Investment promotion agencies (IPAs) play a vital role in a country’s growth and development, guided by foreign direct investment (FDI) and domestic investment. FDI enables inflow of essential capital, drives sustainable growth, and expands productivity in an economy. COVID-19 triggered a significant decline in revenue-generating sources, especially for smaller economies. In such a scenario, FDIs have become extremely crucial. Economies around the world are intensely competing to secure new investments. IPAs attract these investments as well as potential investors to drive economic and social development.
Prominent IPAs have been mandated by their respective governments to take transformational steps, such as focusing and projecting their expertise and specialization in specific industries, strengthening national branding.
A well-functioning IPA is characterized by high visibility and support from government and private stakeholders. Strong participation from relevant stakeholders and a fair degree of autonomy is key to the success of an IPA. In addition, with COVID-19 restricting movement across nations, especially now with multiple variants of the virus affecting different regions of the world, an online presence is the best way to promote investment opportunities to major investors.
IPAs must follow best practices in designing their structure. Fostering a robust corporate culture, revamping internal systems to streamline operations, removing silos and bottlenecks to assist interested investors, and adopting improvised online tools to reduce time are some areas that can improve the service quality and effectiveness of IPAs.
The pandemic left many countries dry on essential resources. Declining FDI flows and disruptions in global value chain forced IPAs to adopt improvised strategies to achieve their objectives. The use of technology has emerged as a prominent tool for IPAs to attract foreign attention.
In addition, the pandemic compelled economies to adopt more inclusive policies and reprioritize their public budgets to include the cost of unprecedented medical expenses. Limited funding to IPAs due to shifting government priorities forced IPAs to operate under pressure. Global economic contractions, the decline in FDIs, pressure on wider public budgets, and change in government policies are just some of the areas that have impacted the operations and activities of IPAs.
A well-structured, properly aligned, and fairly autonomous IPA can play a dynamic role in attracting foreign investments, contributing significantly to nation building in terms of job creation, infrastructure building, and facilitating long-term, sustainable growth in an economy.
This white paper is based on our understanding acquired through thorough research on investment promotion activities and study of leading IPAs across the world. It seeks to become a reference for anyone looking to understand the structure of IPAs and how they play an important role in investment promotion and facilitation in their home countries.
By Dr. Pradeep. K. Mukherji, President & Managing Partner, Avasant and Ranjit Samal, Associate Consultant, Avasant.