An assessment of 189 national investment promotion agencies (IPAs) shows five out of every six provide little or no information to investors who ask for it as part of their site selection processes, according to a World Bank report. Many of these IPAs are in locations with non-transparent and unpredictable investment climates, precisely where IPA support could make the greatest difference to investors and influence their decisions. The World Bank study suggests that most IPAs could quickly increase their competitiveness and that of their countries, by simply adopting certain basic, low-cost practices for the provision of sound information and good customer service.

Best practice

Issued every three years since 2006, Global Investment Promotion Best Practices (GIPB) evaluates an IPA’s two most important channels for relaying information to investors in the early stages of site selection: the IPA’s website and its responses to investor requests for information. The latest report found increasingly skilful use of websites globally, with more than one-quarter of IPAs achieving a ‘best practice’ rating.

The global average score for IPA responses to investor enquiries has not exceeded 29% since the report began. And in 2012, that score was at an all-time low of 22%. The report employs a ‘mystery shopper’ approach to test enquiry responses, hiring a site-selection firm to submit two project-specific enquiries and to evaluate every aspect of the IPA response, including whether it replied to e-mails, the relevance of information supplied, whether it took the opportunity to make a business case for its location and how it followed up with the site selection firm after submitting a response. This year's enquiries were for investment projects in the tourism and agribusiness sectors.

The low 2012 score reflects the fact that 79% of IPAs completely ignored at least one of the two enquiries. This is in line with the real-life experiences reported by industry-leading investors and site-selection companies that participated in focus groups assembled to inform GIPB methodology. The proportion of non-responses was not significantly better for the 118 IPAs that claim to prioritise agribusiness investments or the 107 IPAs that said the same for tourism investments. This casts serious doubts on the practical measures being taken by IPAs to operationalise their strategic priorities and contribute to the national development goals on which they are often based.

Customer service is key

Handling investor enquiries professionally and effectively can help create a positive and lasting reputation with investors and requires two basic ingredients. First, IPAs need to develop and maintain up-to-date information on the business environment, the costs and quality of factors in important sectors, investment opportunities and the advantages of their investment locations over competing locations.

Second, IPAs need to adopt a customer-oriented approach and stand ready to respond to investors’ requests for information and assistance in a timely and professional manner. Good customer service allows an IPA to build a relationship with the potential investor and facilitate the investor's transition to the next step, whether it be a meeting, site visit, introduction to industry players and relevant public officials, or an investment decision.

There is a clear paradox here. Handling enquiries comprises a number of simple and inexpensive tasks, such as answering the phone, responding to e-mails, and answering all of an investor's questions as best possible. IPAs such as PRONicaragua and Invest in Cyprus provide excellent service with few staff and small budgets. Yet few IPAs do this well. Fortunately, the two major obstacles to handling enquiries well are internal to most IPAs and, therefore, can be controlled to an extent by committed management. These are organisational culture and internal systems.

Too many IPAs have bureaucratic cultures that are focused on procedures instead of outcomes and do not see interactions with investors as part of a bigger picture, let alone as invaluable leads to be converted into concrete investment projects. IPA managers must recognise that they need to fight for investment, that providing quality services really matters and that investors knocking at the door with concrete projects are great opportunities to be maximised not ignored. Governments must recognise this, demand more of their IPAs, and allow them to foster the competitive, customer service-minded culture they need to understand and influence investors.

Systems, standards and staff

The World Bank's experience of working with IPAs around the world is that once they get over this admittedly big cultural hurdle, the rest becomes much more achievable. First, IPAs need a system for handling enquiries, with clear and systematic procedures, defined roles and responsibilities for staff, communication protocols, and quality control for response content and service standards, such as response times, formatting and branding. Second, IPA managers need to ensure that their staff know what is expected of them, recruit and/or train them accordingly, and evaluate their performance.

With only 25 staff members and an annual budget of less than $1m, PRONicaragua was best in the world in 2012. If an IPA with few resources in a lower-income country with a recent history of armed conflict can achieve excellent investment facilitation, anyone should be able to do it.

Tough times are no excuse

Defenders of poor-performing IPAs might point to the sluggish global economy, fiscal crises or political instability as leading to budget cuts or confused leadership at the IPA level. Yet, several of the world's best-performing IPAs have excelled despite operating exactly under these conditions. Together with PRONicaragua, the Hungarian Investment and Trade Agency (ITD Hungary) and Invest in Greece Agency were among only five IPAs in the world to achieve a ‘best practice’ rating in GIPB.

ITD Hungary was undergoing a major reorganisation when it received the mystery shopper enquiries. In fact, its investment promotion function had already been reassigned to another public body, which had not yet implemented that mandate, leaving the country's investment promotion in limbo. Unwilling to let this gap cost their country potential investments, ITD Hungary's professionals kept its website current and managed to deliver world-class responses. Despite no governmental expectation or professional incentive to continue serving investors, and despite the fact that neither of the enquiries were in priority sectors, ITD Hungary’s dedicated staff delivered prompt, detailed enquiry responses and followed up closely in the following weeks, achieving the second best GIPB score in the world.

Likewise, Invest in Greece Agency's performance has been unshaken by its government's fiscal crisis and corresponding austerity measures. This is directly attributable to the agency's strong private sector-minded culture and service standards, which give it a clear focus on achieving its targets and a healthy disconnect with the fluid priorities of its government. Invest in Greece Agency leapt from ‘average’ performance in GIPB 2009 to ‘best practice’ in GIPB 2012, in no small part because of the comprehensive and effective enquiry-handling processes that recently earned it an ISO certification in management system standards.

Investors are comfortable with risk, but they are uncomfortable with uncertainty. Especially in tough times, IPAs can have a large effect on how investors view their locations, by giving investors the detailed information and assistance needed to dispel uncertainties and clarify risks. For any IPA that finds that a daunting task and does not know how to set about doing it, it is easy: let the investor guide you. Listen to their questions and answer them. It is that easy.

For the full GIPB 2012 report, please visit www.globalinvestmentpromotion.org

Valeria Di Fiori and Carlos Griffin are investment promotion consultants and Robert Whyte is global lead specialist, investment promotion, for the Investment Climate Department of the World Bank Group