Investment promotion agencies are eager to promote renewables and increasingly inclined to digitise their methods, according to a joint survey by World Association of Investment Promotion Agencies (WAIPA) and the World Bank. Now, amid a protracted global pandemic, this trend is only set to continue.  

Alex Sanchiz Vicente, investment policy and promotion consultant at the World Bank, tells fDi how sustainability considerations are becoming part of many IPAs’ mandate and investment services, citing India and Spain as two notable renewable energy proponents.

Renewable energy tops the list of sectors targeted, with 68% of IPAs deeming it a high-priority sector, closely followed by agriculture, fishing and forestry, and pharmaceuticals and biotechnology, the survey by Waipa and the World Bank found.

Conducted between July and December 2019, it polled 91 IPAs, mostly from Europe and Asia, to offer a snapshot of what characterised investment promotion before the Covid-19 pandemic. With an addendum on the early effects of the pandemic covering the period up to April 10 2020, it also touches upon the changes IPAs have been undergoing since the outbreak of Covid-19. 

Ahead of the end-of-year survey, Mr Sanchiz expects this particular trend to remain “stable”, as developing and developed economies alike look to attract investment in this sector through government incentives and a reformulation of their value propositions. 

Other emerging sectors identified by the survey are food and beverages production and transport and telecommunications.

By contrast, over the past five years, IPAs have stopped promoting the real estate sector (15% of the IPAs surveyed). Other common sectors that IPAs have discarded are media and entertainment (9%), wholesale and retail trade (8%), and financial services (8%).

As some sectors gain and others decrease in relevance, Mr Sanchiz highlights that countries and investment agencies are turning to a more strategic way of doing things as opposed to maintaining the reactive attitude they have had for many years.  

Developing countries moved “very quickly”, he says, in response to lockdown and movement restrictions, by making use of bots, chats and online roundtables in order to act quickly to allay investors’ grievances.

It is undeniable that the economic disruption brought about by Covid-19 will restrict the activities of IPAs.However, several trends of the past few years, such as the prioritisation of the renewable energy sector and the push towards digitalisation, have been accelerated and strengthened by the pandemic. 

The study reveals that the most common changes anticipated by all IPAs are the impact of digitalisation and technology disruptions, and market changes.

In addition, it illustrates that the challenges facing IPAs in developing countries differ from those in developed countries: for developing nations, budgetary constraints loom large; however, for developed countries, human capacity and staff remain the principal concerns. 

Investor retention has become “much more critical” in a scenario where confidence is lacking, Mr Sanchiz highlights. Many IPAs are “still too focused on the attraction stage”, the study insists. 

Survey results show that 93% of IPAs throw their weight behind early stage investment promotion, such as business events and conferences abroad (or online) to promote attraction. But this figure falls to 65% for those who communicate with investors to understand where their grievances lie, and further still to 64% for those who coordinate initiatives and events that provide networking opportunities in the local ecosystem.

Agencies should indeed try to detect at-risk investments and support conducive policies for investment, such as endorsing the sustainable development goals, the survey says. 

But whether IPAs manage to retain investment effectively or not, the high seas of cross-border expansion look increasingly choppy.