Med-Academy Intro to FDI IssuesBénédict de Saint-LaurentMarseille, 14 January 2009
Introduction to Project Life Cycle ManagementFrom intelligence & lead generation to project handling and after-care
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Investment Project Life Cycle
2
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Needed information to adress inquiries from potential investors
Exercise. Can you imagine what resources you have to collect?In order to address the needs of the average investor?Anyway, does he/she exist, the average investor?Then, what to do?How can you prepare the most probable requests?
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What type of resources?Resource data base/FAQs
Selling pointsSector overviewsDigests on labour /law /subsidiesCompanies already installed (per region, sector, country of origin)StatisticsMaps, photos, images
Pre-investment data Cost of factors (energy, labour, transport etc.) updatedImmediately available land/offices for projectsIn some cases (Ireland), pre-defined business models (IRR etc.)
Case study: The Invest in France resource centre
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Example: Invest in France resource centre In-sourced:
General dataEconomic, sectoral, national…
Out-sourced:Specific data and market studiesLocation infosNetwork of partners: consultants, other ministries (fiscal matters), real estate….Regional and local data
Partnership: in France, with regions; worldwide, with trade missions (« missions économiques ») Built around an intranet –hundreds of pages thousands of documents (same for ANIMA about MEDA)Managed by 1 central operational unit in Paris
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Investment intelligence
Knowledge management
"Manual" management via media, contacts, consultants
Resource databases
Information tracking, in particular via internet
Computer-aided tools (Autonomy etc.)
Selection and evaluation of information, exploitation of alarms
Case study: the ANIMA intelligence system
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Example: ANIMA intelligence
• FDI projects• Prospects
• Small projects (franchise, rep. office)
InternetWebwatcher /Monitoring
of companies
Others sourcesNewsletters, events,
listings
Direct information
ANIMA team
RecordsIPAs & other
partners
Factiva economic newsflow (>15,000 news per day) Reuters -Dow Jones etc.
Open databasese. g. Kompass, Google, etc.
Semantic Analysis via AFII
Selection of ±2,000 news and alerts per year
for MED
MIPOMediterranean
Investment Project Observatory
VigieInvest in France FDI
data base on 30 European countries
Benchmarkinge. g. with East. Europe
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Sources: a. Data banks
Professional data banks, e. g.
Lexis-Nexis : more than 33,000 press sourcesFactiva
(Reuters/Dow-Jones): 10,000 news a dayDun & Bradstreet:
financial information on about 63 million companies and allows to know the localisation of all their branches
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Sources: b. InternetInternet
Follow-up of all the internet sites from companies identified from other sourcesIn addition, search engines working on the major internet portals (professional sites, financial news…)
Fidélisation
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Sources: c. Newsletters & RSS
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Examples of FDI intelligence outputs:Value-added investments
Company Host Size ProjectRenault-Nissan (France)
Morocco € 600 mLarge automotive export complex in Tangiers free zone
Delphi (USA) Morocco 3 000 jobsRelocation of Spanish automotive production in Tangiers
Al Ezz (Egypt) Algeria US$ 750 m New steel plant in the Jijel regionEl Sewedy (Egypt)
Libya US$ 64 m New cable factory with State-owned partners
TAV (Turkey) Tunisia € 500m BOT for the Enfidha airportNational Bank of Kuwait (Kuweit)
Egypt US$ 516 mCompetitive tender to buy Egypt's Al Watany Bank
Orascom / OCI (Egypt)
Turkey US$ 508 m Buy out of Turkish Baticim (cement)
SanDisk (USA) Israel US$ 400 m New stake in Tower SemiconductorsTéléperformance (France)
Egypt 600 jobsNew 600 positions call centre for English-speaking customers
Theolia (France) Morocco 250 jobsThe renewable energy specialist creates a group with 4 subsidiaries in Casablanca
Industrial polarisation
effect
Intra-MEDA FDIs
Creation of a MEDA financial market
Novel projects
Selection among 800 projects for 2007 (MIPO, ANIMA)
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Outputs: Building int’al infrastructureTop ten FDI projects in 2007 so far (MIPO, ANIMA)
Company Host Amount ProjectEmaar (Emirates) Algeria US$ 20 bn Major real estate projects in Greater AlgiersENI (Italy) Egypt US$12 bn Egyptian natural gas projectsReliance (India) Egypt US$ 10 bn Petrochemical plants in EgyptDubai Holding (Emirates)
Turkey € 5 bnNew Dubai towers and other real estate projects in Istanbul
BP (UK) Egypt US$ 5 bnVarious investments in Egyptian oil industry over 5 yrs
TAQA (Emirates) Algeria US$ 4 bn New petrochemical plant in ArzewMubadala & Dubal (Emirates)
AlgeriaUS$ 3.74
bnAluminium smelter through a JV with Sonatrach-Sonelgaz
Malay. Airports (Malaysia)
TurkeyUS$ 3.45
bnBuilding and operation of a new terminal for the Sabiha Gokcen Airport
Emaar (Emirates) Egypt US$ 3 bn Mega-project in real estate in Cairo Citigroup (USA) Turkey US$ 3.1 bn Acquisition of 20% of AkbankFraport (Germany)
Turkey € 2 370 mBOT for 3 terminals at Antalya, Turkey's 2nd-largest airport
Real estate, logistics
Oil and industry
Banking
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Outputs: 1,000 world companieshaving recently invested in MEDA Source: MIPO
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Turkey274 projects
Algeria279 projects
3 505
2 267
6 355
2 363
Algeria279 projects
3 505
2 267
6 355
2 363
Morocco450 projects
3 375
5 397
4 153
2 382
Morocco450 projects
3 375
5 397
4 153
2 382 Tunisia177 projects
95217
998
3 969
Tunisia177 projects
95217
998
3 969
Cyprus25 projects
0 1408
152
Cyprus25 projects
0 1408
152
Malta22 projects
1 0 14367
Malta22 projects
1 0 14367
2003 2004 2005 2006
FDI inward flows, €m, MIPO2003 2004 2005 20062003 2004 2005 2006
FDI inward flows, €m, MIPO
Egypte284
projects
477
15 862
2 102
9 003
Egypte284
projects
477
15 862
2 102
9 003
477
15 862
2 102
9 003
Israel211 projects
1 153
131
13 758
5 922
Israel211 projects
1 153
131
13 758
5 922
Jordan119 projects
119
2 0491 324
2 901
Jordan119 projects
119
2 0491 324
Jordan119 projects
119
2 0491 324
2 901
Lebanon77 projects
384813
643
700
Lebanon77 projects
384813
643
700 Syria118 projects
4 970
146444
2 982
Syria118 projects
4 970
146444
2 982
4 970
146444
2 982
582
12 936
2 712
14 070
582
12 936
2 712
14 070
Palestine Auth.
11 projects
10801
289
Palestine Auth.
11 projects
10801
289
MEDA share of world FDI
0.7%1.5%
0.9%1.9% 1.7%
3.3%4.1%
0%1%2%3%4%5%
2000 2001 2002 2003 2004 2005 2006
Outputs:A growing piece of the cake
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Outputs: Country& sector
positioningMIPO 2003-2006
IsraelHigh techOrigin US
Maghreb & TurkeyTraditional industries,Telecom, off-shoring
& sub-contractingOrigin Europe
MachreqMega-projectsFinance, real
estate, tourism
Origin Gulf & Asia
Method: principal components analysis over 2,088 projects
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Project generationGoals
Target investors Search, identify and qualify projects
MeansTargetingUse of economic intelligence (analysis, alerts etc.)Use of promotion toolsDevelopment of a prospection network Co-operation between prospectors or consultants, the national agency, the host sitesUse of the existing resources of the country (e.g. commercial attachés of the Embassies, acting as "business developers”) Training (information tracking, listening, negotiation, culturalapproach)
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Targeting: a mustFrequent error: engage in pro-active promotion without targetingTargeting by sector, product and nationality
Based on a clear understanding of comparative and competitive advantages A pre-requisite for success
Firm-specific targetingCustomised approach of individual investors The most effective promotional techniquePrivate sector must be involved to ensure success
Targeting is especially critical for small IPAs/countrieswith limited resources
Case study: Invest in Denmark
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Reasons for targeting
1. No country or territory is good in all sectors –or, if so, it does not need any EDA or invesment promotion!
2. Competition is intensifying in FDI business3. Focus your efforts on your best FDI prospects4. Targeting implies to be specific: targeted companies to discuss
precise niches or business opportunities in the host country
5. Targeting obliges you to understand how your partner/investor is reasoning
6. Investors respond best to material relevant to them7. Targeting provides higher rates of projects effectively
implemented
8. Targeting is more cost effective than untargeted marketing
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General targetingSectors and functions
Industrial firms: production, assembling, R&D, logisticsService firms: software, e-business, engineering, call-centre, service centreAdditional segmentations for manufacturing projects: nature of product, market, technologies and skills needed
Category of investmentInvestment “greenfield” – New plantAcquisition of existing plant (re-conversion)Re-investment (extension)
Wide use of internet and data bases
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Specific targeting
Selection of a first panel of firmsEconomic criteria such as total turnover and number of employees
Creation of a “Golden List” on a data bank Built on the basis of investment intelligence and daily economic watch
Specific selection of “key accounts” / local industrial groups
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Reactive project generation
“Responding to investor enquiries”
Advantages:Enquiries are serious and from companies with a real interest for your locationThe potential for winning the project is realistic
Disadvantages:You will undoubtedly miss opportunities for your location from investors that have not pre-selected you, but for whom your location offers opportunitiesThis activity alone does not contribute to a long term economic development strategy with a focus on stimulating inward investment in certain sectors
Source: IBM-PLI
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Proactive project generation “Identifying Investment Prospects before they become enquiries”
Advantages:Proactive marketing strongly contributes to the national economic development strategy by stimulating investment in certain industriesThere are chances of winning the project by being the first IPA to contact the companyIn times of global competition it is essential to be ahead of the game
Disadvantages:Requires more and dedicated resourcesRequires greater sectoral and commercial understanding
Source: IBM-PLI
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A good recipe: copy the investor!
2. Create long-list of candidate locations Then identify shortlist
The investor decision process The ED marketing process
2. Product definitionWhat do we sell?
1. PositioningSWOT, comparative advantages, country industrial strategies
4. Site proposal Information & negotiation
5. After-care
3. Selection of target group & identification of
potential investors Company targeting
4. Due diligence and negotiations
5. Implementation
3. Evaluate short-listed locations Then select preferred location
1. Strategic decision & project parametersProduce what and how, market
Source: Richard Banks and others
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Abundant seeds, limited cropGoal
FDI
Investment Approvals
Investment Applications
Investor Reconnaissance Visits
Meetings with Individual Prospective Investors
Investor Contacts Generatedby Promotional Activities
National Objectives
No. of Investments
No. of Project Approvals
Require
No. of Project Applications
No. of Site Visits
Require
No. of Meetings/Presentations
No. of Investor Contacts
Require
Require
Require
1,000 jobs
10 new investments
18 approvals
20 applications
100 site visits
1,000 meetings
10,000 contacts
Source: TSG
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Prospection networkExample of Invest in France
IFA OfficesAmsterdamAtlanta (in 2007)BarcelonaBrusselsChicagoDusseldorfFrankfortLondonMadridMilanNagoyaNew YorkOsakaPalo AltoShanghaiStockholmTokyoZurich
IFA branches in Economic missionsDelhiHong KongMoscow (in 2007)SeoulTaipeiTel Aviv (in 2007)Toronto (in 2006)
Countries of interestSouth AfricaArgentinaAustraliaAustriaBrazilChiliDenmark
Egypt
U.A.E.FinlandGreeceIrlandIslandKuweitMalaisiaMexico
NorwayPolandPortugalSaudi ArabiaSingapourThailandCzechoslovakiaTurkey
Attracting international investment
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Prospection network Example of Invest Sweden - ISA
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Project qualificationStrategic interest of the project
For the investorFor the country
Project stage (feasibility, financing, implementation)Estimated timetable (decision date, main deadlines)Subjective elements influencing the decision
ProbabilityOf an effective launch of the projectTo get the project for the country /the sitePossible doubts and questions on the project (economic feasibility, technology risk, fragility of the mother company, investor’s track records etc.)
Proposed attitude for the IPA Stop, or yellow light (go if), or green light (reasonable effortto be done to get the project)
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Effort in project qualification: the « contract review »
Materiality & credibility of the projectDue diligence & project economics (is it viable, serious?)Estimating the probability of winning Timescale (decision schedule)Non-economic considerations Allocating IPA effort reasonably
Content of an offerClear specifications from prospectorsLocal vs. national elements Fixed vs. variable elementsElectronic vs. paper offersNeed for synthesis in case of offers on multiple sites
How to add value to an offer?
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Data to be collected on the project1. Project objectives (market share, potential clients)2. Type of investment (greenfield, extension, partnership) 3. Production considered4. Transfer of specific technologies5. Job creation (production, logistics /commercial, admin.)6. Global economic impact (spillovers, linkages etc.)7. Amount of investment, funding (and self-financing share)8. Structure and ownership considered 9. Timing (decision date, investment date, start date)10. Decision process (status? who decides?)11. Geographical flexibility (mobile project?) and competitors12. Localisation strategy (main criteria, priorities, needs)13. Specific needs (labour, training, land, buildings, sub-contracting,
utilities, infrastructure and services, R&D…)14. Aids and support sought
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Investor servicing
1. Project handling & Offers to investors2. Investment facilitation & one-stop shops3. Follow-up, after-sale, after-care, clubs etc.
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Project handling
GoalsNurture potential and existing investorsTransform prospects into real projectsSpeed up implementation and add value
MeansAnswering day to day questionsAdapted web site (FAQ, facts, data)Effort in project qualificationPreparation of relevant offersSupport projects (financial and fiscal aids, facilitation)
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Among other functions:Feed the decision process within the company
Industrial level (sector-based information, technical input..)Financial level (DB, incentives, costs…)Decisional level
Feed the project formalisation process Geographical issue (location identification)Real-estate issue (technical criteria)Industrial issue (suppliers, utilities)Human resources issue (typology of employment) etc.
Suggest partners, ideas etc.
Project handling
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Offer preparation strategyMore and more, projects are won after “tenders”Hence the need to prepare formal offersConditions to win
Good qualification –good RFPs or brief for the EDAIssues really strategic for the investorPrecisely tackled in the IPA offer
Use of pre-existing resources Pre-investment dataKnowledge management (resource centre)
Electronic offers, unless requiredSimple presentation (often, Power Point)Encapsulated into an Acrobat PDF file
Method
Packaging
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Efficient offersThe do
Acknowledgement of receipt in 24 hoursStandardisation /offer format (PDF, PowerPoint, templates)Pre-investement dataImportance of personal contacts /feeling /reportingAppointment of an identified counterpartRegular information and follow-up
The don’tsSend documents under standard (poor English, bad presentation, errors...)Give illusions via unreliable promises (« for me, X. is the country of the eternal potential »)Make contact with VIPs/ top level without real content /newsCompete badly with other fellow national operators
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Template for a synoptic offerLettre d’envoi / Letter II. Résumé / Executive summary
A. Votre projet, vos besoins / Our Understanding of Your NeedsB. Vos priorités / Your PrioritiesC. Notre engagement à vos côtés / Our Commitment to your ProjectD. Caractéristiques du secteur en France / Specifics of the Industry in FranceE. Synthèse des meilleures offres françaises / Synopsis of the Best French BidsF. Vos contacts / Your contacts
III. Infos AFII / Invest in France Information Package
Site internet / Web siteArgumentaires / Investment rationale in FranceAutres données (fiscales, réglementaires) /Other Info (law etc.)
IV. Offre de la région A/Region A OfferChiffres-clés, plans de situation / Key Figures,
Location, MapsUne région attractive. Les « plus » / Region
A Attractiveness. The « plusses »Contexte d’activité et secteur /Your Business
Environment& Sector in Region ARéseau d’entreprises, recherche etc. /
Company Network, R&D…Communication, logistique, services /
/Communication, Logistics, ServicesEducation, formation, marché du travail /
Education, Training, Labour MarketCulture et qualité de vie / Culture and Quality
of LifePrésence de votre pays /Your Country’s
PresenceSites proposés / Proposed LocationsLes aides / Investment Support
V. Offre de la région B / Region B Offer
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ObjectivesDeliver on time –precede needs if possible…
Save money (DHL and printouts are expensive)Save time Get quick feedbackCustomised offers… but standardisation
Go to the point
Pre-investment data
Templates
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The financial package
Subsidies, grants, tax exemptions, loans, land and building facilities etc.EU and WTO rules limiting the distortion of competitionUsefulness and limits of economic intervention by the public authorities How to get rid of « aid seekers » ?
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Administrative facilitation & other services
E-administrationOne-stop-shopsProtecting investors against red tape abuses / corruptionExtra services: HR recruitment & training packages, facilitation for expat executives (housing, working visas, international schools), etc.
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It is 7 times more expensive to land a new customer than to sell to an existing one
Former Chairman of Ford UK
Local development benefits from FDI will not come about at once
Incremental investment can account for 60% of investment flows in Western European countries
According to PWC Consulting, 2/3 of companies say that after-care influences their expansion plans
Perception of host country = key trigger for investment
Positive impact for potential investors of witnessing existing investor expansion
Why is after-care so important?
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After-care: some targetsKey projects or issues
Re-investment, production unit expansionCo-investment opportunitiesSector/cluster development initiativesRisks of closure or vulnerable industryLicences, privatisations
Key players in target sectors: foreign-owned firms per sector, country of origin, function
Multinationals with foreign/local clients/suppliersPotential for new types of activity, for growth, for suppliers
MNCs and foreign-owned firms whose know-how could be used/ developed locally to integrate suppliers
Reinforcement of the supply chain value‘Embedding’ companies more strongly in the territory
Retention of existing companies
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After-care: methodsKnowledge of impatriates
Follow-up of prospects and projects (data bases, maps etc.) Cf. British companies in France
After-sales service Importance of nurturing companies after investmentCultural differences (e. g. Japanese investors, often gregarious)Information, news, facilitation, “clubs” for existing investors, taking care of expatriate families
Marketing activitiesConferences, seminars, exhibitions, conventionsDirect mail to companies, satisfaction surveys etc.
Links with private firms, networks, resourcesLinks with local Chambers, Employers’ AssociationsLinks with Universities, vocational training centres
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After-care: example
Knowledge of the existing foreign basis per nationalityExample of UK companies in France
Total UK and Irish investments in France:
1,800 companies200,000 jobs
UK and Irish investment flows in France:
40/50 projects per year2,000/3,000 new jobs per year€ 12/13 bn per year
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The image of the aircraft(given by a foreign investor in a MEDA country)
As a plane, the investor has landed in the countryThe plane has stopped on the runway and seems abandonned…
No information about parkingNo luggage handlingNo passenger handlingPoor condition of the airport
Importance of follow-up Re-investment account for less than 10% of FDI flows for MEDAMost IPAs/EDAs are either waiting passively or searching abroad (when the resource is here)
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Back to Policy advocacyGoal 1: increase country attractiveness
Political and social stabilityLegal frameworkSocial legislation Training of the workforce
Goal 2: build a business environment favourable to investors
Sectoral regulations for project approvalProtection of the investorTaxation, repatriation of profitsTech-parksReal estate, infrastructure and "utilities" Venture capital Facilities offered to expats
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Facilitate investment and exchanges
Location criteria for investorsImportance of qualitative factors (personal experience and links, confidence, political stability of the system, consistency speech vs. reality)Discrepancies between the "official" framework and local practices Bureaucracy, other obstacles and costs (red tape)Technical barriers to commercial exchangesStandards and qualifications Be the advocate of foreign investors vis-à-vis the Government
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Required changes in mindsetsCurrent attitude
A public administration “granting” authorisations (and sometimes tax exemptions) to those investors who take the risk to come in your country/territoryBetter than creating bureaucratic obstacles, of course
New mindsets 1. Consider that the investor is a client, a customer and must be served (investor servicing, after-sale, after-care)2. Understand that FDI is now a world market, that it is not the investor who receives a privilege when he gets a licence to invest here (but the contrary: the territory is privileged…)3. Realise that passive investment promotion and FDI facilitation must be complemented by a pro-active search for targets (often abroad) fitted to your competitive strengths