. and N. Davis, “Does Investment Promotion Work?” The B.E. Journal of Economic Analysis & Policy 7 (1): 1-21. https://doi.org/10.2202/1935-1682.1743 14. Harding, Torfinn and Beata S. Javorcik. 2011. “Roll out the Red Carpet and They Will Come: Investment Promotion and FDI Inflows.” The Economic Journal 121 (557): 1445-1476. https://doi.org/10.1111/j.1468-0297.2011.02454.x EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 13 Sectors vs. Markets as Primary Focus more commonly, IPAs organize their investment promotion solely around specific sectors. Targeting investors in specific sectors, subsectors, and segments makes more sense for an IPA than only focusing on targeting investors in specific markets. Country knowledge is Number of Sectors to Target helpful for the IPA’s communication with investors, but sector knowledge is critical to investors’ decision-making and is An IPA can truly focus on proactively targeting a sector, highly valued by them. subsector, or segment only when it allocates to it adequate resources, primarily dedicated staff and budget for investor Therefore, sector targeting should form the fundamental services. If an IPA has a large number of target sectors it is basis for investment promotion and IPA strategies. This type likely to be difficult for it to allocate sufficient resources to of knowledge can be well-developed and maintained by an promote each of them. In this sense, many IPAs today still IPA which organizes its work around sectors, but it is much tend to have too many “priority” sectors for meaningful focus, harder to develop for an IPA with only a geographic focus. with 11 on average per WBG’s latest global IPA survey. In Some IPAs, such as Austrian Business Agency, Invest in fact, 44 percent of the IPAs surveyed indicated that they have Türkiye, and Invest India, have both sector specialists and more than 10 priority sectors, and 26 percent indicated 8 to 10 market specialists who team together as needed. However, priority sectors, as can be seen in Figure 4.15 >>> Figure 4: Number of Priority Sectors among Responding IPAs 15% 25% 26% 44% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 1-4 5-7 8-10 >10 Source: World Bank 2020. While deciding on the specific number of sectors to target will Targeting Markets Following Competitive depend on the IPA’s context and resources, the IPA is likely to have more success by proactively targeting no more than a Sector Identification handful of sectors. For example, while Austrade, the Australian Once sectors are identified, IPAs can then focus attention IPA, has five mandates – promotion of trade, investment, on identifying the markets where investors in these sectors tourism, international education, and provision of consular are based – see Section 2.4 for a discussion on sector and passport services -, its FDI promotion focuses on its own identification. Given that the IPA’s resources are usually priority sectors based on national priorities, demonstrated limited, its strategy will achieve more by focusing on targeting competitiveness, and synergies with other mandates. In sectors, subsectors, and segments; strategic geographical Austrade’s 2016-17 strategy, these “five ministerially agreed markets where those sectors are based; and specific investors national investment priorities” were: located in those locations. The strategy can then consider the activities needed to promote these sectors and set targets to • Advanced manufacturing, services, and technology. be achieved. See Box 4 for examples from Jordan and West • Agribusiness and food. Bank and Gaza. • Major infrastructure. • Resources and energy. • Tourism infrastructure. 15. Sanchiz and Omic. 2020. EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 14 Box 4: Targeting Sectors and Markets Pharmaceuticals was one of the focus sectors of the strategy of the Jordan Investment Board (JIB) in 2004, Jordan’s national IPA at the time. JIB identified that Jordan’s pharmaceutical value proposition was most appealing to medium- sized European and American generics manufacturers or global ethical manufacturers with investments of around $5-7 million and 75 employees for production of antiulcerants, antibiotics, drugs going off patent the following year, vaccines, hormones, anti-AIDS drugs, and anti-cancer drugs to be sold in Europe and Africa. Similarly, in 2002, the Palestinian Investment Promotion Agency (PIPA) and the Palestinian Industrial Estates and Free Zone Authority (PIEFZA) targeted investors even more narrowly, with a list of 150 companies in 18 countries with ICT, textile, and stone-working projects likely to be well served in their location. Sources: United States Agency for International Development (USAID), (i) Investment Promotion Sectoral Strategy 2005-2007: Pharmaceuticals (Jordan, 2004), https:// pdf.usaid.gov/pdf_docs/pnadb390.pdf; and (ii) Target Investor Profiles (TIP) for Investment Promotion in the West Bank and Gaza (2002), https://pdf.usaid.gov/pdf_docs/ PNACU069.pdf. The markets to target must be linked to the sectors that have Alternatively, if priority sectors have not yet been identified, been identified; this is why sectors, not markets, are the the strategy should set out the process that the IPA will use starting point for the IPA’s targeting focus. It follows that the to research and identify such target sectors, subsectors, and main criterion for identifying markets is that they are relevant segments. This may be achieved by a sector scan planned with regard to one or more of the priority sectors that the IPA with timelines and expected outcomes. intends to target. For example, an IPA targeting the textile sector may want to target markets with a concentration either of international clothing brands and retailers, such as Europe 1.3. Setting Strategic Objectives and and the US, or of efficiency-seeking firms that manufacture garments for these brands and retailers, as found in East and Targets Southeast Asia, or both. Based on the vision, mission, and the identified competitive Ultimately, in terms of investment promotion implementation, sectors, the IPA’s strategy must clearly articulate the the identification of specific investors to target will stem from objectives that it is designed as a roadmap to achieve. The the identified sectors and markets. This will depend on the IPA’s objectives will specify the IPA’s mission – its role in the profile of investor that may be attracted by the unique attributes economy and in relation to other agencies, as conceived by and value propositions of the IPA’s location. For example, if the the government and in accordance with the IPA’s specific IPA’s location is an emerging one for its sector of focus, it will context. Box 5 presents two examples from Singapore and have more success approaching companies with strategies of the United States. being first movers and avoiding companies with a track record of entering only countries with well-established ecosystems. EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 15 Box 5: Examples of Government Articulation of IPA Roles Singapore’s Economic Development Board Act of 1961, the legal instrument establishing the Singaporean IPA, lays out specific functions of the Board as the lead national investment promotion body, including: • “to stimulate the growth, expansion and development of the Singapore economy” • “to encourage foreign and local industries to upgrade their skill and technological levels through investment in technology, automation, training, research and product development activities” • “to promote, facilitate and assist in the development of support industries and services which provide important parts, components and related services to the manufacturing and services sectors.” By contrast, in the US, where there is a long history of widespread investment promotion by subnational authorities, the 2011 executive order establishing SelectUSA (the US-wide IPA) assigns it functions in a way that is more associated with a national coordinating, support, and arbitration body, including: • “coordinate outreach and engagement by the Federal Government to promote the United States as the premier location to operate a business” • “provide information to domestic and foreign firms on: the investment climate in the United States; Federal programs and incentives available to investors; and State and local economic development organizations” • “serve as an ombudsman that facilitates the resolution of issues involving Federal programs or activities related to pending investments.” Sources: Singapore Statutes Online website: https://sso.agc.gov.sg/Act/EDBA1961; US Government Information website: https://www.govinfo.gov/app/details/DCPD- 201100446. The IPA strategy should, therefore, include a congruent, SMART: specific, measurable, achievable (but challenging), clear and detailed statement of its strategic objectives over relevant, and time-bound. Selection of feasibly measured the strategy period, as well as a way to assess its degree result indicators and the setting of quantitative targets allow of success in achieving these objectives. This includes an agency to target concrete outcomes of clear value to key performance indicators (KPIs) for expected outcomes, stakeholders and objectively determine whether they have related targets, and a detailed monitoring and evaluation been achieved or not. Box 6 shows IDA Ireland’s Strategic process to capture and report on outcomes throughout the Objectives as an example of SMART objectives, as well strategy period (see Section 1.10). Typically feeding into as the set of KPIs devised to measure the achievement of national development goals, the IPA’s objectives should be these objectives. EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 16 Box 6: IDA Ireland’s Strategic Objectives and KPIs IDA Ireland’s 2021–2024 strategy titled, “Driving Recovery and Sustainable Growth” outlines strategic objectives across the pillars of Growth, Transformation, Regions, Sustainability, and Impact. Each set of objectives under these pillars has its own set of KPIs to measure success: Pillar Objectives KPIs GROWTH • Support existing clients to develop and realize their growth • Win 800 investments. agendas in Ireland. • Support client job creation of 50,000. Win investment to • Plan for the next generation of FDI in targeting of first-time • Drive market diversification. support job creation investors to Ireland. • Win two high impact investments. and economic activity • Diversify our source markets for investment to enhance resilience of FDI in Ireland. • Seek high impact investments to address specific national development goals. TRANSFORMATION • Support clients to increase their productivity, resilience and • Support 130 training and upskilling innovative capacity. investments. Partner with clients • Support client investment focused on the training and upskilling • Support 170 RD&I investments. for future growth in their employees. • Support cumulative client RD&I Ireland • Embrace the future of work through collaboration with clients and investments of €3.8 billion. key stakeholders. • Grow client training and upskilling • Engage with clients on the addition or extension of research, investments to €100 million. development & innovation (RD&I) to their mandates in Ireland. REGIONS • Win investment to propel recovery and support development in • Win 400 investments for regional each region. locations. Win investment to • Partner with existing regional clients to transform through • Maintain record investment targets for advance regional innovation and upskilling. each region. development • Develop clusters to support transformation, spillovers and • Substantially increase remote working linkages. jobs. • Collaborate with clients and stakeholders to facilitate remote working opportunities. • Continue to roll-out our essential regional property program. SUSTAINABILITY • Promote a sustainable approach to all investment. • Support 60 client sustainability • Support de-carbonization and responsible production across the investments. Embrace an inclusive IDA client base. • Reduce IDA organizational carbon and green recovery • Win sustainability investments to drive a green recovery. emissions in line with Government • Collaborate across Government on environmental sustainability targets. • Promote environmental sustainability in IDA’s own activities and • Improve IDA’s energy efficiency by 25% specifically across our office and property portfolio. • Pilot biodiversity measures on a minimum of five IDA business parks. IMPACT • Increase client employment and direct client expenditure in • Increase Irish economy expenditure by Ireland. 20%. Maximize FDI’s • Expand and strengthen linkages between IDA clients and • Support cumulative client RD&I positive impact on SMEs including through clusters, Global Sourcing, research & investments of €3.8 billion. local businesses and development (R&D) joint ventures, and innovation collaboration. • Grow client training and upskilling communities • Support clients and their employees in each region to thrive in investments to €100 m. the Future of Work. • Partner on the development of 5 • Drive FDI’s contribution to Ireland’s sustainability ambitions. clusters to support spillovers and linkages. Source: IDA Ireland website. “An FDI strategy for Ireland: Driving Recovery and Sustainable Growth 2021-2024.” https://www.idaireland.com/about-ida/driving-recov- ery-and-sustainable-growth-2021-2024. EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 17 Beyond development objectives, the IPA’s strategy should a particular time. It is this level of specificity that makes the also provide for its own institution-building and strengthening. difference between a strategy which looks more like a wish Although relevant to all IPAs, this is especially important for IPAs list and a strategy which lays out a concrete plan to effect still in the early stages of existence. This may include measures specific outcomes. to strengthen expertise in a given sector, expand international market presence in a given region, update marketing materials, Strategic actions provide an outline for an IPA’s annual work restructure the organization to better achieve its goals, foster plan. However, they must be turned into implementation partnerships and collaboration with stakeholders, or develop work plan activities, and these, in turn, into the day-to-day tools and systems to support the IPA’s efforts. Consequently, activities undertaken by staff – see Section 1.7. In the garment the IPA can have different levels of objectives – for example, manufacturing example above, the hypothetical strategic actions high-level objectives dealing with the IPA’s contributions to might be turned into tailored services such as the following: economic growth, job creation, and productivity increases; and intermediary objectives related to building a high-quality IPA. • Import/export and water purification plant: Conduct market impact assessments in cooperation with garment 1.4. Strategic Actions manufacturers association. Advocate streamlined procedures and strengthened trade infrastructure to the customs authority, ministry of finance, and reform Strategic objectives define what is to be achieved regarding secretariat. Advocate public expenditure on water a particular development impact or institutional improvement. purification plant before SEZ authority and ministries of Strategic actions17 describe how a strategic objective is to be finance and industry. achieved, turning objectives into specific programs of activities • Skill mix: Establish a trilateral forum for strategic that can serve as an operational work plan for IPA personnel. collaboration on garment sector development, including For example, an IPA might target more jobs, skills, and value garment manufacturers and related private sector addition in garment manufacturing as one of its strategic stakeholders, technical and vocational education and objectives (what). Thinking of how to do this could hypothetically training institutions, and concerned public institutions, lead to strategic actions such as: including the IPA, labor ministry, and sector regulators. • Marketing: Generate leads and conduct investor-targeting • Increase international competitiveness by advocating to campaigns for manufacturers of high-fashion and/or more- reduce time and cost to import inputs and export garments. specialized garments. Engage established investors through • Work with partners to secure a water purification plant at the individual aftercare and larger sector dialogue platforms to garment special economic zone (SEZ) where high mineral promote the location for higher value-added activities. content prevents fabric manufacturers from operating alongside and, thereby, enabling growth of their garment manufacturing customers. • Steer the sector’s training institutions toward the skills 1.5. Tailored Services that investors need to upgrade to the next stage in garment manufacturing. More generally, to fulfil their essential mandate of attracting, • Leverage the segment’s improvements and growth path retaining, and expanding investment, IPAs provide many to market the country as a manufacturing location to a services to investors along the different stages of the new subset of investors involved in high-fashion and investment lifecycle. These services may include marketing and more specialized garments beyond the country’s current awareness raising, investor targeting and outreach, information product mix. provision and investor inquiry handling, assistance with investor establishment and expansion, support to resolve investor issues The suitability and feasibility of strategic actions emanating from during operations and encourage their expansion, linkages and strategic objectives are highly context-specific. In the above matchmaking between domestic and foreign investors, and example, they could be dependent on the strengths and advocacy to improve the investment climate for existing and weaknesses of the sector’s value chain and stakeholders at potential investors.17 This is illustrated in Figure 5. 16. These are also called strategic pillars or programs. 17. Heilbron, Armando, and Yago Aranda-Larrey. 2020. “Strengthening Service Delivery of Investment Promotion Agencies: The Comprehensive Investor Services Framework.” Investment Promotion for Impact Series. Finance, Competitiveness, and Innovation in Focus, Washington, DC: World Bank. https://openknowledge. worldbank.org/handle/10986/33498 EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 18 >>> Figure 5: IPA Services to Investors Along the Stages of the Investment Lifecycle (the World Bank’s Comprehensive Investor Services Framework (CISF)) Stages Linkages and Entry and Retention and Attraction Category Establishment Expansion Spillovers Marketing a a a Information a a a a Assistance a a a a Advocacy a a a a Source: Heilbron and Aranda-Larrey 2020. IPAs choose to prioritize the provision of certain services over choose to prioritize marketing and advocacy at the attraction others for their anticipated effectiveness. This may depend on stage of the lifecycle. On the other hand, if the IPA’s location factors such as the IPA’s available resources and capacity, the experiences frequent investor exit and little reinvestment by attributes and developmental needs of the IPA’s location, and existing investors, the IPA may choose to focus on assistance the needs of existing and potential investors. For example, if the and advocacy at the retention and expansion stage. Box 7 IPA’s location is suffering from low levels of FDI compounded presents the example of how the IPA of the Malaysian state of by being relatively unknown to foreign investors, the IPA may Penang tailors services to investors. Box 7: InvestPenang’s Tailored Investor Services InvestPenang, the IPA for the Malaysian state where much of the country’s increasingly high-tech manufacturing and services are located, has long had a strategy of developing industrial clusters. This requires the cultivation of a strong supply chain and collaborative ecosystem for innovation and workforce development. Many of InvestPenang’s investor- focused services and activities are designed to foster this, including: • Sector-specific “supplier days,” to introduce local suppliers and service providers to foreign multinationals and the standards and processes for becoming their suppliers. • Informing “local institutions of higher learning … with information on the skills needed to be competitive among targeted potential investors.” • Attraction and facilitation of satellite campuses of foreign universities, including the UK’s Hull University, focused on engineering, finance, and accounting, and the Asian Women’s Leadership University. • Assistance to investors in the resolution of post-establishment issues with the federal and state governments. • Policy advocacy. *UNCTAD. 2014. The Investment Promotion Agency (IPA) Observer, No 3 – 2014. https://unctad.org/system/files/official-document/webdiaepcb2014d2_en.pdf Source: Interview with Dato’ Loo Lee Lian, CEO of InvestPenang. https://www.bfm.my/podcast/morning-run/the-breakfast-grille/bg-dato-loo-lee-lian-ceo-investpenang- investing-in-penang-future. EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 19 The IPA’s services may also differ by sector. It may focus on should be set or adjusted to optimize delivery. IPA structures investor-targeting for emerging sectors, investor aftercare can vary considerably, but, ideally, they should emphasize the for sectors with the most potential for expansion or value IPA’s sectoral focus. Some IPAs choose structures based on addition and diversification, and advocacy for a new sector or target markets as this puts the emphasis on business culture, for a successful sector being constrained from going to “the language, and time zones. Some choose the functions next level” by, for example, advocating to unblock regulatory assigned by their establishing law — for example, policy, hurdles or improve skills. promotion, or facilitation. When mandated to also engage in non-promotion functions, IPAs may choose the tools or Given its typically scarce resources, the IPA may develop a authorities they aim to leverage – for example, incentives client charter to help prioritize investors and determine the department, zones department, public-private partnership level of services delivered to them depending on their strategic (PPP) unit, or international cooperation unit for government-to- importance to the location. Finally, the IPA should not be the government outreach to solicit bilateral aid for infrastructure. sole actor in investor service provision. It can help to create an “institutional ecosystem” comprising the different stakeholders However, none of these structures offers the advantages that the IPA and its client investors interact with along the of a target sector-based IPA structure, which would allow different phases of the investment lifecycle, to ensure that the development and leveraging of the degree of sectoral investors experience seamless service provision throughout specialization and deep knowledge that is conducive to higher their investments’ lifespans. success of the IPA’s promotional activities. Some IPAs, such as the Austrian Business Agency, Invest in Türkiye, and many The IPA strategy should, therefore, include a statement of IPAs that also promote trade, have used framework structures which services will be provided by the IPA to prospective, new, to combine sector expertise with regional and/or function and existing foreign investors. It should be clear about how expertise, but a strong focus on competitive sectors remains each service will be targeted and resourced, which partner the optimum guideline for devising IPA structures. Invest India organizations might need to be involved in providing such has a cubic structure, tackling sectors, source markets, and services, and what the expected outcomes are. regions within India.18 Figure 6 presents the organizational chart of Austrade, the 1.6. Organizational Structure Australian Trade and Investment Commission. The investment department is divided primarily along Austrade’s investment priority sectors, followed by target markets for these sectors, An IPA’s organizational structure should be optimized for the indicating the strong sector focus in the agency’s structure. implementation of its strategy. Once the IPA’s objectives and strategic actions are determined, its organizational structure 18. Phillips, Heilbron, and Kher. 2021. EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 20 >>> Figure 6: Organizational Structure of Austrade’s Investment Department Head of International Education Head of Defence and Space Head of Advanced Technology and Manufacturing Head of Health Head of Agribusiness and Food Deputy Chief Executive General Manager – Head of Resources, Energy Chief Executive Officer Officer – Trade and Investments and Sectors and Infrastructure Investment Head of EMEA* Desk Investment Head of Asia Desk Investment Head of Americas Desk Investment Head of Investment Strategy, Insights & Performance Head of Major Projects *EMEA: Europe, Middle East and Africa. Source: Austrade website. https://www.austrade.gov.au/about/our-structure (Retrieved Dec. 11, 2022) EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 21 It may not be feasible for the IPA to immediately build its implementation plan would detail which activities will take organizational structure around its focus sectors, especially place and when during the strategy implementation period. for new IPAs with limited human resources and existing Figure 7 provides an example of an implementation plan sectoral expertise. In this case, IPAs may start with a structure for the 2014–2018 regional investment promotion strategy that revolves around the IPA’s different functions or mandates, of the Caribbean Export Development Agency, the region’s for example, investment promotion, investor support, sector trade and investment promotion agency. This plan sets out and market research. Alternately, it may create a structure the expected implementation steps for the agency’s three that highlights the different types of services the IPA offers main activity areas – marketing, investment promotion, and investors, such as marketing, attraction, facilitation, aftercare, business climate reform. and advocacy. In this case, the structure should also be considered for clarity from the investor’s perspective, and Each activity will also have its own detailed work plans as mandates should be separated, especially those that are step-by-step implementation roadmaps to be developed investor-facing from those that are not, and those that deal during strategy implementation. The plans can be presented with investment promotion from those that deal with regulation, in various ways, for example as a Gantt chart with responsible if applicable. parties identified for each of the sequenced steps and milestones. A work plan should include any subordinate When changes are needed, the IPA strategy should specify or preliminary steps to be taken, such as those to do with the desired organizational structure with steps and milestones hiring needed staff, capacity building, outsourcing research, to achieve that organizational reform and maximize the interviewing investors, engaging partners, securing funding, implementation of the IPA’s agreed objectives and activities and advocating for reforms. Plans that can be carefully over the duration of the strategy. executed by IPA staff help to promote successful strategy implementation through sound project management and also help to ensure that the strategy is achievable and time-bound 1.7. Time-bound Implementation as per the SMART objectives. Plans Detailed implementation plans are typically developed immediately after the strategy is adopted. The IPA strategy The next important step for the strategy is deciding how needs to include a section which discusses the high-level it will be implemented, and the duration and sequencing of implementation plans and provides for the development the strategy’s various components and activities. Translating of clear and detailed plans and arrangements designed to the strategy into implementation and work plans is important ensure the delivery of the strategy’s objectives. to keep implementers on track and well-coordinated. An EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 22 >>> Figure 7: Implementation Work Plan for Caribbean Regional Investment Promotion Strategy (RIPS) Year 1 Year 2 Year 3 1 5 8 Preperation of Investors Investors Sector Profiles follow up and follow up and and Documents appointment appointment setting setting 2 List and qualification of 6 9 I. Proactive investors in target Investor’s Investor’s Promotion markets outreach outreach 3 7 10 Investor’s Implementation Implementation outreach of second road of third road 4 show show Implementation of first road show 1 Annual Carribean Annual Carribean Preparation of Investment Summit Investment Summit Online News Room 2 II. Marketing and Preparation of PR Communications Campaigns Investor Workshops Investor Workshops Investor Workshops in Target Markets in Target Markets in Target Markets Operation of News Room / Content Marketing Strategy Implementation of Paid Media Implementation of PR Campaign 1 Design strategy Implementation of promotion policies and mechanism for using alternative energy for alternative sources in CARIFORUM. energies 2 Design Program for development of Implementation of program for development of workforce workforce 3 Visa requirements reform analysis Harmonization of visa requirements. III. Business 4 Climate Study for Access to Capital Options Promotion of capital access options 5 Land registration streamlining Implementation of land registration methodology in methodology CARIFORUM countries. 6 Trade and customs Harmonization and automation system for transparency CARIFORUM customs. analysis Source: Effective Promotion of Investment Opportunities Within CARIFORUM: A Regional Investment Promotion Strategy And Implementation Plan, Caribbean Export Development Agency. 2014 (https://www.investincaribbean.org/media/userfiles/subsite_196/files/reports/RIPS.pdf) EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 23 1.8. Resource Allocation any gaps in knowledge and skills that the IPA could address by providing for training, hiring, and/or outsourcing as needed Implementing the strategy’s activities over multiple years will for meeting objectives and building internal capacity within require sufficient human and financial resources that must be budget. Based on its strategic plan, InvestHK, the IPA of Hong planned for and explicitly articulated in the strategy document. Kong, for example, has employed local salespeople on one- Investors may take up to a few years to conceive and design or-two-year contracts in target markets, such as Silicon Valley, their overseas investment project, explore various possible to build Hong Kong’s image, nurture sector relationships, and sites, and set up their operations in a given location. The IPA’s generate strong leads. investment promotion efforts follow the investment lifecycle over several years, which means that IPAs must have funding Even if human resources are the most important asset of continuity over a period of at least three to five years. Having every IPA, other resources are needed for successful strategy a multiyear strategy also allows the IPA to obtain preapproval implementation. The provision of the IPA’s services laid from government on its activities and funding during the out in the strategy requires undertaking typical investment strategy’s time span. promotion activities such as investor-targeting campaigns, aftercare company visits, and participation in and holding As part of the process for developing the strategy, the IPA of events and meetings, which require adequate budget. So should make an assessment of the required resources to does the running and operation of the IPA as an effective deliver the strategy and its implementation plans. If that well-functioning agency. Physical assets include up-to-date assessment reveals any shortages or misallocations then equipment, technology, vehicles, and real estate. Budget these must be addressed, by reallocating available resources, and funds need to be commensurate with the ambitions of realigning the strategy with the available resources, or the strategy. securing additional resources accordingly. For example, the IPA may come to the conclusion that it must reduce the IPAs typically receive their budget allocation from number of sectors and/or markets targeted simultaneously to government.20 This is less likely to be adequate when there ensure timely success with the resources available. On the is limited understanding among stakeholders of what the IPA other hand, the IPA may realize it can tackle more activities does, why it needs the resources requested, and what the with the resources available, for example by leveraging IPA’s past achievements and future objectives are. Including technology and networks, thus providing impetus for new line ministries and budgeting authorities in the strategy initiatives. Harmonization of the strategy’s goals and plans development process (see Section 2) and showcasing with the budget and staff available to the IPA is a critical part the results of previous strategies as captured in a robust of the strategy development process. M&E system (see Section 1.10) will better secure their understanding, buy-in, and budgetary support. With a strategy in place and an organizational structure optimized for implementation, execution still depends on the To summarize, an IPA strategy should set out the budget and individual capacities of staff. As an indication of the level of staff that will be needed to deliver the objectives and activities, staff capabilities needed, high-performing IPAs hire staff with stages and/or sequencing to account for the possibility with private sector experience, and remunerate them at a of change in FDI context and/or the availability of resources level that is comparable to the private sector19 The strategy throughout the planned period. should identify the profiles and number of staff needed for implementation. This will clarify whether there are gaps in the number or capacities of current IPA staff and will enable the 1.9. Internal Tools and Systems IPA to set out what steps it will take to resolve any gaps or weaknesses. For example, there may need to be new staff IPAs need systems and tools to optimize their operations and hiring, or some existing staff may need to be reassigned to increase the efficiency and effectiveness of their efforts. The new tasks or receive additional training targeted at new activity right systems and tools adapted to the IPA’s needs would areas. The strategy could also call for a staff audit to identify greatly improve the IPA’s ability to implement its strategy, 19. More attributes of high-performing IPAs are listed in Box 10. 20. Sanchiz and Omic. 2020; Heilbron and Kronfol. 2020. EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 24 and the strategy should address whether the IPA’s existing government, and justifying the autonomy of the IPA’s systems and tools should be upgraded, or whether some are decision-making. Monitoring entails the routine checking of missing and would have to be established at the IPA. the IPA’s and the strategy’s progress toward planned goals, whereas evaluation allows the IPA to assess whether a Among the main internal systems used by IPAs around the project’s end-objectives were achieved and, if they were, world are: an investor information system (IIS, or virtual how efficient and economical the process has been. M&E is documents library); a customer relationship management essential to sound strategy implementation and overall IPA (CRM)21 system to support and track progress towards management. Keeping accurate records of evaluations is investment results; and SOPs to consistently deliver quality important for tracking the IPA’s progress and to enable the and timely services to investors. Complementing these are agency to complete its regular reporting requirements to the systems and tools that the IPA uses to communicate with its board of directors and the government. It is also beneficial target audiences (website, social media, and so forth). The to the future financial strength of the agency. development of the IPA’s Strategy provides an occasion to reconsider how the IPA can better leverage technologies to The IPA’s achievements in reaching its objectives are improve its impact and effectiveness, as well as its efficiency, measured against intermediate and end-goal KPIs with and thus its return on investment. quantitative and time-bound targets. Most important indicators to measure are results (outcomes and impacts) One of the most important tools an IPA can have is the CRM rather than activities or inputs. IPAs too often reference system. The CRM helps ensure that the services provided the number of activities completed (for example, events by the IPA are well coordinated between different units attended or organized) or budget spent as a means of and that commitments made to investors are addressed indicating progress or results to stakeholders. However, in a timely manner, ultimately helping the IPA achieve its of much more interest and importance to stakeholders are strategic objectives. According to a forthcoming World Bank the impacts achieved as a result of such activities, such as study, having a CRM is linked to IPA success.22 In addition actual investments generated, and jobs created. Moreover, to managing relationships with investors, the CRM will in evaluating impact, it is important to account only for enable the IPA to report on activities and showcase results investments for which the IPA had a direct role in attracting, to its stakeholders. facilitating, or retaining in its location.23 The IPA strategy, therefore, should clearly state the tools An M&E system provides objective, evidence-based analysis and systems required to support the delivery of its strategic using cost-benefit techniques or tools to support the case activities and goals. It should identify the amount of for increased investment promotion expenditure. Once investment that needs to be made to acquire and introduce impactful development objectives and KPIs to measure them new tools and systems or upgrading existing ones, and set are agreed, and the direct cost of achieving objectives is out the timing and sequencing of such investments relevant estimated, stakeholders have a concrete basis for evaluating to the implementation of the strategy’s activities. the effectiveness, efficiency, and impact of the IPA’s strategy design and implementation. A summary of IDA Ireland’s KPIs and annual results is presented in Box 8. 1.10. Monitoring and Evaluation Framework Monitoring and evaluation (M&E) activities are key to capturing progress in strategy implementation, securing funding from 21. Also referred to as Investor Relationship Management System, including the CRM at its core, in addition to corporate culture, protocols of engagement, standard operating procedures, and staff KPIs. 22. Heilbron. Forthcoming. 23. For more information on the IPA’s M&E system, please refer to Nicholls et al., forthcoming. EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 25 Box 8: Summary of IDA Ireland’s M&E Framework, 2021 IDA Ireland publishes a broad set of impact-oriented KPIs designed to demonstrate the socio-economic benefits of its work to Ireland, including: • Cumulative employment and new jobs by IDA client companies. • Number of new investments (combining new companies and existing investors). • Qualitative KPIs in relation to FDI operations – including the total euro value of research, development & innovation (RD&I) projects. • Regional dispersion (with a minimum percentage increase in investment in each region outside of Dublin). • In-country expenditure by IDA client companies. IDA Ireland reporting to its stakeholders on how it is spending its budget supports its claims to sufficient funding over the coming years. Here is a summary of IDA Ireland’s impact reporting in its 2021 Annual Report: IDA Ireland Indicators Employment in IDA Supported Companies Indicator 2021 Value For Year Ended 31 December 2021 Total of Investments Approved 249 2021 000 No of Greenfield investments 104 Job Gains 29,057 No of Expansion investments 87 Employment in IDA Supported Companies No of Research, Development & Innovation investments 43 2020 2021 Investment in Research, Development & Innovation investments €1.34bn Training investments 15 Environmental/Sustainable investments* 15 Total Employment 258,558 275,384 % of Investments Located Outside Dublin 53% Full Time 237,865 255,491 % of Jobs Approved Outside Dublin 47% Other 20,693 19,893 % Jobs Approved with Salaries in excess of €35,000 94% Average Salary in Investments 57,735 Net Change in total employment 9,869 16,826 Total R&D in-house Expenditure** €2.8bn % Net change in total employment 4% 6% *Of the total 249 investments approved in 2021, 15 were Environmental/Sustainable Source: Department of Enterprise, Trade and Employment and are included across the different investment types identified above. Note: Other Employment includes part-time and short term contract employees ** R&D in-house expenditure data refers to 2020. The Department of Enterprise, Trade and Employment estimates that for every 10 jobs generated by FDI directly, another eight are generated in the wider economy. This translates into 495,691 jobs that were supported by FDI at the end of 2021. Secondary economic benefits are enjoyed by the construction, retail, and hospitality sectors. The Annual Business Survey of Economic Impact 2020 (latest data available) includes data for exports, expenditure in the Irish economy, in-house R&D, and capital expenditure as follows: • IDA client exports increased by 9.4 percent to €291.4 billion in 2020. • Expenditure in the Irish economy grew 8.9 percent to €27.9 billion in 2020. This is made up of expenditure on payroll (€16.8 billion), Irish services (€8.4 billion), and Irish materials (€2.6 billion). • In-house R&D investment grew 7.2 percent to €2.8bn in 2020. • IDA clients invested €7.5 billion in capital projects in 2020. IDA Ireland also computes and reports the “cost per job sustained” (CPJS) metric as a way to show increased efficiency. The CPJS has declined consistently over the past fourteen years - half in 2013-19 vs. 2006-12 – and in the 2013- 19 period was just over a tenth of the average salary paid by the investment projects IDA Ireland attracted (€59,384). IDA Ireland Indicators IDA Ireland 207/13 2008/14 2009/15 2010/16 2011/17 2012/18 2013/19 2014/20 201521 Sustained FTJ* 44,752 49,452 56,973 69,611 77,099 94,880 104,690 110,063 121,861 CPJS** €13,273 €13,273 €10,983 €9,499 €8,336 €6,779 €5,812 €5,850 €5,586 Source: Annual Employment Survey 2021 of Ireland’s Department of Enterprise, Trade and Employment. *FTJ = Full Time Job. **CPJS = Cost per Job Sustained Note: The cost per job sustained is calculated by taking into account IDA Ireland grant expenditure to all firms in the period of calculation. Only jobs created during and sustained to the end of each seven year period are credited in the calculations. Source: IDA Ireland Annual Report and Accounts 2021, https://www.idaireland.com/getattachment/a1e0578f-74a6-429f-af7a-f0f5ded03ad2/IDA-Annual-Report-2021-En- glish-Version.pdf?lang=en-IE&ext=.pdf. EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 26 Similarly, CINDE, the Costa Rican national IPA, publishes ($3.9 billion in life sciences) to number of links established an annual report with figures on more than a dozen tracked between FDI projects and local suppliers (20), projects impact indicators, ranging from new jobs created (19,806 in established outside the country’s industrial center (8), and 2020) and exports by supported companies in priority sectors progress toward the SDGs as summarized in Figure 8.24 >>> Figure 8. Summary of Selected SDG-Related Results from CINDE’s 2020 Annual Report Goal 5: Gender equality Goal 8: Decent work and economic growth (inclusive employment) • Share of women in new net jobs at CINDE- supported companies: 49 percent • New jobs for over-40s: 2,904 • Share of women in management positions at • New jobs for youth (17-29): 7,250 multinational service companies supported by • New jobs outside metropolitan area: 465 CINDE: 42 percent Selected SDG results from CINDE’s 2020 annual report Goal 9: Industry, innovation, and infrastructure Goal 4: Quality education • Diversification of FDI: 30 percent from non- • Participants in online training grant program traditional sources promoted by CINDE: 40,200 • Locally procured inputs: 43 percent of FTZ • Courses completed: 38,313 company procurement • Jobs offered at CINDE’s multilingual job fair: • Number of local providers to FTZ companies: 3,000 11,000 Source: CINDE CINDE also publishes the yearly promotion budget value for money and may be worth supporting more strongly. ($6,258,341), which allows its audience to quantify the The cost-per-job figure is also a prime example of an efficiency agency’s degree of efficiency by calculating the cost of metric. Table 2 presents how CINDE’s cost per job improved investment promotion per job created: $316. This is a very each year from 2017 to 2019, before losing a little efficiency in clear headline figure which can communicate to budgeting the first year of the COVID-19 pandemic. authorities and the public that CINDE generates considerable >>> Table 2: CINDE’s Year-on-Year Efficiency Gains Year New jobs created Budget Cost of creating 1 job 2017 13,754 $5,435,705 $395 2018 12,961 $4,896,530 $378 2019 16,718 $5,145,773 $308 2020 19,806 $6,258,341 $316 Source: CINDE 24. CINDE Impact Report 2020. https://f.hubspotusercontent30.net/hubfs/5082883/Resources/CINDE%20-%20Impact%20Report%202020%20ENG.pdf EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 27 EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 28 2. >>> Section 2. How to Develop an IPA Strategy As mentioned in the Introduction, IPA strategies take their cues for impact objectives and focus sectors from national development strategies. Beyond this, how does an IPA develop its strategy and set itself up for successful implementation? This section discusses the prerequisites for developing a successful strategy, the steps involved in developing the strategy, and the basic factors impacting strategy implementation >>> Figure 9: How to Develop an IPA Strategy Developing a Feedback Loop for Policy Reform Communicatio ns, Media, and Public Outreach Tracking Strategy Implementation Progress and Post- Implementation Evaluation Prerequisites to Strategy Development How to Develop an Defining the Process Evaluation of Past Efforts Competitivene ss Assessment IPA Strategy Building Partnerships for Drafting the Strategy Strategic Formulation and Document Implementation Building Staff Consulting with Capacity for Implementation Stakeholders Getting the Ensuring Strategy Implementation Approved EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 29 2.1 Prerequisites for Strategy appreciation of investment promotion good practices outside of the IPA, there may be considerable pressure Development on the IPA to promote sectors or projects better promoted by other institutions. The IPA may also be pressured to Before going through the hard work of strategy development, take on non-IPA functions such as investment regulation, it is important to ensure that conducive conditions for or to adopt non-IPA functions which spread it too thin and implementation exist, even at a minimum. Many good prevent adequate focus or specialization, such as SEZ strategies go partially or wholly unimplemented for a variety of administration or SME development. Agreement with key reasons, including insufficient resources, weak management, stakeholders on the optimal limits of IPA scope is a critical inadequate staff skills, weak performance monitoring, parameter for the IPA’s strategy. resistance to change, over-ambition, and failure to adjust 4. Sincere buy-in from implementing partners: No IPA to changing circumstances. Once identified, many of these accomplishes its goals without the support of others, factors can be overcome or mitigated, not least by designing such as government offices generating the business the strategy to account for such constraining circumstances. information with which the IPA appeals to investors, officials whose facilitation enables business start-up One of the most common self-destructive reasons for failure and operation, or private sector advocates of business- to implement a strategy is the lack of commitment among enabling reforms. An IPA which has a history of receiving the IPA’s management and supervisory bodies. A good such support or which has secured strong, public strategy is an organization’s plan to achieve ambitious but expressions of support for a new strategy initiative is attainable goals. When IPA management and its supervising much better poised for implementation. authorities are committed to implementation, staff can be selected, organized, trained, equipped, and supervised so that all the IPA’s day-to-day operations are geared toward the achievement of those goals, as measured by objective 2.2 Defining the Process criteria. An IPA’s supervising authorities in government and/ or its board of directors can support the implementation of It is important to think of who will actually draft the strategy: the strategy by: first, explicitly agreeing to and approving the is it a task group or a certain unit within the IPA, or will the strategy; second, allocating the financial resources required process be outsourced to a firm or external expert(s)? In to deliver the strategy; and third, monitoring progress against most cases, deciding on the strategy writing process will the agreed strategy. depend on the level of experience and investment promotion expertise that the IPA has. Additionally, consider the available The WBG’s field experience indicates that while leaders may level of resources for the strategy process: do staff have acknowledge the importance of an investment promotion enough experience and knowledge to undertake the process strategy and express commitment to its implementation, that of researching, writing, convening stakeholders, etc.? Are commitment in principle is often not matched in practice. there enough staff so that some of them can concentrate on Individuals setting out to develop an IPA strategy should first leading the strategy-drafting process without affecting the ask themselves whether IPA management and its supervising IPA’s operations and services to investors? Or does the IPA authorities display characteristics such as the following: think that it would benefit from the expertise of a specialized firm, consultant, or international organization? Does the IPA 1. Impact orientation: Sustained focus on leveraging have the resources to fund an external firm or consultant? If IPA resources for the maximum achievement of target not, can the IPA find the budget to fund strategy development development impacts. by reaching out to the government or to its technical and 2. Custom of monitoring and evaluating performance: A financial partners? demonstrated willingness to openly hold the IPA accountable for its success or failure in delivering targeted results. If possible, developing the strategy internally may translate 3. Agreement with key stakeholders on scope into more ownership and help build IPA capacity through the of strategy: In a government where there is little process itself. On the other hand, bringing in external help EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 30 may bring in global experience and lessons learned. Whether a new one. Are the previous strategic objectives still relevant or the strategy is developed in-house or through external help, have market circumstances changed? For those that are, were the IPA must take full ownership of the strategy development targets met or not, and why? Were the activities designed to activity and be as involved in the process as possible, keeping achieve them effective? How did staff and partners perform in track of it and steering the activity. This can be done through their pursuit of the objectives? Were any deficiencies revealed the designation of a responsible senior staff or task team, and remedies hinted at? What did investors served in the and through the engaged involvement of IPA management preceding strategy period have to say about the usefulness of on a regular basis to guide the process and ensure its timely the IPA’s services? This feedback can be used to improve IPA completion. As to the timeline, drafting an IPA strategy should effectiveness in the new strategy period. not be rushed, and may take a few months to perhaps a year depending on the extent of research and consultation desired, apart from the necessary approvals process. 2.4 Competitiveness Assessment Section 1.1 discussed the importance of a focus on 2.3 Evaluation of Past Efforts internationally competitive sectors as one of the IPA strategy’s main elements. The IPA’s priority sector identification typically Strategy development is iterative. Unless an IPA is newly starts from national plans and strategies and goes through established, any strategy exercise needs to consider what a research-driven identification process. In a survey sample has happened in the past period. The commissioning, of 75 IPAs, the large majority (81 percent) said they decide internally or externally, of an objective assessment or an ex- on their priority sectors based on national development post evaluation of the activities of the previous strategy period strategies, as can be seen in Figure 10, but these are further is usually one of the first steps in any strategy development refined based on the location’s international competitiveness process. Understanding the successes and shortcomings of (49 percent) in consultation with stakeholders (47 percent). the preceding strategy is a good starting point for the design of >>> Figure 10: Sources that Inform the IPA Strategy Taken from a national development strategy or other 81% policy document Selected based on research on global demand, FDI 49% trends, export potential, etc. Selected by IPA management in consultation with 47% stakeholders Selected by the office to which the IPA reports 16% Selected by IPA management alone 5% Selected by IPA without detailed analysis 0% 0% 20% 40% 60% 80% 100% Source: Sanchiz and Omic, 2020. EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 31 The IPA strategy should prioritize a small number of embassies from key investor countries, etc. The objective of high potential, highly attractive sectors, subsectors, and these interviews will be to gather and evaluate existing data segments based on an objective assessment of the location’s and assumptions regarding the most viable subsectors and competitiveness and a benchmarking against comparator segments in the long list of potential sectors, and also to have locations on the national and sectoral levels. Identifying forward looking conversations about future FDI potential in the the IPA’s sectors, subsectors, and segments of strategic sectors and the location’s unique comparative advantages. focus requires an objective, data-driven ranking of each This field work should underpin and complement the qualitative sector’s attractiveness to investors and its desirability from side of the sectoral competitiveness assessment. Qualitative the development perspective. This “sector scan” typically and quantitative analysis will also help to evaluate each of the identifies sectors, subsectors, and segments which respond long-list sectors, subsectors, and segments for their potential to the criteria of attractiveness to the investor and desirability to attract FDI over the next few years based on the two key for the location. dimensions of desirability and attractiveness. Desirability refers to the sector’s potential impact on the With a sense of the location’s most competitive sectors, the location’s development. For example, the target sector is IPA’s next step is to objectively demonstrate its competitiveness expected to increase quality jobs; foster skills, technologies, through a quantitative and qualitative comparison against and connections to international markets which are currently other leading and emerging locations for these sectors – scarce or non-existent in the IPA’s country; or strengthen the global benchmarking. In the consumer electronics industry, country’s markets and value chains. Attractiveness to the for example, typical comparator locations would include investor has a direct link to the expected success of the IPA in the countries with the largest and most quickly growing promoting the sector. Attractive segments are those in which manufacturing hubs: China, India, Indonesia, Malaysia, investors can operate more competitively and profitably in the Philippines, Poland, Republic of Korea, Taiwan, Thailand, IPA’s country than in alternative locations. and Vietnam.25 Data-driven quantitative and qualitative comparisons of these locations would be based on decision- The sector scan usually starts with a long list of potential driving factors such as the number, wages, and skills of the sectors. It will then analyze these sectors and their subsectors local electronics workforce; time and cost to procure/import and segments through comprehensive research of available inputs and export goods, including customs and transportation; data and statistics. This may, for example, cover current global cost and availability of industrial land and facilities; cost and market and FDI trends, national and regional FDI and trade reliability of power and water; availability, cost and quality of performance, assessment of industry competitiveness and local suppliers; ability of the local ecosystem to support product sectoral business environment in the location, and key national and workforce development; intellectual property protection; strategies. This research is usually complemented by field investment protection; and regulatory and political stability. work interviewing existing investors, private sector or industry Qualitative comparisons may be based on the reputation of associations, international chambers of commerce, relevant well-known brands sourcing from these locations, testimonials line ministries, national and subnational investment promotion from investors operating there, and business surveys or less agencies, SEZ or industrial park management authorities, formal “buzz” about their emergence or prospects. researchers and universities, financial and technical partners, 25. Euromonitor, 2018. “Top 10 Countries to Drive Global Electronics Production Over 2017-2025.” EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 32 Box 9: Sector Identification and International Benchmarking – Canada Example In 2009, Invest in Canada conducted an objective competitiveness assessment of six of its grain and oilseed processing hubs against 19 American and European hubs.* Figure 11 and Figure 12 show the results, which allowed Invest in Canada to articulate a value proposition based on its objective strengths: “With proximity to raw materials and strong research and development, Canadian grain and oilseed processing offers higher profitability than US and European counterparts.” Figure 11: Benchmarking Canada’s strong cost advantage over US and European competitors for the grain & oilseed processing sector Cost Assessment* NPV of Project Cash Flows (average = 100) Canadian 140 Non-Canadian 120.6 118.9 117.8 116.0 114.4 C$1 = US$0.862 120 106.6 105.3 102.3 89.7 89.3 100 80 60 20 0 D B D SK B B SK N TX ,A N ,S A S M ,O ,K s, n, r, at lls n, k, a, ee rk oo H on ta Fa oc do in Fo D hi e at eg nd bb an in x ic ed sk nd ou R ic Lo Lu W Br Sa R ed ra Si G M Figure 12: Benchmarking Canada for location decision-drivers in the grain & oilseed processing sector 8.0 Living environment 7.0 6.8 Qualitative Assessment Score (0 to 10) Real estate 7.0 6.5 6.2 6.2 5.9 5.8 5.8 5.7 5.7 Infrastructure & 6.0 communications 5.0 Flexibility of labour & regulations 4.0 Presence of Industry/ cluster 3.0 Local potential to 2.0 recruit skilled staff General business 1.0 environment 0.0 K SK AB B SK B A O S X A N W M ,K ,T , n, a, at O r, a, n, oo a, ee om H k ta , in oc on do m at hi D ne eg ah co bb nd an ic sk ed ci R kl W Ta Lu Sa Lo Br i ed R O M This research not only validated Invest in Canada’s identification of priority sectors but also gave it the compelling value proposition and promotion materials to make the pitch for it. * The IPA commissioned IBM Plant Location International, a site selection consultancy, to do this research. Source: Invest in Canada website, 2010. EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 33 As an IPA prepares for identification and benchmarking of not be present in all of the sectors that the government is priority sectors, it can also find useful guidance and validation targeting. Sectoral targeting is about allocating the often- from existing investors who themselves conducted a similar limited resources earmarked for investor targeting to process before selecting the IPA’s location. Ideally, the IPA proactively promote the sectors that have the highest chances should have the latitude to identify its own sectors, subsectors, of attracting investors in the short term. Of course, the IPA and segments that fulfil the requirements of desirability and should continue to promote all sectors reactively—responding attractiveness. But sometimes the IPA may not have full to investor inquiries, facilitating investor establishment, etc. freedom to do so. Some of the national development plans The IPA can also help to identify the constraints that hinder the may identify specific sectors for focus and development, attractiveness of some sectors and develop a reform agenda and the mandate to focus exclusively on these sectors may that could get these sectors to the level of competitiveness also cascade down to the IPA, since the scope of these where they can be confidently promoted to investors. plans is larger than that of the IPA, and they are typically developed and housed at a higher level within government, Moreover, some sectors may simply be less suitable for purely and sometimes even at the entity that the IPA reports to – private investments or for investment promotion by the IPA. for example, President’s or Prime Minister’s Office, economic This is the case of PPPs, extractive sectors, infrastructure ministry, etc. concessions, construction, tourism, privatization, and national- priority social sectors such as the operation of schools, If their identification was based on sound and selective hospitals, and housing complexes, sometimes related to SDG26 analysis, these sectors will fulfil the requirement of being commitments. These sectors tend more to be supply-driven “good for the country” (desirable); they may have the potential by publicly conceived projects and concessions rather than to create jobs for urban youth, for example, or help alleviate by investor-conceived, market- or demand-driven projects. poverty in rural areas. However, they may not fulfil the second Successful IPAs focus only on the latter, unless they have requirement of being “good for the investor” (attractive), also been mandated as the lead agency in the government meaning that they may not be attractive enough to lure for one or more of the above-mentioned areas. Ministries of investors to the IPA’s location. In other words, these sectors education and health, housing authorities, PPP units, and are desirable from a developmental point of view, in the sense development finance institutions are more likely to take the that they are thought to have positive impacts on the location’s lead on identifying, defining, and promoting these, with the IPA growth in terms of jobs created, exports, etc. However, they having very little to add.27 may not yet be tested for investor appetite. And, in some cases, they may be aspirational in the sense that they still However, with progress toward the SDGs lagging at the need further government effort to remove any obstacles and halfway point to the 2030 target for their realization, many improve the ecosystem for these sectors to grow and yield the IPAs find themselves under renewed pressure to find a way desired results. As such, these sectors may not be realistically to contribute – and some have subsequently reoriented promotable at the time for the IPA strategy development. What themselves – toward a heavy SDG focus. In this context, can the IPA do if the sectors it can target are preidentified other IPAs, realizing that they cannot be equally effective and imposed? What can the IPA do to avoid getting bogged for all SDGs and not wanting to waste resources on fruitless down and wasting resources in the unfruitful promotion of pursuits, have identified the areas in which they can be unattractive or unsuitable sectors? effective and have adopted the same KPI-driven, strategic approach in those areas as with their historical performance The IPA could try to raise the awareness of policy makers indicators. This is well demonstrated by the CINDE example to the principles governing targeted investment promotion, shown earlier in Figure 8. Sanchiz and Omic (2020) found and lobby for more flexibility for the agency to identify its that the most popular priority sector for IPAs was renewable own sectors to target. Sectoral targeting is not about “picking energy, which itself relates to SDGs 7 and 11. In fact, many winners,” but doing what will allow the most efficient use of priority sectors lend themselves to advancement of the SDGs resources while yielding the best results. The requirements if they are undertaken in a sustainable manner. For example, for successful, targeted investment promotion may simply agriculture, fishing, and forestry can directly serve SDG 2 (no 26. For more on SDGs, see https://sdgs.un.org/goals#goals. 27. Heilbron and Whyte. 2019. EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 34 hunger), SDG 12 (responsible consumption and production), In the context of various global crises, IPAs need to build SDG 14 (life below water), and SDG 15 (life on land), as well flexibility in their strategies to rapidly adapt promotion as the more directly economy-related SDG 8 (decent work efforts, for instance, proactively promoting new dynamic and economic growth) and SDG 9 (industry, innovation, segments such as digital infrastructure and services, and infrastructure). A major part of serving the SDGs as an while shifting towards supporting affected sectors, such as IPA is understanding how any economic activity relates to tourism-related activities that were badly impacted during them, positively or negatively, maintaining basic visibility on the COVID-19 pandemic. those impacts, promoting investment projects which have net positive effects, and using M&E to capture the IPA’s positive influence. 2.5 Drafting the Strategic Even when an IPA must operate within a prescribed Document sectoral framework beyond its technical strengths, it can still differentiate between sectors that are promoted proactively With the foregoing political, institutional, and analytical or reactively. The IPA can identify specific subsectors and prerequisites in place, drafting the strategy can begin. The segments within the national priority sectors that are viable substantive elements of a strategy flow from one another. The for investment promotion, and target those subsectors and identification of priority sectors narrows options for strategic segments proactively. It can still include sectors that are not objectives which, in turn, narrows options for strategic yet ready for proactive investment promotion on its website actions which, in turn, narrows options for tailored services, and promotional publications, and also continue to engage and cascading down further to day-to-day actions. Table 3 and assist all investors that approach it in a reactive manner, presents a recommended sequence for drafting the essential allocating fewer resources to those sectors. The bulk of elements of an IPA strategy, along with typical inputs which its investment promotion resources will be dedicated to are needed at each stage and the way in which each newly proactively reaching out to investors in the viable, competitive conceived, subordinate element may lead to a rethink of one sectors, subsectors, and segments as determined by or more preceding steps in an iterative process. deliberate research-based sectoral identification. EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 35 >>> Table 3: Recommended Sequence for Drafting Strategy Elements Sequence Key inputs Process/stakeholder feedback National plans and strategies, IPA legal mandate, Feedback to government on appropriateness of direction from government executive, guidance 1. Vision and mission IPA mandate to government objectives for the of board of directors, staff opinions, expert tips IPA. on meaningful vision/mission design. National plans and strategies, sectoral analysis and international benchmarking, assessment of performance during previous strategy period, 2. Strategic objectives Adjustment based on what is found to be feasible investor satisfaction survey, direction from and targets in the assessments and consultations. government executive, sector competitiveness assessment—including internal and stakeholder consultation. Sector and market research, staff and partner Periodic review of strategic objectives and expertise, investor inputs on what the sector 3. Strategic actions targets based on what has worked and what has needs and how to appeal to other investors, not. stakeholder readiness to support/collaborate. Investment promotion best practices, assessment of investor information and Investor feedback to improve services; M&E of 4. Tailored services assistance needs within the country, stakeholder IPA’s effectiveness, efficiency, and impact. ability and willingness to support investment project facilitation and investment climate reform. Staff audit, organizational KPIs, job descriptions 5. Organizational and individual KPIs, staff performance Adjustment to services offered as well as to structure agreements, workflows, standard operating recruitment and training to fill gaps. procedures. SMART work plans from each department and Adjustments to strategic actions, tailored 6. Time-bound staff member, resource requirements, capacity services, and organizational structure based on implementation plan assessments and plans to fill gaps. feasibility and outcome optimization. Reflection on the adequacy and appropriateness 7. Resources Assessment of requirements to execute of resources and tools needed to execute (budgetary and implementation plans, staff and budgetary implementation plans, staff and management human), tools and audits, evaluation of existing tools and systems feedback on suitability of resources and tools systems available to the IPA. and any potential gaps. Impact attribution standard, records of lead 8. Monitoring and conversions and issue resolution, data on project Adjustments to all of the above based on M&E. evaluation plan impacts – for example, capital expenditure, jobs, exports. EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 36 As discussed in Section 1, some of these elements will be be consulted as they have on-the-ground experience with the core components of the strategy document, whereas others IPA’s operations, potential pitfalls, and success factors. This will be given high-level treatment in the strategy, to be fully is especially important when the agency has other mandates developed once the strategy is approved. such as export promotion, special economic zones, or SME linkages, so that FDI promotion can leverage inputs from all of these areas that are relevant to investors. 2.6 Consulting with Stakeholders Other than gathering feedback to strengthen the strategy, stakeholder consultations serve to develop synergies and Attracting and retaining investment is not a solo activity by strengthen collaboration, allowing staff from the IPA and the IPA; it requires the inputs and collaboration of the IPA’s other agencies in the investment ecosystem to meet and multiple partners. Moreover, the IPA’s staff collectively have discuss openly, rallying support, and identifying focal points valuable experience through their daily operations and and contact protocols for further collaboration during strategy interactions with investors and other stakeholders. This is why implementation. Consultations also help to position the IPA the IPA’s strategy should be formulated in a consultative and as the lead agency for investment promotion in the location, collaborative manner involving the IPA’s public and private forging a unified approach to promoting the location, be it stakeholders and partners as well as IPA staff. with direct collaborators or with other bodies that will promote investments that are not within the IPA’s purview or focus – for Stakeholders to involve include public sector agencies that can example, the extractive, infrastructure, social, and privatization make or break the strategy’s success; these are the agencies (PPP-funded) sectors mentioned in Section 2.4. Consulting that have a role in the IPA’s or the investor’s operations. with the line ministries and budgeting authorities mentioned For example, ministries such as Finance, Economy/Trade/ above also helps to ensure that there is a clear understanding Industry, Foreign Affairs, sectoral line ministries, agencies and buy-in both for targeted impacts, the suitability of the involved in the investor registration, licensing or permitting resource levels allocated to the IPA and understanding of process, subnational governments directly impact the IPA’s whether the IPA over- or under-delivers. performance. Foreign entities such as embassies of target markets in the IPA’s location, foreign IPAs – especially those Consultations with stakeholders can take place at various dealing with Outward FDI – and export promotion agencies points during strategy development. They can be used at the are also key stakeholders. due diligence phase to gather inputs that would help refine the strategy’s focus and at the last stage before strategy It is also important to consult the private sector as it is ultimately finalization to validate the strategy’s results and directions. the target for the IPA’s strategy and can shed light on sector Consultations can involve different levels of seniority within competitiveness and the issues that prospective investors may the relevant agencies, with the final rounds of validation face or existing ones may be facing. Private sector stakeholders consultations typically convening the IPA’s head with the and partners include leading investors in key target sectors as heads and senior representatives of other agencies. well as representatives from local chambers of commerce and industry, trade associations, binational chambers of relevant As presented earlier in Figure 10, 47 percent of IPAs surveyed markets for FDI, foreign investors associations, and targeted in a 2020 joint WAIPA-WBG IPA survey cited consultations strategic partners. Other stakeholders to be consulted should with stakeholders as one of the sources they use to inform their include educational institutions, research centers, think tanks, strategy.28 Thirty-eight percent of the IPAs in Organisation for international organizations, and civil society organizations that Economic Co-operation and Development (OECD) countries are active in the IPA’s location. For strategic sectors or projects used consultations with stakeholders as one of the elements clearly affecting a particular community, the IPA should also in the process of identifying country and sector priorities.29 consult that particular community. A 2017 Inter-American Development Bank-OECD survey of Latin American, Caribbean, and OECD IPAs found similar Additionally, the IPA’s staff from different departments, whether results pertaining to the role of consultations in prioritizing or or not they are working directly on strategy formulation, should 28. Sanchiz and Omic. 2020. 29. This includes international investors, external experts and consultants, ministries, domestic firms, universities and research centers, specialized government bodies, and local government. Source: OECD. 2018. Mapping of Investment Promotion Agencies in OECD Countries. www.oecd.org/investment/Mapping-of-Investment- Promotion-Agencies-in-OECD-Countries.pdf. EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 37 excluding target sectors and countries in the IPA’s targeting 2.7 Getting the Strategy Approved strategy.30 This will depend on the IPA’s local context, but once the strategy During the drafting of its new Investment Promotion Strategy development process is concluded it is likely that the final draft 2022–2026, the Ministry of Investment in Jordan held a would need to be approved by government, a process that series of stakeholder consultations in 2021 and 2022. A final usually involves the IPA’s parent ministry, council of ministers stakeholder consultation workshop was held on 20 March (cabinet), and prime minister/president’s office. Submitting 2022, with representatives from the private and public sectors the strategy document for approval constitutes yet another and the international community, where participants were opportunity where the strategy document is on display, raising able to share their views and feedback on the advanced draft awareness of the IPA’s efforts and endeavors. Obtaining before finalization. The draft was shared with stakeholders approval from the highest echelons of government legitimizes beforehand and made available online for a week after the the strategy document and wins official backing. Both these consultation workshop for stakeholders to view and comment aspects will be helpful in garnering stakeholder support during on.31 Investment Fiji undertook consultation for its new draft the imminent implementation stage. The IPA should carefully strategy in the finalization stage, hosting a validation workshop consider the necessary approval process early on so that it with government ministries and stakeholders to facilitate can be factored into the strategy development’s timeline and discussions on its new trade and investment strategy.32 ensure that the approving bodies receive advance notice. 30. Volpe Martincus, Christian; Monika Sztajerowska. 2019. How to Solve the Investment Promotion Puzzle: A Mapping of Investment Promotion Agencies in Latin America and the Caribbean and OECD Countries. Washington, DC: IDB (Inter-American Development Bank). https://publications.iadb.org/en/how-solve-investment- promotion-puzzle-mapping-investment-promotion-agencies-latin-america-and 31. Website of Jordan’s Ministry of Planning and International Cooperation (MoPIC), Reform Secretariat, March 2022 Newsletter: https://www.mop.gov.jo/ebv4.0/root_ storage/en/eb_list_page/reform_secretariat_newsletter___march_2022.pdf. 32. The Fiji Times. Investment Fiji’s strategic transition. 19 February, 2022. https://www.fijitimes.com/investment-fijis-strategic-transition/ EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 38 2.8 Ensuring Effective IPA management must have regular implementation status meetings with departmental directors and staff to monitor Implementation progress and maintain hands-on engagement to deal quickly and effectively with problem issues. A strategy is worthless if it remains on a shelf collecting dust without being implemented. Going through the process of developing a strategy is not a guarantee that it will be implemented. Unfortunately, many IPAs falter at the 2.9 Building Staff Capacity for implementation stage, which requires more involvement and Implementation mobilization than strategy development. Moreover, the IPA’s strategy is time-sensitive. It should be executed immediately An ambitious new strategy may call for the creation of a new unit following its development and approval as its data and findings within the IPA’s structure, the deployment of a novel investor can quickly become obsolete. services program, and/or engaging in a new sector. As such, it may require higher levels of staff skills to implement. Investing Much like carrying out a business strategy in the corporate in staff development should be an integral part of the IPA’s world, there are ways for an IPA to improve the chances strategy from its initiation. Staff development needs during of its strategy being actually adopted and executed. An implementation can be anticipated during strategy formulation. implementation plan covering at least the first year that links To do this, the strategy can initiate a staff audit to assess the development and implementation phases will outline the needs and include a formal capacity-building plan for staff steps to be taken, schedule milestones, assign tasks, and development at different stages throughout implementation. allocate resources. The strategy must have clear and tangible The implementation phase should also offer opportunities for goals with KPIs that illustrate the potential gains to the IPA learning by doing, practical training, and hands-on coaching by from the successful implementation of the strategy. The IPA’s international experts and through exposure to other agencies accountability to the government for the achievements of and global events. In a time or context of skills shortage, staff these agreed goals and indicators could act as an impetus for development has the potential to increase staff motivation and the IPA to successfully carry out the strategy which would, in thus, decrease staff turnover. turn, justify continued or increased funding. The strategy itself may be made public, kept private, or disseminated just among key partners and stakeholders, but in any case, a report of 2.10 Building Partnerships for the IPA’s results against its specific targets should be included in an annual report that is published and disseminated to Implementation stakeholders and the general public. Stakeholders are important to strategy formulation; they Engaged staff are at the core of strategy implementation. are equally important to strategy implementation. Like the Staff consultations during strategy formulation help to imbue investment process carried out by the investors themselves, the staff with a sense of ownership of the strategy and could strategy implementation requires interaction with and inputs improve chances of adoption. Once completed, the strategy from many parties. Overlaps and gaps in the mandates and should be formally shared and disseminated to all staff. Board, activities of the IPA and its partners should be avoided as they management, and staff roles in the implementation stage must impact the quality of support that investors receive and the be clearly articulated and communicated during the strategy benefits accruing from their investments to the IPA’s location. development and implementation phases. Job descriptions Sometimes, these overlaps or gaps are inevitable or cannot and performance evaluations of individual staff members be remedied immediately. In such cases, the IPA can seek should be linked to overall strategic objectives through KPIs to strengthen its partnerships with these stakeholders to for the IPA as a corporate body, departmental units, and collaborate strategically on overlapping mandates and ensure individual staff, wherever possible. Performance rewards and that the investors’ needs are met with no gaps, while working incentives such as training and exposure could be utilized to with decision-makers on a more permanent solution. motivate staff’s active involvement in strategy implementation. EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 39 The modalities of building IPA partnerships will depend on above the IPA’s level. For example, investors’ motivations for the IPA’s context and on the location’s political economy. In investing in the IPA’s location could shed light on the country’s a wider sense, the IPA’s ability to convene stakeholders, not competitiveness and desirability to investors, and provide ideas only to ensure the buy-in for its strategy, but also to influence for improvement. Issues hampering investment materialization, policy reforms in general through advocacy,33 largely depends or that are faced by existing investors on the ground could be on the IPA’s mandate, institutional set up, understanding of taken up and addressed through improvements and reforms the political economy, and its credibility built over time. The encompassed in sectoral and investment policies. The IPA is IPA’s strategy development and implementation phases could typically consulted and can contribute these insights during be accompanied by stakeholder mapping that catalogs the the policy-making process spearheaded by other entities. The typical stakeholders and their roles with more details, and IPA can also channel these insights and suggestions on a identifies the most effective modalities for engaging with each continuous basis through a combination of its formal advocacy partner. Typical stakeholders are listed in Section 2.6. function, its board members, and its management’s regular contacts with policy-making government entities.34 The strategy should address ways for the IPA to strengthen and maintain partnerships with relevant stakeholders. This “partnership framework” can identify ways for creating win-win 2.12 Communications, Media and scenarios for both sides, the IPA and its various stakeholders. It can detail how both the IPA and the partner entity benefit Public Outreach from collaboration, and define incentives for collaboration, such as shared information or referrals. The strategy can As part of strategy implementation, many of an IPA’s also emphasize how the IPA’s location benefits as a whole departments and activities will involve communications with from increased productive FDI facilitated by better synergies external parties, such as existing and potential investors, amongst the agencies involved. Partnerships can also be public officials, various public and private sector partners, formalized, through the designation of focal points, the signing international partners, and the public at large. Communicating of agreements such as memoranda of understanding and with these stakeholders is helpful in achieving strategy service level agreements, the creation of multiagency task success. The IPA, the value it offers investors through its forces or working groups, and the scheduling of regular services, and the development impacts it generates for the meetings. The IPA can also activate the role of influential local citizenry may not be adequately known, impeding the board members in fostering partnerships with key agencies. IPA’s ability to gain the attention of target investors and to take a stronger leadership role in government-wide initiatives for branding and advocacy, for example. Publicizing the IPA’s services and successes is indispensable to winning stronger 2.11 Developing a Feedback Loop for engagement from companies and organizations and extracting Policy Reform greater benefits for the local economy. Similarly, it buys the IPA greater cooperation from stakeholders and partners who want As the strategy’s implementation phase proceeds, insights to share in that success. It is worth noting that some IPAs may from implementation activities can be conveyed through choose to publish only the higher level “strategic” elements the IPA’s management and board to policy makers for of the strategy, such as mission and vision, sectoral focus, consideration when formulating relevant policies and plans, and objectives, while withholding the parts that deal with the such as the country’s economic development plan, private internal structure and operations of the IPA, such as staffing sector development strategy, or FDI policy (see Introduction). and tools and systems, for an internal audience. Other IPAs These insights resulting from the IPA’s direct interactions with may only disseminate their strategies to their stakeholders. investors and with other government agencies could inform The IPA should decide what works best in its context to help it and enrich national policy formulation, typically conducted achieve the goals of strategy dissemination. 33. For more details on IPA Advocacy services, see Griffin and Rogatschnig. 2022. 34. For more on this upward feedback loop to influence policy, see Heilbron and Kronfol. 2020, and Heilbron and Aranda-Larrey. 2020. EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 40 2.13 Tracking Strategy implementation. Beyond addressing the M&E framework to track strategy progress and goals, the strategy should tackle Implementation Progress and Post- the agency-wide M&E framework, including investor tracking Implementation Evaluation through the CRM, staff performance, department spending, and other areas that are crucial for the IPA’s success. M&E of the strategy’s progress and objectives should be taken seriously. It should not be an afterthought, but part of Following the conclusion of implementation, the IPA must also the strategy process from the start. It will help improve the evaluate its success in achieving the strategy’s objectives. chances of strategy implementation success by acting as a If the IPA has not been successful in any aspect of its motivator for implementation, enabling the tracking of progress strategy, it must be able to assess and articulate the reason in attaining goals, and allowing for course correction if needed. for any shortcomings, so that they may be taken on board M&E will also facilitate transparent, recurring reporting on the in subsequent strategy development and implementation strategy’s success to the IPA’s stakeholders. This will help with efforts. Even if the IPA were successful, it must still evaluate elevating the IPA’s profile as a capable agency and supporting how efficient and cost-effective the strategy implementation its claims to the needed funding in the future. Additionally, an process was, so that it can either follow the same processes honest assessment of the IPA’s performance will help with the or tweak its practices to achieve increased effectiveness and formulation of future IPA plans and strategies. The strategy’s efficiency in the future. Box 10 describes the attributes of high- M&E function should be endowed with sufficient attention and performing IPAs. resources to ensure that it accompanies all stages of strategy Box 10: Attributes of High-Performing IPAs A forthcoming World Bank study* analyzes the differences between high-performing IPAs and other IPAs regarding their general characteristics and institutional arrangements, their strategic alignment and focus, their organizational framework and resources, and their investor service delivery. First, the study uses a structural gravity model with country-interaction effects to explore the effect of IPAs’ sectoral targeting on inward FDI stocks in these sectors for a sample of 36 high- and middle-income countries around the world. Results from this model are used to define two groups: high-performing IPAs, those with positive, significant effects between their sectoral targeting and FDI stock; and other IPAs, those with insignificant or negative, significant effects. Using t-tests, it then considers which IPA characteristics significantly differ between the two groups using a recent WAIPA-WBG survey.** Of relevance to the IPA’s strategy, the study finds that high-performing IPAs are more likely to: • Be narrowly focused on attracting FDI/not be in charge of promoting domestic investment. • Have staff with private sector experience and remunerated at a level that is comparable to the private sector. • Engage in sectoral analytics, either by preparing sector profiles that detail their country’s relative advantage or by purchasing sectoral intelligence/research reports. • Adopt systems for identifying investor complaints or disputes. * Steenbergen, Victor. forthcoming. What makes an investment promotion agency effective: findings from a structural gravity model. Washington DC: World Bank Group. ** The data from the joint survey was reported in Sanchiz and Omic. 2020. EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 41 EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 42 >>> Conclusion It may be tempting for an IPA to hasten through its strategy development exercise, treating it as a formality, or even forgoing it altogether, in favor of quickly launching into its activities. This may result from frustration over previous strategies not having been developed in a way as to be useful or easily implemented and tracked. Or, especially for newly established or restructured IPAs, this may be induced by the desire to achieve and present results quickly to stakeholders. However, a strategy is a powerful tool in the IPA’s hands which, when properly developed and implemented, can lead to better and more sustainable results, as well as better recognition, reputation, and support for the IPA in the long run. The keys to an effective IPA strategy are its basis in a candid assessment of the location’s sectoral competitiveness, the deep involvement and buy-in of stakeholders in setting strategic objectives, the tailoring of activities and services to target investors, and the optimization of IPA structures, staff, and systems for implementation. Developing a strategy does not automatically lead to implementation; attention needs to be paid to factors such as building staff capacity, strengthening partnerships with key stakeholders, and effective communications. Finally, tracking strategy implementation progress and post- implementation evaluation would help the IPA stay the course, achieve and showcase results, and be better prepared to develop and implement subsequent strategies. EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 43 References Charlton, Andrew, and Nicholas Davis. 2007. ‘‘Does Investment Promotion Work?’’ The B.E. 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