THE WORLD BANKWorld Bank Group Multilateral Investment Guarantee Agency

Investor Aftercare What is it and why is it important?

BEEnet Annual Meeting

Investment Policy & Promotion Deep Dive Workshop

Belgrade, October 28-29, 2008

Wim Douw

2 THE WORLD BANKWorld Bank Group Multilateral Investment Guarantee Agency

Contents

1. Aftercare and its objectives

2. Why is aftercare important?

3. IPP and after care

4. Some thoughts for discussion

3 THE WORLD BANKWorld Bank Group Multilateral Investment Guarantee Agency

1. Aftercare and its objectives

“Aftercare” involves the provision of services by an IPI aimed at:

Facilitating reinvestment, expansions and diversification

Anchoring foreign investment

Providing the factor conditions to encourage existing investors to upgrade their activities

Identifying ‘ambassadors’ and testimonials

Targets:

generally, only foreign investors, but

in some circumstances, large or strategically important domestic investors, for example significant exporters, suppliers to major foreign investors, etc

Aftercare is not targeted at domestic SMEs (although some services provided will be relevant to both foreign and domestic)

4 THE WORLD BANKWorld Bank Group Multilateral Investment Guarantee Agency

2. Why is aftercare important? The government’s point of view

Financial crisis and economic recession impact global investment flows. Demand from client countries anxious about retaining key foreign investments is likely to grow.

Expected FDI trend for 2008 and 2009

S&P 500 Performance and global FDI Trends

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FDI (US$ billion)

5 THE WORLD BANKWorld Bank Group Multilateral Investment Guarantee Agency

2. Why is aftercare important? The government’s point of view

• “It is 6 times more expensive to land a new customer than to sell to an existing one.” Source: former Chairman of Ford UK.

• Potential to influence investor decisions on reinvestment or divestment. Incremental investment can account for 60-75% of investment flows in many Western European countries (incl suppliers);

• Happy existing investors are a powerful marketing tool and existing investors that expand/diversify send a strong positive signal to the marketplace.

• “Three out of four investment promotion agencies state that after care is one of the most effective and cost efficient methods for identifying new leads and generating new enquiries” (IBM-PLI survey of 12 agencies)

• Local development benefits from FDI will not come about automatically; Promoting developmetn of linkages with local suppliers.

• Different kind of needs: retention (Philippines, UK in 90s), expansion, diversification (Czech autmotive), etc.

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2. Why is aftercare important? Our clients

Possible aftercare objectives / priorities

Post-conflict

IDA Middle income

Re-active

Operational phase - problem solving X X X

Pro-active

Post-decision / Pre-operational phase implementation support

X X X

Seeking investor-feed-back / identify IC improvement priorities (PPD)

X X X

Investment retention X X X

Investment expansion X X

Investment diversification X

Embedding the investment X X

Encouraging technology transfer X

Engaging investors in the marketing effort X X X

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2. Why is aftercare important? The investor’s point of view

Investor needs a local partner that is proactive, credible and able to:

• solve problems• act as an advocate for the investor• providing information• effective at networking and coordinating

8 THE WORLD BANKWorld Bank Group Multilateral Investment Guarantee Agency

3. IPP and aftercare

Aftercare is a strategic function of investment promotion –same counterparts and very similar objectives (reform, investments, jobs)

Aftercare is important to IG as it promotes and facilitates ongoing dialogue with strategic investors and helps set an investment climate improvement agenda.

Strategic focus on IDA and/or frontier or post-conflict countries. Aftercare is a potential “low cost / high impact” activity for these clients.

FIAS uniquely positioned to offer integrated solutions to clients (PPD, RS, IPP)

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4. Some thoughts for discussion on Tue Nov 25th

1. “Investor Aftercare” - what do we at FIAS understand this to mean/include?

2. Has it indeed become more important / relevant to our clients?

3. What are appropriate entry levels for frontier and conflicted affected client countries that want to start an investor aftercare program? (objectives?, activities?).

4. How do we want to position ourselves in this area? (what is our experience and what are others doing already, e.g. OECD, UNCTAD, UNIDO?).

5. Are there any immediate opportunities for some pilot projects within the framework of existing IG programs?

6. Anything else?