They say a job saved is as good as a job created. For investment promotion agencies (IPAs), this theory of maximising what is already in place rings true for growing foreign direct investment (FDI). While FDI can evoke images of inaugurations and ribbon-cutting ceremonies, for IPA officials working day-to-day with foreign firms, the most valuable projects tend to inject fresh capital from repeat customers, rather than involving the arrival of new names. Not only does reinvestment remove some of the work and expense of investment promotion activities, it is among the best PR an IPA could hope for. Indeed, foreign firms’ willingness to plug even more capital into a region is something that catches the eye of new investors. 

The aftercare needed to support reinvestment from existing foreign investors often happens behind the scenes and to little fanfare. But these efforts are extensive and can propel local economies’ productivity, create deeper linkages between foreign and local firms, and increase the prospects of further reinvestment later down the track. 

In fDi’s latest IPA Roundtable, we spoke with four regional IPAs — Baden-Württemberg International in Germany, Piemonte Agency for Investment and Export in Italy, Investissement Québec in Canada and Invest in Pomerania in Poland — about reinvestment’s role within their FDI flows, and how they convince foreign firms to inject more capital into their regions.

The panel

Christian Herzog, CEO, Baden-Württemberg International

Stefano Nigro, general manager, Piemonte Agency for Investment and Export

Daniel Silverman, vice-president of foreign direct investment, Investissement Québec

Mikołaj Trunin, deputy director, Invest in Pomerania

Q: What is reinvestment’s share in your region’s overall FDI mix, and how is this evolving?

DS: Reinvestment generally floats in the 60–75% range [by project number]. That’s over the four years I’ve been in Québec. Before that, when I was at IPA Toronto Global, it was roughly the same. So that’s a trend you’d see across Canada. 

MT: Reinvestment accounts for around 30% of the projects we close, and our target is to reach 40% within the next seven years. This is the result of an analysis the World Bank did for us [in 2022-3], which concluded that our market for FDI is generally developed. So we don’t have to work so much on attraction, but we need to build internal bonds to support investors that we already have. 

CH: Right now it is about 50:50 by project numbers, with maybe a little more expansion by existing companies than investment from new foreign companies. In years past, some companies already present in Baden-Württemberg expanded extensively. So five years ago, it was 70% from in-house expansions and 30% from FDI. 

SN: The share of reinvestment in the overall investment mix depends on the sector, but it’s in the 30–40% range by project number.

Q: What is your aftercare strategy to encourage and support reinvestment?

MT: We organise quarterly meetings for our priority sectors and executive clubs for top investors to help us identify investors’ challenges. One of those is talent; five years ago we started working on attracting talent and launched a reskilling programme which is based on companies telling us what competencies they need.

We also try to be the middleman between the investor and government on administrative issues, such as permitting, and we lobby our central government on regulations like work permits. Companies looking to expand might also have a facility in Gdansk or Hungary or the Czech Republic competing for reinvestment. So, they often ask us to present to their management, to convince them that the contract should be carried out in their facility here.

CH: Aftercare is more important than maybe the first contact and attracting of companies. We set up a key account management system for our 500 most important foreign companies in Baden-Württemberg to ensure they get the support to succeed. And we closely cooperate with local economic development agencies and chambers of commerce to take care of companies that want to expand. We also help attract talent, find new locations, and help with subsidies and funding. 

SN: Our aftercare services are a primary focus and aim to, inter alia, identify companies’ reinvestment needs and bring them to the attention of Piemonte’s [government] institutions, and build loyalty between existing investors and local stakeholders. To ensure this dialogue happens, we organise roundtables and one-to-one meetings, including with legal, tax or labour law experts. We also help identify suppliers, search for spaces for the company to expand into, and hire and train staff.

DS: I have a team whose mandate is to reach out to the 3300 foreign subsidiaries in Québec. Every 18–24 months, we will do a subsidiary forum, where 50–75 heads of foreign subsidiaries meet us, and the ministry of economy, for a two-day meeting to understand their pain points. We also help subsidiaries build a business case to sell to their headquarters why they should reinvest in this market. In a way, we treat them as if they’re a greenfield project. Because when you're pitching to your headquarters, you're pitching against other locations. 

Q: Are there client or sector stories that show how this works in practice? 

DS: For Northvolt [whose planned gigafactory is facing protests over alleged ecological damage] we have a concierge team that supports them to ensure there’s transparency and help with their messaging. So it can communicate its plan properly and ensure the information it gives is relevant to what the groups are asking for. We meet with Northvolt at least twice a week on these subjects. Once an FDI announcement has been made, aftercare commences. We had to put this concierge team into action probably while we were still courting them. 

CH: Baden-Württemberg has more than 70 universities and 100 research institutions, and nine out of 10 companies are asking us for a co-operation partner at one of them. That’s the extra mile we go, and our unique selling point. 

Q: What’s your budget split between investment promotion and aftercare, and how is it evolving?

CH: At the moment, about 60% of our budget concerning sales is for new investments and 40% is for our key account management system. That system is not just about expansion, but also keeping players in Baden-Württemberg so they don’t move, for example, to eastern Europe where there might be more subsidies and funding. 

MT: It’s been evolving and we are putting more resources into different initiatives that are related to aftercare. It is becoming a bigger priority, as it’s logical [to focus on this] because the investors are already here. You want them to be happy with the location so that they help promote the region and they continue to develop here. 

SN: Investment promotion accounts for around three-quarters, while aftercare and support to foreign companies account for the rest. But as we monitor investment flows, this allocation will evolve to ensure that we effectively support both new investments and existing ones.

DS: We have started to transfer more [resources] to aftercare over the past 12–24 months, and we are putting more time and people into working with our foreign subsidiaries over the next couple of years. With the economic context that we’re going into [sluggish growth, competition for talent], it’s going to be more difficult to pull companies in than help them grow from within. Our last strategic plan was to double FDI in the three years to 2023, which we did. Now we’re transitioning more towards quality FDI, for which you have to work with existing stakeholders.

This roundtable has been edited for clarity and brevity.

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This article first appeared in the April/May 2024 print edition of fDi Intelligence.