Investment promotion agencies (IPAs) are still struggling to influence the decision making of foreign investors, according to a survey by the World Bank’s trade and competitiveness global practice division.
Of the 754 executives of multinational corporations investing in developing countries that took part, only 43% said IPAs are important or critically important in their decision making – the lowest result out of the investment climate variables covered in the survey. It also found that only 11% of respondents use IPA services in their typical investment, despite 43% saying they are important.
Other factors such as transparency and predictability of public institutions, as well as protection guarantees provided in the host country’s laws, ranked as the most important investment climate variables to influence investors’ decision making.
“IPA services thus have great scope for improvement,” the survey says. “The relatively low rating of the importance of IPAs does not necessarily suggest that host countries should not strengthen them. The reverse could actually be true – that host countries currently offer poor-quality IPA services for investors, which is why investors’ perceptions are not very positive.”
More foreign investors use IPA services in low-income countries than in middle-income countries, the survey highlights, “suggesting that IPAs provide more value when the business environment is more difficult and information harder to obtain, as is often the case in low-income countries”.
Among investors who find IPAs to be important or somewhat important, two-thirds highly value help in handling issues and resolving grievances with government, information and assistance in setting up, and business advocacy efforts to improve the business environment.
These services are rated more important than investment promotion activities. Promotion efforts to attract investors such as advertising online and in media, and exhibitions at trade shows, investment conferences and events are rated as relatively less important.