How investment promotion agencies can move from competition to collaboration to achieve inclusive growth
In an era of declining Foreign Direct Investment (FDI) flows, reduced stock and tight budgets, competition isn’t always the best way to deliver results. Investment Promotion Agencies (IPAs) must realise the need to drive economic development in their local economies and pivot to be more collaborative. So, how can IPAs move from competition to collaboration?
Tumultuous times necessitate a re-think
FDI flows are falling worldwide, with global flows down 13 per cent last year. They are as low as they were following the global financial crisis and developed countries have been hit the hardest. The geo-political condition is unstable, and economies are adopting insular, protectionist policies. Against this backdrop, it’s little wonder that IPAs are seeing fewer projects, increased competition and declining shares.
For too long, IPAs have viewed a policy of friendly competition as the optimal way to deliver results. But in the era of collaboration, IPAs need to change their mindset and move to more collaborative ways of working. Competition has winners and losers and can often be a zero-sum game. Whereas collaboration offers new opportunities to generate inclusive growth for everyone.
Build and maintain relationships
There’s no one-size-fits-all approach when it comes to the governance, organisation or devolution of investment promotion powers. However, experience has shown, in ICEX-Invest in Spain and Invest in Iceland, that building effective working relationships with other public and private entities is important for successful investment promotion.
IPAs that collaborate with other entities are more efficient as they enhance their visibility of leads, government policy and market innovations, and improve local skills and talent through close working with Multinational Corporations (MNCs).
A good example is award winning IPA InvestKL, which works closely with multi-national corporations to meet their needs, develop local talent and facilitate collaborations with academia. As of 2018, the IPA had attracted 80 MNCs with approved and committed investments of RM12 billion (£2.34bn) and created more than 12,000 regional high-skilled jobs. InvestKL did this, in part, through understanding the needs of their MNCs and facilitating and encouraging collaboration between key stakeholders to meet these.
Building and maintaining strong relationships with key stakeholders, both public and private, will put IPAs in a better position to attract FDI, stimulate inclusive growth and improve economic location.
Adopt digital tools to your advantage
Working collaboratively with teams from across the investment network can help IPAs to identify opportunities across the value chain. Digital technology brings people from different locations together to share insights and generate ideas for new products and services that appeal to investors.
However, the introduction of collaborative digital tools is only part of the journey. It’s important that a culture of collaboration is in place. This culture must value and prioritise communication and the sharing of information to drive performance and help realise inclusive growth for all.
Use data to drive effective, open decision-making
Data has the potential to improve IPA decision-making by presenting better information and deeper insights into the strengths of its location, what it and its partners can offer, and what customers want.
In addition to better IPA performance, it can also improve transparency and openness. This gives citizens confidence in IPA leadership. Our work with the Foreign & Commonwealth Office to provide a game-changing monitoring and reporting function within the Prosperity Fund showed the value of having key stakeholders provide data consistently. IPAs could adopt a similar approach to the provision and use of data, collaborating with key stakeholders to gather data from a range of sources and enable effective, transparent decision-making.
In the age of instability, with trade wars and the looming spectre of recession, IPAs must re-think their approach to stimulating inclusive growth. For too long, IPAs have continued to view competition as the best way to deliver results and missed out on the opportunities that collaboration can bring.