The role of a diplomat has always been twofold: to both protect and to promote the interests of the home country. But whereas previously the emphasis was often placed on the former, in recent years the promotional aspect of the position has come to the fore. Increasingly, junkets are being replaced by investment forums, and secret talks by business roundtables.
"More countries are [encouraging their diplomats to take] a proactive role in targeting potential investors and maintaining contacts with the headquarters of companies that are already present in their [home] countries," says Paul Wessendorp, chief of investment promotion at the United Nations Conference on Trade and Development (Unctad).
Adapting to change
Dr Carlo Angelo Bocchi, head of the Italian Trade Commission in Los Angeles, says that in recent years his organisation has become more involved in partnering with local companies through participating at trade shows, and has started targeting second-tier cities as both new sources and new destinations for Italian investment. ”It is not so much the role of embassies that is changing, [it is] the world. And we have to adjust accordingly," he says.
Gathering political intelligence – traditionally one of the main roles of embassies and diplomats – is now often reactive thanks to the 24/7 stream of information available around the globe. Diplomats still play a crucial role in acting as the eyes and ears of their home countries, but their value is now more focused upon gathering investment leads and reaching out directly to the private sector.
"Businesses are not surprised to see embassies acting as investment promoters. Throughout the years, embassies have established themselves as partners for the entrepreneurs," says Aleksander Libera, deputy head of trade and investment promotion at the Polish Embassy in London.
Unctad estimates that there are 170 national investment promotion agencies (IPAs) – entities tasked with boosting the level of inward FDI and trade volumes for the respective country or region – in the world. The global presence of each of these agencies varies widely. The South Korean IPA has 43 branch offices in 22 countries, while Poland's IPA does not have any international offices. But, according to Mr Libera, Poland's FDI promotion abroad is conducted by the country's 48 foreign embassies, which operate under the umbrella of the Ministry of Economy.
While in the past embassies tended to be involved in economic promotion on more of an ad hoc basis, now their activities in this realm are more structured and economic promotion comprises a key part of a diplomat's role. Unctad has been supporting change by organising workshops for diplomats involving themselves in promotional activities.
After organising training sessions for representatives of countries such as Brazil, Egypt, Indonesia, Peru and Thailand, demand for these workshops was so high that Unctad decided to publish a handbook offering guidance and advice on investment promotion. Mr Wessendorp, who led the team behind the manual, says that Unctad is now working on an online training course for diplomats, which he says will "hopefully be available before the end of this year".
For countries with limited budgets for investment promotion, the promotional activities of their diplomats are proving essential, especially when the diplomat operates in large financial centres. Many of the embassies in London, for instance, are incorporating investment promotion into their remits.
"Two years ago we did not have an investment section within the embassy. Now we have a proactive agenda and we are looking for ways to become [even] more dynamic," says Henning Andres Droege, the head of the co-operation, trade and investment section at the Embassy of Guatemala in London.
The Embassy of Guatemala's co-operation, trade and investment section is involved in organising investment forums, arranging trade missions to Guatemala and providing individual services for potential and existing investors. Mr Droege says that these activities have brought tangible results, citing deals made with UK healthcare company Bupa, which is investing $5m in Guatemala, and private equity firm Actis, which is making a $345m investment in the country's energy sector.
The Embassy of El Salvador in London has undertaken a similar acceleration of enterprise recently. "The current Salvadoran government decided to reinforce the work of our embassy in London by adding one person purely dedicated to economic and commercial affairs, therefore the activities and work in that area has increased considerably," says Rosella Badia, minister counsellor at the Embassy of El Salvador in London.
Currently, the country’s government is replicating the model in other countries with the goal of having 14 commercial offices operating within Salvadoran embassies under the auspices of the country’s IPA.
The promotional capacity of embassies located in emerging markets is of varying value depending on the investment potential of the host country. "In 2011, Romanian investments in Spain were $100,000 and it was considered a good year. Therefore our pro-investment efforts here are limited,” says Eduardo Prieto Kessler, economic and commercial counsellor at the Spanish Embassy in Bucharest. But Mr Kessler stresses that his entity has a hands-on approach when it comes to providing information for Spanish entrepreneurs looking to expand into Romania.
However, in the up-and-coming FDI source markets, such as Brazil and China, knowledge of the local business conditions and key business people can be extremely useful. ”We benefit from the expertise of the Australian diplomatic offices in China and count on their expertise,” says Michelle Gallaher, CEO of BioMelbourne Network, a biotech trade development organisation.
Most of the economic departments within embassies are directly linked to the ministries of foreign affairs, while trade and investment sections tend to be linked to ministries of economy. Nonetheless, all diplomats interviewed by fDi Magazine say that they work closely with national IPAs, something that Unctad strongly recommends. ”I would not encourage embassies to have their own initiatives. Diplomats should work with the national investment promotion strategy,” says Unctad's Mr Wessendorp.
Unctad’s handbook states that one of the keys to successful lead generation and business facilitation is based upon good communication with pro-investment entities back home. Although site advisory and business seminars may be less glamorous than the banquets and cocktail parties often associated with embassies, there is nothing unglamorous in generating capital for inward projects in their home country.