Congratulations to the European locations which did well in the recent fDi Magazine European Cities and Regions of the Future 2012/13 rankings.  This is a bi-annual exercise to identify the leading European FDI locations based on analysing a lot of numbers.

The numbers are important in FDI.  Companies make location decisions based on the numbers stacking up; locations compete against each other, benchmarking themselves on key numbers; and many investment promotion agencies get their funding based on the numbers they achieve each year.

However, the people behind the numbers are also a vital part of the FDI competitive game.  For investment promotion agencies, it is their vision and their passion for their location that helps win FDI projects, even sometimes when the numbers are not in their favour.

 

Continuing our conversations with members of the FDI community, we are very happy to get some insight from David Parker who is Head of Investment Promotion at Invest Hong Kong’s London office. Previously he worked for the Welsh Government’s Trade and Investment operation in London and New York. Here he shares his own personal views on the FDI market and IPA activities.

Q: What should be the main priorities of investment promotion agencies (IPAs) in 2012?

A: Aftercare would be top of my list. During difficult economic times, the first priority should be to monitor how existing investors are weathering the storm. Early intervention could mean the difference between retaining and losing a key local employer. This intervention needs to be at corporate HQ level as well as locally as location decisions are very strategic, with companies constantly reviewing their international activities and global footprint. Aftercare is not all about simply saving or safeguarding jobs of course. It’s often an opportunity to identify expansion, reinvestment and diversification projects for the local plant. Smart IPAs know this and will approach existing investors with bespoke propositions for reinvestment.

In terms of pursuing new investment opportunities, IPAs should be very focused and play to their regional/competitive strengths.

Q: What industries/sectors are particularly active in the FDI market at the moment?

A: There is an ever increasing trend towards smaller projects across all sectors. It is unusual to hear of the mega-projects that Wales used to attract any more. In broad terms, manufacturing is still as important as always, and Western economies are finally waking up to that fact. The financial and professional services sector will always be there as it supports all other industries in terms of raising finance, legal services etc. Then there is the explosion of activity around ICT and digital media encompassing cloud computing, apps development and games. Environmental technology will continue to grow in importance. Cutting across all sectors is the critical importance of innovation and entrepreneurship. Although FDI is all about attracting existing/established companies, a strong indigenous cluster can make a region much more attractive fuelling FDI opportunities. The FDI attracted can then fuel further innovation and entrepreneurship in the local economy creating a virtuous circle.

For IPAs tasked with attracting FDI it should be about sub-sectors and niche industries that have a strong fit with their offering. Most IPAs target “ICT” but this is now such a broad industry. Invest Hong Kong is this year focusing its efforts on cloud computing from an ICT perspective. Likewise, our focus on financial services will be specifically around “asset management”.

The challenge for IPAs has always been (and always will be) being the first to spot and target the next big thing. This makes research and analysis as important in some respects as business development. Those sectors worth monitoring are those that are going through significant transformation. For example, more and more Education & Training providers that might traditionally have focused on their home markets are now expanding internationally. Hence, Harrow School now has a campus in Hong Kong.

Q: What are your thoughts on the effectiveness of social media for place marketing to attract FDI?

A: As with most products in 2012, a compelling web presence is critical. It is no different for place marketing. Social media, if channelled effectively, can provide a small IPA with budget limitations with the kind of international exposure that it could only have dreamed of a few years ago. I wonder how many IPAs have a clearly defined strategy for using social media as a tool for leveraging FDI?   Likewise, how many are using other technology platforms such as apps for pushing their offering? But one thing that hasn’t changed is that the IPA still needs strong propositions to go to market with.

Q: You have moved from the West (promoting Wales in the UK and US) to the East (promoting Hong Kong in Europe). Are there any differences in your approach and messaging re: FDI attraction?

A: There are some notable similarities and some differences. With Wales it was all about promoting the fact that it was an integral part of the United Kingdom and the European Union, but had its own devolved and very young government. The same could be said for Hong Kong in so much that it is part of China and a gateway to Asia but is also a Special Administrative Area with an equally young government and the very compelling proposition of “one country two systems”.

The big difference though is that most American companies that I spoke to that operated internationally, already had a presence in the UK/Europe, so it was about potential expansion into Wales. In the case of promoting Hong Kong in Europe, many European companies do not yet have a presence in China but see it as critical to their future growth and expansion. Hong Kong is the perfect base from which to target the Greater China market. Therefore most of the projects and enquiries that I am currently working on are for “new” investment. That is probably the big difference between West and East. The West as a location option for FDI is at the mature stage of the product life cycle, while the East is a rapidly rising star. But it is not all doom and gloom for the West as this sea change presents opportunities as well as threats. Many mainland Chinese companies are using Hong Kong as a gateway from which to “go global”. These companies will view America and Europe as important markets for their international growth, so IPAs in the West should be positioning themselves for the opportunities that this presents - but through robust long term strategies led by senior politicians and business leaders.

Q: Are you organising any special initiatives or events for the Olympics in London this year?

A: The Hong Kong Economic & Trade Office is busily organising our activity including an event in honour of the Hong Kong athletes. This is an incredibly exciting year to be in London. It is a truly international city at the best of times but in 2012 the eyes of the world will be on it, perhaps like never before given modern media. That represents a huge opportunity for all IPAs, trade bodies, tourism agencies etc. with a presence here. As always with FDI though, it is about turning opportunities in to tangible results - i.e. prospects. With this in mind, IPAs should already be working on their Olympic campaigns, utilising social media and all the other place marketing tools.

The excitement is building up for the London 2012 Olympic and Paralympic Games in July/August/September.  As well as spectacular sport, it will also be a great chance for trade and investment activity, with over 200 countries participating in the Games.  Various national “Olympic Houses” will be a hotbed of networking and deal-making.  Lancaster House is where the British Government is setting up its trade hub - the British Business Embassy - and on the eve of the Olympics it will host a business summit for over 200 major companies.

We welcome all the trade and investment executives coming to London and we hope to catch up with you during the Games - do get in touch!

We already know of one Olympic winner - our good friend Alan was one of the many people in the UK who bid for Games tickets, and after going for all his favourite sports, as an after-thought he also bid for beach volleyball tickets.  He was lucky enough to get some tickets, and guess what for…the women’s beach volleyball semi-finals!  He says he already has the tickets allocated to friends and family, but we are currently in negotiations with him on this…

The BRICs, the next eleven (N-11), the CIVETs, the EAGLEs etc are now part of our acronym-filled conversation.  The emerging markets have emerged, and are now a big (and ever-growing) part of our FDI landscape.  To hear the latest on their FDI ambitions and attraction activities, Andrew Keable of the KW Group, is organising a Global Special Economic Zones Summit in Kuala Lumpur in March, where a broad range of panel discussions will be covering trade and investment, master planning, infrastructure, connectivity and transport in the emerging economies.

One of our favourite cross-border lawyers Miller Rosenfalck have just produced a guide for companies who want to take up the export challenge.  Produced in partnership with UK Trade & Investment it provides sensible advice and useful contacts for going global.

Our friend Michel Lemagnen, Head of Business Intelligence at Greater Helsinki Promotion has looked at FDI performance in the Nordics in 2011, highlighting growth in cross-border investment through M&As and greenfield investments in the first three quarters, but with the action tailing off in the last quarter of 2011.  The forecast for 2012 is one of decline in FDI activity with potential recovery in the last quarter.

It is good to see that Greater Helsinki Promotion includes mergers and acquisitions (M&As) in their review of FDI activity.  Many investment promotion agencies don’t pay enough attention to M&A activity, which is an important method of new market entry, particularly for technology businesses.

Well done to Poland for a strong FDI performance in these difficult times.  It is the only country in the EU which doesn’t do recessions , and is attractive to businesses across a wide range of industry sectors.  In particular, it currently has a strong shared services and BPO offer; is quickly building up its ICT credentials; and is winning lots of automotive investments.  Go Poland!

Happy New Year!

As we start 2012, it is a good time to reflect and look forward.  We are very pleased to welcome Courtney Fingar the editor of fDi Magazine to share her views on where FDI is going and where investment promotion agencies should be focussing their efforts.

Q: fDi Magazine recently celebrated its 10-year anniversary and you referred to some of the changes in the market since it started, as well as some of the constants.  What big changes do you see for the next 10 years?

A: I see Brazil completing its ascent and establishing itself firmly as a world-leading economy and heavyweight on the world stage, and in Latin America generally there will be continued rises in FDI levels, incomes and living standards.  Mexico is the big question-mark here, mainly for security reasons; its future hinges entirely on the extent to which violence in the border states can be contained and reversed.  Within the US - as argued in a brilliant article by Michael Lewis recently - the shift in the economic centre of gravity to the Sun Belt states and away from the northeast and north-midwest (largely off the back of more business-friendly investment environments and faster job creation and thus more inbound migration) will have seismic political ramifications.  I see at least some level of disintegration in the euro zone, and increasing clout, both economically and politically, for CEE countries such as Poland.  I see a widening of the gap between northern and southern European countries.  In Asia, the most interesting question is whether the political structure in China could change; I consider that highly possible.  Some southeast Asian countries - Cambodia, Laos - will come out of the shadow of neighbours and become of investor interest in the way that Vietnam already has.

For all the talk of the potential for protectionism and isolationism as a natural reaction to some of the excess of globalisation, I do not see companies pulling back in any great number from crossborder expansion. However, due to a natural process of plateauing, we might not see the huge ramp-up in globalisation that characterised the 1990s, and FDI levels might not greatly exceed the pre-2008 high-water marks.

Q: If you were an investment promotion agency (IPA) in today’s FDI market, how would you be marketing your location?

A: Before marketing anything, I would do a very thorough examination of the location’s real (not imagined) strengths and assessment of where it can fit in the market.  I would also insist that every single member of the team completes training in general business, business strategy and basic economics - after all, how can they pitch to companies if they don’t know how companies function or what they need?  In the current climate companies are looking for bespoke solutions, and so it is essential that IPAs are able to carefully identify the most appropriate target companies, study up on the companies, and be able to present to the companies highly specific commercial opportunities in that location.  A location can never be all things to all companies, so broad-brush marketing and generic brochures are just not going to cut it in today’s climate.

Q: What stories are you looking for from IPAs?

A: I am interested in anything that is unique.  I am also interested - perhaps even more interested - in hearing about challenges they face and how they are working to overcome them, as opposed to just straight success-story type pitches.

Q: What IPAs have given you a surprise (good or bad)?

A: The most fascinating and surprising organisation carrying out investment promotion activities these days - whose work in this area I have had the great pleasure to witness first-hand - is the US Marine Corps.  In line with the concept of what can be termed “economic counter-terrorism”, forward-thinking members of the military are utilising FDI as a tool for reducing violence and instilling peace in conflict-ridden territories, the idea being that creating jobs deprives radical groups of potential recruits and also illustrates to the local populace the gains that can be made in their own lives through channelling productive rather than violent energies.  This worked to quite some significant effect in Al Anbar province in western Iraq, where the governor bought quickly and enthusiastically into these efforts.  The result is a very intriguing scenario in which career military officers are now, in essence, learning the ins and outs of investment attraction.  Actually, they are well cut-out for such a mission, because of their pragmatic, flexible and results-driven ethos, and I feel that most civilian IPAs could learn a thing or two from them.

Q: What are the favourite (over-used) words/terms that IPAs use when they are pitching to you?

A: “Strategic location” (complete with requisite map showing diametric circles radiating outwards from the location to show how it is, in fact, the centre of the region/world/universe); also “value-added services” and “moving up the value chain”.  For once I would like to hear an IPA say, “You know what, for now, we need to just work to excel in more basic services and fill that gap before we seek upgrades”, because actually, there is still great demand and need for production facilities and what could be classed as low-end services.  And I cringe horribly when anyone uses the term “glocalisation”, although to be fair, this most likely was the brainchild of a consultant somewhere and only a few IPAs have so far latched on to it.  I wish they would stop!

                                                                                        Seasons greetings & the best for 2012!!!