The traditional aftercare functions provided by investment promotion agencies (IPAs) to investors are going through a transformation. Increasingly referred to as ‘investor or corporate development’, rather than the medical-sounding ‘aftercare’, the functions are becoming more diverse and agencies are developing a much broader mandate when it comes to looking after the interests of established investors.

It is widely recognised that a majority of investment in a location comes from companies that are already established there. “A report carried out five years ago showed that 70% of investment in developed countries is linked to the existing investment base,” states Roel Spee, director of IBM Business Consulting Services Plant Location International.

In a more recent example, figures show that 60% of investments made in Singapore come from foreign companies that are already there.

A range of IPAs worldwide interviewed by fDi all agreed that providing good aftercare is absolutely fundamental to attracting further investment.

James Gray, chief executive of Invest East of England, points to the growing importance of investor development activity, with the average of 43% of investments made in the east of England region being made as a result of services offered.

Traditional approach

Aftercare, in its simplest form, is not a new service. Agencies have traditionally provided investors with solutions should problems arise after the initial investment and have carried out surveys on how satisfactory an investor finds a location. As competition between locations has increased and with the realisation that it is easier and cheaper to retain an investor than to attract a new one, the services offered have broadened.

Now the aftercare function has a wider objective. This largely encompasses the development of a network of contact between investors and local industry to provide ideas for mergers, acquisitions and other expansions as well as the identifying of new markets for these expansions.

Other important functions relate to attracting new suppliers to service investors and improving the efficiency of the existing supply chain, as well as ensuring an adequate education system and training schemes to provide the necessary pool of employees. These provisions aim to prevent a company from disinvesting or deciding to locate an expansion elsewhere.

“The alternative to providing a good aftercare service is to ignore important investors who have invested in our region, bringing new skills and employment, opportunities for our local businesses and universities and development of our key sectors,” emphasises Mr Gray.

Fabian Collard, communications manager for the Office for Foreign Investors in Wallonia (OFI), says: “Keeping close connections with foreign companies allows us to be informed of new developments in their business. We can see if there are any new partnerships going on; if a company is developing a new product which might help attract a new sub contractor; or if there is a new technology emerging.”

Spread thin

Although broadening services and increasing links between agencies and investors is a noble aim, the impact is harder to measure. Mike Harling, director of Whitefield International, a UK-based location consultancy, suggests that a lack of resources may hinder effective investor development programmes. “Organising the right resources is difficult, as in agencies there is usually not a lot of fat in the personnel.”

The agency needs someone who concentrates specifically on developing links with the investors and this should ideally be someone at senior level who has experience, commands respect and therefore provides a legitimate reason for the agency to be talking with the company, says Mr Harling. “It is important that there is research into the business and the right person is spoken to. Resources have to be prioritised in order for an agency to gain credibility.”

Mr Harling also points out that IPAs can be highly politicised and appointing the right person can “upset the political balance.” Outsourcing, he suggests, could be one way of getting around this.

Top priority

The allocation of resources also varies between countries with the emerging markets likely to fall behind those of the developed world. As a result, the services offered differ from agency to agency. Blain Trendler, manager corporate site selection (assembly and test design) at Intel, agrees: “Some are definitely more robust than others.”

In addition, the main priority of agencies in some emerging markets is to attract new and initial investment rather than expand existing projects. Matej Kovac, director of Slovenian Trade and Investment Agency (TIPO), says: “Slovenia is in great demand by potential new investors. So, at the moment, the majority of TIPO services are targeted towards new incoming investors.”

Specialist help

Some IPAs dedicate specific teams to providing aftercare. One North East, the IPA of the north east of England, for example, targets certain companies and assigns a case officer. The target companies are selected because of their strategic situation in the region, in terms of a range of factors, including growth rate, potential threat of downsizing, technology opportunity and employment impact. Other measures in this investor development programme include extensive networks which enable people from the same sectors to network.

One North East funds the North East Pharmaceutical and Speciality Cluster group, which represents more than 150 member companies in the region. David Allison, director of manufacturing at Rhodia Pharma Solutions – which has just opened a Ł5m expansion of a facility based in Dudley, Northumberland in the north east of England – says that the group is an excellent forum for the sharing of best practice.

Different strokes

The first measure that Alan Timblick, the newly-appointed chief executive of Invest Korea, put into place was the assigning of a project manager for each investor in the country. The Office for Foreign Investors in Wallonia, on the other hand, dedicates a team to investor development but, as the agency operates with a small staff, it would not be their only job.

There is no single model that is followed according to IBM’s Mr Spee. However, he points to UK Trade and Investment and the regional agencies, such as One North East and Invest East of England, as providing a good example of ‘best practice’. While the national agency UK Trade and Investment maintains links on an international level, regional agencies deal with day-to-day and local issues.

“UK Trade and Investment has made aftercare a priority because of the number of FDI investors in the UK and their importance to the national economy,” says Mr Gray. “Of course, companies invest in certain regions so we in the East of England need to deliver support on the ground.”

The national agency is a particularly important partner to the regional investment and development agencies as its worldwide network of offices in embassies and consulates provide contacts with corporate headquarters. Most decisions to expand are made in these headquarters rather than the host country.

Regional agencies also work closely with UK Trade and Investment on best practice in aftercare, which ensures that investor development in the different regions is co-ordinated, particularly as many investors may have more than one facility located around the country. The Committee on Oversees Promotion meets regularly to discuss these issues, bringing together directors of regional agencies from across the UK and directors from UK Trade and Investment.

Another advantage drawn from this close relationship is when a senior person, such as a minister or dignitary is required to raise the profile of a project, UK Trade and Investment can provide an appropriate person.

Best practice

Mr Harling views the investor development practices in several states of the US as “solid”, especially in Georgia, which operates a similar system to that of the UK, with project managers at the state level as well as in the different regions of the state.

Although these examples show best practice in two developed countries, it is in western Europe that some of the most significant failures of aftercare have taken place. Mr Spee states that, in the past decade, western European countries have been “rather naďve” in their attitude to the movement of companies to lower cost destinations in eastern Europe and Asia. He believes the authorities are missing significant opportunities to retain operations of companies that have located elsewhere.

Although many companies have moved for cost reasons, good investor development would ensure that some core operations stay within the country, particularly of the more value added nature such as R&D and business development, he says.

More to do

Many corporates have not had anything to do with the aftercare services provided by IPAs, illustrating that the agencies still have some work to do. Mr Trendler emphasises that Intel’s dealings with agencies are typically at the “front end” when a new site is being selected. However, he adds that good communications are maintained for future expansions.

Mr Trendler names the Irish Development Agency as being particularly proactive in this area. Intel originally set up its largest manufacturing base outside the US in County Kildare, Ireland in 1989. Since then its operations have expanded to four other locations, including an R&D facility.

Pete Silveston, site director of Murex Biotech, a subsidiary of Abbott Laboratories, agrees that the efficiency of Locate in Kent in south east England in helping to facilitate a recent expansion of the Murex plant in Dartford has led to Abbott choosing to locate a shared service centre in the county.

In Ontario, the investment board helped Belgian company Agfa to acquire a small local firm called Mitra. The combined effort of efficient aftercare services and good representation in Europe stopped the company relocating to North Carolina and has since lead to the Agfa global R&D office being located in Waterloo, Ontario.

Proven progress

The above results of the proactive attitude towards investment development is probably the most important reason to develop a comprehensive aftercare programme. It is important in the overall marketing of a location to have positive testimonials and good aftercare usually provides these.

As Mr Collard emphasises: “Investors speak together and exchange experiences. Existing investors are the best testimonials of success stories, not hiding difficulties but also showing the positive aspects of investments and making business.”

• Identifying suppliers, customers and competitors
• Helping form links with region’s universities and research institutes
• Providing advice on recruitment, skills availability and training support
• Offering strategic information on regional and national initiatives
• Organising of networking opportunities to meet other investors
• Connecting with local partners and foreign companies
• Identifying suitable property and site options
• Producing annual surveys
• Appointing dedicated case officers

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