The winners of fDi’s first Personality of the Year awards have truly earned their trophies. From Spain’s Basque Country, which has had to convince the world of its merits despite an ongoing terrorist campaign by separatist guerrillas, to Mexico, part of a region that has had more than its fair share of economic troubles this year, FDI promoters have been waging an uphill battle to boost business confidence. It hasn’t been any easier for Namibia, in a continent hit by civil unrest and stagnant economies, or Dubai, in the same region as the Iraqi battlefield. But as Namibia’s former trade and industry minister Hidipo Hamutenya notes, winning those contracts requires sharp investment tools and being able to provide investors with rapid and convincing answers. This is what makes a winner.
Overall winner Vicente Fox, president of Mexico
Mr Fox: a tireless advocate, looking to double Maxico's flow of FDI
Mexican president Vicente Fox knows what multinational companies are looking for when they choose an investment location. Before his election, he served as an executive for Coca-Cola. Since becoming president, he has proved himself a tireless advocate of FDI, calling for Mexico to double its levels of investment.
Although Mexico, like every other country, is now struggling to compete with China’s low-cost, high-growth economy, Mexico is still winning significant flows of FDI. Last year it attracted some $13.6bn of FDI, representing a staggering 69% of all investment into Latin America. Even more impressive is the fact that against a worldwide 57% slump in FDI from 2000 to 2002, FDI into Mexico increased 30%.
In just over two years in office, Mr Fox’s reputation for being ‘more business than politics’ has undoubtedly helped Mexico unlock many of the commercial benefits offered by the North American Free Trade Agreement. Foreign investment, particularly from the US and Canada, has contributed more than anything else to the country’s transformation from third-world country to red-hot investment location. For example more than 1 million Mexicans are now employed by the Maquiladora export manufacturing sector which has attracted a significant proportion of FDI flows into Mexico during the past decade.
Recognising the importance of foreign investment, president Fox has visited the heads of hundreds of companies both in Europe and in the US in order to widen the country’s investor base. He has also pushed for the creation of free trade agreements between Mexico and other countries.
Most important of all, president Fox has remained steadfast in his personal commitment to politically sensitive reforms, including those in the labour market and energy sector. After 18 months of negotiations with unions, workers and the business community, his party is pushing a bill through Congress that he hopes will finally make labour conditions more flexible, giving companies greater freedom to hire and fire.
Mr Fox is also attempting to open up the energy sector to foreign investment considered critical for the country’s long-term economic development. Investment in the energy sector stands at around $20bn for this year. Mr Fox is proud of the fact that in the electricity sector, most of this investment has come from overseas. Although private investment in energy has been politically controversial in Mexico, Mr Fox has made it clear to voters that attracting foreign investment is the only way forward.
James R Thompson, chairman of Crown Worldwide Holdings Ltd
Mr Thompson: low corporate tax is a major advantage of Hong Kong
Indefatigable, Jim Thompson has spent the past 25 years jetting round the world to promote Hong Kong to investors, when not running his own relocation company Crown Worldwide Holdings, which operates in 43 countries. Last year alone, he led or participated in a dozen Hong Kong investment missions from Houston to Seoul. Some of the companies he has courted that have invested or expanded their operations in Hong Kong include Walt Disney, Microsoft, Boeing and AOL Time Warner.
Mr Thompson says that in the past, the principal obstacle to overcome in attracting FDI to Hong Kong were the high costs of labour and property. “This has undergone a dramatic correction in the past five years or so, but the challenge now is the Sars epidemic,” he says. “This is now coming under control but there is a lot of damage repair work to be done and this could take six to eight months to accomplish.”
Hong Kong’s biggest competitive advantage, according to Mr Thompson, remains its simple and low corporate tax, which stands at 17.5%.
“This means that regional offices can keep most of the money they make, and there is no tax on dividends or offshore income. The high quality of the city’s infrastructure and transport system are also major incentives, as is the rock solid and effective rule of law.”
Mr Thompson says that going forward, Hong Kong will remain a major financial services centre, but it is also promoting other sectors such as the logistics industry and tourism. “The Sars epidemic itself could be the catalyst to develop Hong Kong as a centre for medical technology,” he says.
Josu Bergara, prime minister of the Basque province of Biscaya
Mr Bergara: level of regional autonomy provides major incentive
Attracting FDI to a region plagued by 35 years of terrorism requires tenacity and imagination. For Josu Bergara, who heads the local government of the Basque province of Biscaya, the task is made easier by the region’s infrastructure and competitive advantages.
“Biscaya is the strongest of the three Basque provinces in terms of economics, finance and demographics,” he says. “But it should not be viewed out of context with the other two provinces, which are less than a hour away by motorway.”
Mr Bergara cites the high degree of political and economic autonomy as a major incentive for investors. “The Basque Country collects its own taxes of more than E9.4bn a year, it boasts a first rate financial and business infrastructure and a highly skilled workforce. Within this regional framework, Biscaya offers the most attractive incentives for investment, with its port and outstanding technology park.”
Mr Bergara says he is striving to promote media technology, biotechnology and electronics as new areas of investment. The region also aims to become self-sufficient in energy generation by 2005. But there is no doubt that the Basque terrorist group ETA poses an obstacle to achieving these objectives.
“However, we believe that while this is a factor investors should be aware of, it should not dissuade them from coming to the Basque region,” he says. “ETA is part of the story, but so is our quality of life, the low level of street crime and high standards of education, our modern business outlook and the ability to solve problems for investors.”
Hidipo Hamutenya, Namibian minister of foreign affairs
The man who led Namibia’s crusade to attract FDI for nine crucial years can point to an impressive string of achievements. Former trade and industry minister Hidipo Hamutenya, who now holds the foreign affairs portfolio, is under no illusions about the difficulties in attracting FDI to his country.
“We faced a lot of stiff competition from our neighbours in developing countries, all of whom are competing for the same business,” he says. “To achieve a breakthrough you need to hone your investment tools. This means a professional response to investors’ enquiries and having the facts and figures at your fingertips.”
A major step forward was the creation in 1995 of a series of export processing zones (EPZ), which led to the creation of thousands of jobs and the influx of badly needed technology. “We made roads and infrastructure available to investors and we are happy with the results,” says Mr Hamutenya. “For instance, we enabled Anglo American to set up a major zinc refinery with EPZ status. This resulted in a SAR2.3bn investment with the creation of employment for 4,000 people.”
Mr Hamutenya says Namibia is anxious to diversify the country’s economy from its traditional activities of mining, fishing and farming. “World prices for these products are unstable and we cannot control the global market,” he says. “We want to promote areas such as tourism and manufacturing. We are looking for investors who can add value to our natural resources and boost our export industry.”
Winner Middle East
Sheikh Mohammed Bin Rashid Al-Maktoum, Crown Prince of Dubai
Sheik Mohammed: ensuring that the tiny emirate is more than just a stopping-off point for travellers
If there was anywhere that could have been excused a slowdown in FDI because of concerns about terrorism and war in the region, it would be Dubai. That the tiny emirate has, contrary to expectations, continued to prosper is due in large part to the sheer ambition and tenacity of Sheikh Mohammed Bin Rashid Al-Maktoum, Crown Prince of Dubai and president of the Dubai Development and Investment Authority.
Dubai has historically been a hub for re-export, but now it is fast becoming a regional headquarters for finance, shipping and technology – and a magnet for tourism. All of this
encapsulates Sheikh Mohammed’s concept of ‘Destination Dubai’, making the tiny emirate not just a stopping-off point en route to elsewhere in the Gulf or South Asia, but a business and tourism destination in itself. Since assuming the mantle of Crown Prince of Dubai in 1995, he has taken a series of steps designed to make that happen. First came the Dubai Shopping Festival to exploit the city state’s reputation as a major shopping destination. Then came the airport’s expansion, the creation of the towering Burj Al-Arab hotel, now a Dubai icon, the Dubai Internet City and most recently the Palm resort development – visible from space.
Of his style of management, he talks big but is self-effacing at the same time. “I look to the future, 20, 30 years. I learned that from my father, Sheikh Rashid. He would rise early and go alone to watch what was happening on each of his projects. I do the same. I watch. I read faces. I take decisions and I move fast. Full throttle.”
Despite Dubai’s full throttle gains over the past decade, 54-year-old Sheikh Mohammed remains concerned that the Gulf region is punching below its weight in investment terms. At the recent International Investment Summit held in Dubai, he called on Arab governments and businesses to be more open and co-operative if the region wants to attract the investment it needs. “The Arab world has a population exceeding 300 million, but these 22 countries have a combined GDP less than that of Germany – and attracted less than 1% of the $735bn in global FDI,” he said. “We are faced with change – but this can only be driven by a change in attitude and mindset.”