If some investment promotion agencies (IPAs) were to be taken for their word, the investor would never lose money. Their countries and respective economies would grow forever, both rapidly and lucratively to an extent that would rival the Roman Empire. Unfortunately, there are not too many examples where this has actually happened. In fact, there are none. No country booms forever, and even the mightiest economies have fallen victim to vicious corrections brought on by excessive market enthusiasm.

But in this day and age, with revolutions changing the game in the Middle East and north Africa, and natural disasters causing unspeakable damage in places such as Japan, Australia and New Zealand, IPAs are being taken to task. How should they respond when the facts on the ground clearly damage or complicate the case for investment?


Responses from IPAs on this issue have varied greatly, as have their actions following major events, such as the revolution in Egypt. Some IPAs have responded with candour, being honest about the situation while still trying to paint an optimistic picture in the long term. IPAs in other countries, such as Bahrain, have stuck to the script. After all, their job is to promote investment, they say, not discourage it. Others feel IPAs must take something of a balanced approach, promoting the advantages of their country while being realistic about the challenges it faces.

Too optimistic?

Rufat Mammadov, who works with Azerbaijan’s IPA, says: “It depends on what you understand as the definitions of ‘tell the reality’ and ‘optimistic view’. In general terms, I believe it is in the nature of any IPA to be optimistic, irrespective of the country of origin. I witnessed the country presentation of an Afghanistan IPA, which was quite positive and optimistic, despite some objective danger for foreign investors. However, it should also be careful in promoting investments under certain circumstances such as acts of God or civil unrest, not to end up hurting its credibility and country image.”

Yet overwhelming evidence suggests that investors value the truth above all else, and have little interest in yes-men telling them what they want to hear. Perhaps Arpad Abonyi, a partner at Canadian media production firm ShareMedia, puts it best: “If you do not convey a realistic view, you will destroy the IPA’s and the country’s credibility. Companies will have other sources on the ground and if you are not realistic about the situation, your value will be discounted. Once this happens, it takes years to get back to credibility. And, in this business, credibility is everything.”

Japan's information offensive

Few IPAs have faced as much difficulty and scrutiny as Japan’s External Trade Organization (Jetro) in recent months. The earthquake and tsunami in March this year and subsequent nuclear meltdown shattered the country’s reputation for stability.

Jetro’s reaction took many forms. Its website stayed active, updating people on the latest developments. One release informed affected investors it had arranged for temporary business space to be made available for them in Tokyo for a certain number of days. While not a panacea, it was better than nothing.

Posing as a potential investor into Japan’s agriculture sector, fDi Magazine asked Jetro what it would advise on making an investment in the near future, asking if it would recommend putting this off until the radiation issues had been resolved.

Jetro’s response was the following: “As a governmental organisation, it is very difficult for us to clearly say if it is the right time to invest into Japan or not, as this is up to each company.” They then proceeded to give links to news stories about companies, such as Philip Morris, Ikea and H&M, re-opening operations in Japan after temporarily closing following the darkest days of the disaster.

Ultimately, Jetro’s strategy was to provide as much information as it could. This included a link to a briefing for foreign companies on the current situation of the Fukushima Dai-ichi nuclear power plant and the effects of the Tohoku-Pacific earthquake. It then provided a link to rules and regulations on investing in Japan’s agriculture sector.

Egypt's vanishing act

This reaction contrasts interestingly with that of Egypt’s IPA, the General Authority for Investment (GAFI). When the revolution’s momentum became unstoppable in February, GAFI practically vanished. Its website stopped working, although admittedly this was not its fault and was the result of Mr Mubarak’s clampdown of the entire internet. However, it still raised alarm among investors.

Yet, even when internet access came back, it was days until GAFI came out with any message about what had been happening. From January 24 to February 11 there were no updates on GAFI’s website, which was one of the most critical periods of the movement for regime change.

Oddly, there are still articles on its website that predate the January 25 revolution and belittle the chances of a major political upheaval. One of these dates back to as recently as January 23 and is an interview with the then minister of trade and industry Rachid Mohamed Rachid, where he dismisses concerns that the recent upheaval in Tunisia could spread to Egypt, saying: “We made it very clear that our economic reform is taking place because we want to create more jobs and we want to improve living conditions, including the ability to cover people’s needs. And we have done a lot of that in the past five or six years.”

To be fair, the situation on Cairo’s Tahrir Square was as chaotic and unpredictable as it has ever been, but there was little to console or inform investors. It was also difficult to understand who was actually in charge of GAFI as management changed around that time, without much explanation.

However, once the dust settled, GAFI went back on the offensive and put out a string of communiqués trying to explain what was happening, and why investors should not pull out of the country. One of the more interesting centred around retail chain Metro’s chairman Joel Saveus saying that despite the plundering and looting of its stores during the riots, the company wanted to stay in Egypt. Since February 26, GAFI has put out a new press release or announcement on a near daily basis.

GAFI's current chairman, Osama Saleh, wholly defended the actions of his group during the crisis, saying: "We definitely took the initiative. We had to make sure that everyone was feeling safe and that the government was beside them. We were the main focal point during the events. We were the only government body that was working 24 hours, and we were calling investors all over the country. Thankfully there were no major problems for foreign investors."

Brisbane's honesty policy

Compare this to the strategy of Brisbane’s development agency, Brisbane Marketing, which was forced to deal with floods that devastated the city in January this year. While the IPA still presented an optimistic view, saying the city would recover well, it also acknowledged the damage the floods had caused and tried to back up its claims with facts and research.

The city’s then lord mayor, Campbell Newman, stressed that an active business and industrial sector was of huge importance to the rebuilding process of the city and that with all the reconstruction and redevelopment, there would be huge opportunities in the infrastructure and construction sectors. Attention was also drawn to independent research from firms such as IBISWorld, which said that while the floods would have a negative short-term impact on the city’s economic growth, it expected that from April 2011 onwards there would be a boost to the economy through rebuilding that was expected to last until 2013 and involve spending of A$9.47bn ($10bn).

Furthermore, Brisbane Marketing pointed out that, of the $1.36bn in investment projects the city had received since July 2007, 91% of those projects had not been affected by the floods. The 9% that were affected, it said, were predominantly in the manufacturing and logistics industries and tourism.

Outcome known

How these strategies will play out is yet to be determined. According to fDi Markets, greenfield investment into Egypt was booming in 2008 and 2009, but slowed down markedly in 2010. Its pace this year is far behind that of last year. Japan is in a similar situation, with FDI levels plummeting so far in 2011.

Based on the same data, Australia’s FDI has grown steadily since 2007. While this looks to slow down a little in 2011, the drop-off has not been nearly as severe. Much of this is because the floods did not affect the entire country to the same extent as Brisbane. However, it is simply too soon to tell how this will affect long-term FDI prospects.

Challenging times

Carlos Bronzatto, executive director of the World Association of Investment Promotion Agencies, believes that the IPAs have generally done the best they can, but he is acutely aware of the challenges they face in game-changing situations. It is one thing for a country such as Egypt to praise a revolution and say the region is now more open and free, but what about when a revolution is brutally suppressed, such as in Bahrain? Mr Bronzatto asks how a country is supposed to promote itself following incidents of repression or political assassinations, as in Pakistan, for instance.

On the whole, Mr Bronzatto is full of praise for the IPAs and says he greatly respects their work, but he is under no illusions. Speaking to fDi at the Astana Invest conference in Kazakhstan, he accepts it is a complicated time for the IPAs and recalls his experiences of working with Colombian, Tunisian and Pakistani organisations. Ultimately, he believes the best way forward is to keep the lines of communication open and be candid about the facts. He has been having many conversations with IPAs about these issues and was on his way to Dubai for a roundtable discussion on this exact subject.

He says: “In terms of awareness campaigns, Colombia sort of recognised there has been a problem, which I think is smart. So you can say, yes, we have been associated with being risky but this is changing.

“But I wonder if countries such as Tunisia and Egypt will come out and... be candid about what happened. I think it is a good idea to be as frank as possible about the situation. You don’t need to overplay it. Recognise it and be frank, but then accentuate the positive elements, too. Japan saying the experience proves how resilient they are as a society is very effective. I think these countries should seize these moments and put them in a good light and show them for the amazing events that they are.”