CONTENTS A) GENERAL 1. FDI: Some theorethical insights 2. FDI Sales Process 3. Aftercare: definition, services, benefits 4. U Curve (Smiling Curve) 5. FDI Figures: World, Europe B) CASE STUDY OF SLOVENIA: How to structure aftercare activities in a small team 1. FDI in Slovenia 2. SPIRIT s FDI functions 3. Aftercare in Slovenia 4. Results 5. Not to forget 6. Q&A
Public Agency SPIRIT Slovenija Slovene Investment Promotion Agency Public Agency of Republic of Slovenia for Entrepreneurship, Technological Development, Foreign Investment and Export Promotion Areas of work: promoting innovation, technological development, entrepreneurship and internationalisation, inward investment promotion, promotion of Slovene economy abroad.
Key location factors for attracting FDI 1. Basic economic factors: size of market, size of population, GDP growth, access to markets, availability/cost of production factors, 2. Regulatory framework and business environment: political and macroeconomic stability, regulatory framework, tax system, labour force market, 3. Specific FDI policy: legislative FDI framework, promotion of a country, investment incentives and measures. Locations/industrial land (zones), they are important when a company short list a country.
FDI Types of FDI: Market seeking FDI Efficiency seeking FDI Strategic asset FDI Natural resurce seeking FDI
FDI Financing components in FDI inflows: 1. Equity (purchase of shares/assets of an enterprise) 2. Intra company loans (short or long term borrowing and lending of funds) 3. Reinvested earnings (after care services) (earnings not distributed as dividends by affiliates or earnings not remitted to the direct investor)
Conversion rates Long list to short list of countries visits decisions establishments enquiries contacts meetings
Sources of FDI: Privatisation process Mergers & Acquisitions, Bank assets Greenfield Brownfield After care
The Sales Process POTENTIAL INVESTOR INVESTOR MARKETING PROCESS SALES PROCESS Identity LEAD OPPORTUNITY ESTABLISHMENT Activity LEAD GENERATION OPPORTUNITY MANAGEMENT AFTER CARE Sales Stages Qualification Interest Needs Solutio n Agreeme nt Impleme ntation Won Check points Interested in International expansion. Profitable offer. Opportunity manager appointed Opinion regarding expected points (best guess). Genuine interest for country. Quantified values known (number of jobs, etc). Case planning made (resources, time plan and activities). Suggested solutions are presented Visit to country conducted. Country on shortlist An agreement for an investment is in place. Receive organizational number/ address/ decision for cooperation. Receive Questionnaire Prepare Audit Committee material Present to AC Salesforce entry Customer visit Known type of investment. The investor has a budget for the investment. Obstacle analysis for agreement performed The opportunity is made available to regional partners. Good understanding of expected decision timeframe Orders booked Net sales
AFTERCARE definition: range of activities from post establishment facilitation services through to developmental support to retain investment, encourage follow on investment and achieve greater local economic impact structured service offer (administrative, operational and strategic support), core function of IPA s, partnership approach, proactive, good customer management system, capable staff monitoring, evaluating results!
AFTERCARE After care services: 1. Administrative services (permissions, work permits, relocations ) 2. Operational services (training, export promotion, industrial land, suppliers, clusters) 3. Strategic services (high added value products, policy advocacy)
AFTERCARE Benefits: 1. New management techniques 2. New technologies 3. New skills 4. International linkages 5. University links in new R&D
U Curve Smiling Curve
World FDI Infows World FDI Inflows: 2010: 1.409 trillion $ 2011: 1.652 trillion $ 2012: 1.35 trillion $ 2013: 1.45 trillion $ 2014: 1.6 trillion $ 2015: 1.7 trillion $ 2016: 1.8 trillion $ Developing countries: 778 mrd $ (54% of all FDI flows) Developed countries: 566 mrd $ (39% of all FDI flows) Countries of FDI origin: 1. US (338 mrd $), 2. Japon (136 mrd $), 3. China (101 mrd $), 4. Russia (95 mrd $), 5. Hongkong (92 mrd $), 6. Switzerland (60 mrd $), 7. Germany (58 mrd $), 8. Canada (43 mrd $), 9. Netherlands (37 mrd $), 10. Sweden(33 mrd $) Vir: UNCTAD, World Investment Report
FDI in Europe Picture: FDI inflows in Europe Source: UNCTAD
FDI outflows: World/Europe FDI outflows, billion $ Country 2010 2011 2012 2013 Netherlands 68,3 39,5 0,2 37,4 Italy 32,6 53,6 7,9 31,6 Switzerland 87,4 47,8 45,1 59,9 Austria 9,9 21,8 17,1 13,9 Germany 126,3 80,9 79,6 57,5 France 64,5 59,5 37,1 2,5 US 277,7 386,7 366,9 338,3 Japan 56,2 107,5 122,5 135,7 Turkey 1,4 2,3 4,1 3,1
FDI in Slovenia Importance of companies with foreign and mixed capital: 10,000 FDI Stock Netherlands, 4 Croatia; 5.1% GB; 2.5% 4.5% of all companies (9.700 companies) 19,2% capital 22,7% assets 22,1% employees 39,5% export 45,2% import Belgium; 1.6% Others; 20,5% Luxemburg; 2.4% Countries of FDI origin: Austria; 34.3% EUR mrd 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 4,870 5,295 5,981 6,725 7,431 8,598 7,828 7,983 8,880 9,249 8,926 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Year France; 6% Germany; 6,4% Italy; 7 % Switzerland; 10.2% Source: Bank of Slovenia
FDI Inflows: Benchmarking Slovenia vs CEE countries FDI Inward Stock 2014 10.129, 8 billion EUR FDI Inward Stock as % of GDP (2014): 27,1% FDI Outward Stock 2014 5.314,9 billion EUR FDI Stock as % GDP in EU countries : approx. 50 % in CEE countries: Czech: 69,3% Slovak: 63,9% Poland: 51,6% Hungary: 87,4%
Location of Slovenia Excellent geostrategic position Easy access to: EU markets (500 million inhabitants) Europe s east (200 million) and southeast markets (20 million) Knowledge of: Local languages, Customs and culture Different mentalities Mediterranean TEN-T Corridor Baltic Adriatic Corridor 1000 km 500 km
SPIRIT FDI Division s function Ministry of Economy Partners (Regional development agencies, municipalities, consultants, WAIPA ) CRM function s RESEARCH MARKETING SALES AFTER-CARE key public CONTACT POTENTIAL INVESTOR INVESTOR - inward questions care tasks -research on competitive advantages - target industries - target markets - advertising - conference and fairs - portal - marketing materials - lead generation - meetings / with partners - financial incentives - meetings with investors - research among companies - FDI award event output -strategy and content input for the FDI sector processes - leads and contacts database - info database - InvestSlovenia.org - investment - references - re-investment - new jobs - Business-zones.si - Newsletter - Mktg materiali
Aftercare in Slovenia: data, analysis, statistical background 1. World Rankings: WEF, IMD, World Bank (Ease of Doing Business) 2. National research Annual research among companies with foreign and mixed capital 3. Target group selection of 20 30 companies per year 4. Business networking FDI Award Ceremony
Aftercare in Slovenia (1/4) ad 1) World rankings 1. WEF 2. IMD 3. World Bank Easeof Doing Business
WEF Global Competitiveness Report GCI2015 2016 GCI2014 2015 Sprememba Rang Št.točk Rang Št.točk Rang Št.točk Danska 12 5,33 13 5,29 1 0,04 Belgija 19 5,20 18 5,18 1 0,02 Luksemburg 20 5,20 19 5,17 1 0,03 Francija 22 5,13 23 5,08 1 0,05 Avstrija 23 5,12 21 5,16 2 0,04 Irska 24 5,11 25 4,98 1 0,13 Estonija 30 4,74 29 4,71 1 0,03 Češka 31 4,69 37 4,53 6 0,16 Španija 33 4,59 35 4,55 2 0,04 Litva 36 4,55 41 4,51 5 0,04 Portugalska 38 4,52 36 4,54 2 0,02 Poljska 41 4,49 43 4,48 2 0,01 Italija 43 4,46 49 4,42 6 0,04 Latvija 44 4,45 42 4,50 2 0,05 Malta 48 4,39 47 4,45 1 0,06 Romunija 53 4,32 59 4,30 6 0,02 Bolgarija 54 4,32 54 4,37 0 0,05 Slovenija 59 4,28 70 4,22 11 0,06 Madžarska 63 4,25 60 4,28 3 0,03 Ciper 65 4,23 58 4,31 7 0,08 Slovaška 67 4,22 75 4,15 8 0,07 Hrvaška 77 4,07 77 4,13 0 0,06 Grčija 81 4,02 81 4,04 0 0,02 Vir: The Global Competitiveness Report 2015 16, WEF
IMD IMD World Competitiveness Yearbook Države Mesto 2015 Indeks 2015 Mesto 2014 Indeks 2014 Sprememba mesta Nizozemska 15 83,6 14 81,10 1 Irska 16 83,0 15 80,40 1 Velika Britanija 19 79,9 16 79,80 3 Finska 20 78,5 18 78,20 2 Belgija 23 75,4 28 66,60 5 Avstrija 26 72,9 22 73,70 4 Litva 28 71,7 34 62,00 6 Češka 29 70,8 33 62,20 4 Estonija 31 69,2 30 64,40 1 Francija 32 69,0 27 67,90 5 Poljska 33 68,8 36 61,80 3 Portugalska 36 64,2 43 54,40 7 Španija 37 63,5 39 57,90 2 Italija 38 61,0 46 52,90 8 Latvija 43 59,8 35 61,80 8 Slovaška 46 57,2 45 53,30 1 Romunija 47 57,1 47 52,80 0 Madžarska 48 57,0 48 52,50 0 Slovenija 49 56,8 55 46,20 6 Grčija 50 54,2 57 42,20 7 Bolgarija 55 50,3 56 45,80 1 Hrvaška 58 44,8 59 39,00 1 5.5.2016 25
Aftercare in Slovenia (2/4) ad 2) National research ANNUAL SURVEY AMONG COMPANIES WITH FOREIGN AND MIXED CAPITAL a list of up to 20/30 companies that have expressed an intention to enlarge/increase their presence in Slovenia
Business environment: MOTIVES of foreign investors Importance of motives for foreign investors: 0.5 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 Dostop ali povečanje obstoječega tržnega deleža v Sloveniji Dostop do trgov v JV Evropi Dostop do trgov v EU Učinkovitost proizvodnje/storitvene dejavnosti v Sloveniji Dostop do inputov (material, sestavni deli) Dostop do znanja, kvalificiranega dela, tehnologije v Sloveniji Kvalitetna delovna sila Nizka cena delovne sile Spremljanje ključnih tujih strank, ki delujejo v Sloveniji Dobra geografska lega in infrastrukturna povezanost Slovenije Davčne ugodnosti Ob vstopu Danes Razlika Vir: Letna raziskava SPIRIT in FDV (Center za mednarodne odnose)
Busines environment: OBSTACLES/disadvantages Importance of obstacles/disadvantages for foreign investors 0.5 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 Visoki davki Plačilna nedisciplina Visoki stroški delovne sile Težave pri odpuščanju zaposlenih Korupcija Neučinkovit sodni sistem Slabo delovanje davčne uprave Ovire pri nakupu stavbnih zemljišč in objektov Zapletena/draga ustanovitev/začetek delovanja podjetja Neustrezna stečajna regulativa Težave z gradbenimi dovoljenji Netransparentna obravnava tujih investitorjev Nerazpoložljivost ustrezno usposobljene delovne sile Neustrezno varstvo konkurence Rigidnost glede delovnega časa Neustrezno uveljavljanje pogodb Visoki transportni stroški Slaba/draga energetska infrastruktura Težave pri najemanju kreditov Slaba/draga informacijsko/komunikacijska infrastruktra Neustrezna zaščita lastniških pravic (intelektualne lastnine) Ovire v zunanjetrgovinskem poslovanju Slaba prometna infrastruktura Majhnost slovenskega trga Ob vstopu Danes Razlika Vir: Letna raziskava SPIRIT in FDV (Center za mednarodne odnose)
Aftercare in Slovenia (3/4) ad 3) TARGET GROUPS large and medium size companies with foreign and mixed capital (more than 50 employees, solid financial structure (growth of revenues, profit, low debt ratio, highest company credit ratings) REINVESTMENTS companies, beneficiaries of financial incentives from the agency/ministry REINVESTMENTS risk companies (retention of the companies) RETENTION
AFTERCARE After care services: Targets: Short term: to build the partnership with the companies with foreign and mixed capital with the target to accelerate its growth and development and to strength the position in the structure/network of foreign investor Long term: reinvestment/to increase the number of new investment increase (retention) the number of employees
Aftercare in Slovenia Services and tools: - Identification of needs of the companies - Tool: financial incentives for FDI, the tools of internationalization - Identification of the needs in the business environment - Tool: policy advocacy with the Ministry of Economy; enabling access to ministries and other government institutions - Information about public tenders, instruments in Slovenia - Tool: the list of public tenders - Business networking - Tool: business events and seminars
Aftercare in Slovenia: FDI AWARD CEREMONY (4/4)
After care services (how to define them?) Areas How to help? 1. Tax, administrative issues NO 2. Labour force legislation NO 3. Availability of Industrial land YES 4. Measures, instruments for foreign investors YES
AFTERCARE in Slovenia: Availability of industrial land (1/2) Goal: to assist expansion projects, identify suitable locations, site options List of required investors One Stop Shop for investors (EU funds!) Potential locations Reactivation of brownfield locations Support at providing licences/permits for construction
AREAS DEDICATED TO PRODUCTION ACTIVITIES Dedicated to industrial, manufacturing, service activities
PROSTOR ZA INVESTICIJE
www. INVESTSLOVENIA.SI/LOCATIONS POTENCIALI ZA GREENFIELD GREENFIELD LOCATIONS PROSTOR ZA INVESTICIJE
POTENCIALI ZA BROWNFIELD BROWNFIELD LOCATIONS to be done PROSTOR ZA INVESTICIJE
AFTERCARE in Slovenia (2/2) Instruments/List of public tenders in Slovenia (Goal: offer strategic information on regional and national initiatives) Partnership approach Mothly report on new instruments/tenders in Slovenia Financial incentives, Training/Education incentives, Tax relief, Regional development programmes Part of the policy advocacy
Results Results 2016 25 meetings (15 companies with highest credit rating, 5 meetings with companies beneficiaries of financial incentives), 3 enlargements/expansions 6 interviews (arguments for Slovenia as a potential location for expansion) Partnership with foreign chambers of commerce (AHK, AMCHAM, BCC )
NOT TO FORGET 1. develop objectives, identify partners 2. assses resources and develop organisation 3. segment targets and design aftercare programme 4. deliver services, monitor and evaluate results BUT, results do not happen immediately: Long term view Know the market, customer Assigned account managers a contact person to whom the investor can turn for assistance Monitor, evaluate and adjust the service
Thank you for your attention Q &A? SPIRIT Slovenija Dimičeva 13 SI 1000 Ljubljana www.spiritslovenia.si