Investor targeting & After care

Plant Location International (PLI) Investor targeting & After care Seminar in Jordan 12-16 October 2003, Amman by Wim Douw IBM Plant Location International Copyright IBM Corporation 2002

Introduction Training overview Start with a long list of industries Find unique location offer for particular industries Location offer Review potential sectors with economic policy Prioritize target sectors Prime Targets (Pro-active) Initial List (Brainstorm) Matching supply & demand Policy Fitness Secondary Targets (Re-active) Investor targeting Investors Demand Exclude 2

Introduction The bigger picture Moscow region electronics industry Example of investment investment promotion promotion cycle cycle Phase 1 Moscow city IPA (MIPA) Ministry of Economics & Trade MIPA Business associations (SEMI) Private sector Phase 2 Department of Zelenograd SEZ Industry& Science administration Private sector Strategy & organization MIPA Post-investment services Trade associations Zelenograd SEZ administration Department of Industry& Science Phase 4 International chambers of commerce (AMCHAM, EBC, JETRO, etc.) Trade offices Universities Embassies Investor targeting & lead Intermediary generation organizations MIPA (Pre-)investment services & Government facilitation Administration Law & accounting firms Utility companies Property developers / brokers Zelenograd SEZ administration Phase 3 Educational institutions 3

BASIC PRINCIPLES OF COMPANY TARGETING Targeting is a core activity of every agencies Granting incentives Investor targeting Investment policy advice After care program Promotion of domestic investment Providing consulting services Export promotion 0% 20% 40% 60% 80%100% Source: UNCTAD survey among 100 IPAs Promotion of tourism Foreign investment registration Promotion of outward investment Foreign investment licensing Promotion of privatization Industrial estates authority function Export processing zones 0% 20% 60% 100% 4

TARGETING AS AN EFFECTIVE APPROACH FOR LEAD GENERATION Goals 1,000 jobs National Objectives Investments Investment Approvals Investment Applications Investor Reconnaissance Visits Meetings with Individual Prospective Investors Investor Contacts Generated by Promotional Activities 10 new investments 18 approvals 20 applications 100 site visits 1,000 meetings 10,000 contacts No. of Investments Require No. of Project Approvals Require No. of Project Applications Require No. of Site Visits Require No. of Meetings/Presentations Require No. of Investor Contacts Source: TSG 5

TARGETING AS AN EFFECTIVE APPROACH FOR LEAD GENERATION 6 Method Nb agencies using the method Average rating for lead generation (max score=5) Aftercare services for target firms 4 5.0 Links to target firms & networks 6 4.8 Links to chambers etc 4 4.1 Direct mail to targeted brokers 5 4.0 Sales representatives 3 4.0 PR Companies 3 4.0 Conferences, seminars 7 3.6 Outward missions 5 3.6 TV commercials 2 3.5 Organisations in source countries 2 3.5 Conventions, exhibitions 8 3.4 Trade press advertising 5 3.2 Direct mail to targeted companies 9 2.8 Inward missions 4 2.8 Directory listings 4 2.5 Table 1 Effectiveness of different promotional methods

Potential sources of leads & marketing targets At home Abroad Direct Existing foreign company base (after-care) HQs of companies in target sectors Large importers/ distributors Indirect Foreign embassies and economic representations of target countries Foreign chambers of commerce (AmCham, JETRO, etc.) Intermediary organisations working with foreign investors (international accountants, foreign banks, legal advisors, international property brokers, location consultants, etc.) Network of foreign venture capital investors in country/region. Professors and research institutes at local universities that work with foreign companies. UNIDO Investment & Technology offices EPZ authorities Foreign expatriate clubs in country Etc. etc. Relevant trade seminars & association meetings Embassies and national representations abroad Trade promotion organisations Foreign embassies in the ME region Intermediary organisations working with foreign investors UNIDO Investment & Technology offices Countries (expatriate) business community abroad Etc. etc. 7

Generating leads abroad: examples pro-active v re-active Pro-active: Overseas representation network in key source markets: Promotion activities (example of successful European IPA representation in the USA): - Existing investors after care to help companies expand and develop in country. - Pro-active lead generation by telemarketing agency. (A significant proportion of the leads comes in through a dedicated telemarketing service) - Has conducted 100 1-1 meetings with companies in the last year. - Meeting companies at conferences, exhibitions, trade-shows and organizing break-fast meetings for targeted audience. - Referrals from consultants, bankers, chambers of commerce etc. (networking with intermediaries) - Tap into personal network and meet new individuals at exhibitions and trade shows. Marketing and networking mainly in selected target events. - Developing and sending brochures for each target sector in local language (eg French, Italian, Spanish, etc.) Re-active: Networking is crucial! Networking requires proximity! IPA Website (key requirements: dynamic, relevant information, and up-to-date) 8

Successful targeting examples in Eastern Europe Czech Republic, Hungary and Poland have been very successful. Success of these countries should be considered demand driven (opportunity for profit maximization in combination with EU access) rather than being a targeting success. However, very professional IPAs were established helping foreign investors in setting up and influencing the direction of inward investment flows. IBM-PLI study in Eastern Europe suggests a positive correlation between structure, strategy and resources available to implement strategy on the one hand and the number of foreign investments received by country. Investments from the US, Europe or Japan in the MEDA region seem mainly local market driven. Much less export platform investments (role of trade agreements) compared to Asia-Pac or Eastern Europe. 9

BEST PRACTICES IN TARGETING INITIATIVES Full preparation of project teams before targeting project, to ensure a consistent and coordinated approach Prepare proposition-based marketing materials and business cases tailored to specific target audience Development of research tools and questionnaire templates to be used when meeting companies Creative, opportunity-driven approach to canvass meetings with companies building on other national attractions (e.g. Golf in the case of Ireland) Post-meeting evaluation and immediate follow-up proposals to be made to companies Longer term follow-up and relationship building Establishment of overseas offices or representatives is a key policy tool for moving to a pro-active targeting approach 10

OTHER KEY LESSONS Sector based Sustained approaches Not just investors Resource intensive Targeting must be based on an intelligent sector-based investment promotion strategy. Targeting is not a one-off initiative. It is about sustained approaches and relationship building. Brokers play a key role in investment decisions, and investment ambassadors should be used. In both time and in the role of overseas offices. Is not stand-alone Is a learning approach To increase FDI organisational effectiveness, user tools, and marketing also need to be in place. Target sectors need to be re-evaluated periodically. Improvements in the local offer or product should also be continuous. 11

Basic targeting tools: 1. CITT 2. Competitive position & Sales manual Copyright IBM Corporation 2002

DEVELOPING RE-ACTIVE AND PRO-ACTIVE MARKETING TOOLS Objective: provide powerful, fact-based marketing messages and data to sell the location most effectively, presented in the latest user tools Key actions Develop practical user tools based on benchmarking exercise which may include: Sales manual containing all sales messages and Research Manual with all back-up data for the sales manual A sales manual provides fact-based, key selling messages aligned to investor needs. It includes: Typical critical investor requirements Key selling proposition Strengths and weaknesses Strengths and weaknesses of competitors Counter-arguments to be used in discussion with potential investors A Research Manual contains the data used in the benchmarking, fully referenced for updating, to be used for project handling, building brochures/business cases and responding to enquiries Outcome: Practical user tools which can be used for marketing, investment propositions, presentations, project handling and training 13

1. Contact & Investor Tracking Tool (CITT) 14

Political stability 10 1.0% and financial stability 10 1.0% Economic 10 environment business General Location Category Total 100 Corporate taxation 15 1.5% setting up (incentives) 25 2.5% for support financial of Availability Environmental protection regulations 10 1.0% 1.5% 15 procedures permitting Business Quality of support from local government & development agencies 10 1.0% 0.5% 5 bureaucracy & ethics Business (%) Location factor (%) Business Consulting Services Local potential to recruit skilled staff 20 Overall size of labour poor 10 2.0% Service attitude 5 1.0% population) 10 2.0% (student staff non-experienced of Presence Presence of experienced industry-specific employees 25 5.0% 6.0% 30 workers manufacturing experienced of Presence Basic tools: 2. Competitive position & sales manual Sales Manual Competitive map 7.5 Investor needs Weight Database Weight Scoreboard Location Category Weight (%) Location factor 6.5 Quality & cost rankings 6.5 6.2 6.1 6.1 Overall weighted quality score Weight Toronto / (%) Melbourne Adelaide Sydney Sao Paulo Montreal Shanghai Prague General business environment 10 Economic and financial stability 10 1.0% 7 7 7 5 7 7 5 Political stability 10 1.0% 7 7 7 4 6 5 5 Business ethics & bureaucracy 5 0.5% 8 8 8 4 8 4 5 Quality of support from local government & development agencies 10 1.0% 8 8 8 4 8 5 7 Business permitting procedures 15 1.5% 7 7 7 5 7 6 6 Environmental protection regulations 10 1.0% 6 6 6 6 6 Total 6 annual utility 5 costs Availability of financial support for setting up (incentives) 25 2.5% Total 7 annual 7 operating 7 costs 8 6 Total 4 investment 4 costs expressed as annual occupancy costs Corporate taxation 15 1.5% 5 5 5 6 6 5 5 (in USD million) Total annual labour cost to employer for full operation Total 100 60 58 62 45 59 49 47 Local potential to recruit skilled staff 20 Overall size of labour poor 10 2.0% 6 5 6 8 7 7 5 31.3 32.0 Presence of experienced manufacturing workers 30 6.0% 6 6 5 7 7 6 7 Presence of experienced industry-specific employees 25 5.0% 7 6 4 7 6 7 7 27.3 Presence of non-experienced staff (student population) 10 2.0% 7 6 6 7 6 9 6 Service attitude 5 1.0% 7 7 7 7 8 6 5 Competition for similar skills 5 1.0% 5 7 6 5 6 8 8 Overall tightness in the labour market (unemployment) 15 3.0% 6 20.06 4 6 5 7 8 Total 100 18.0 16.5 52 51 46 53 53 55 53 17.3 Presence of industry 20 Market proximity (access to customers) 50 15.310.0% 5 5 5 8 8 7 7 Presence of automotive base 50 10.0% 6 4 5 6 5 3 4 13.4 Total 100 11 9 10 14 13 10 11 Language skills 5 Mastery of English (as corporate language) 25 1.3% 9.1 10 10 10 8.5 3 9 3 8.3 3 7.1 Presence of native language speakers in other languages 50 2.5% 8 7 5.9 8 3 8 6 3 5.1 Language skills of local population (if relevant) 25 1.3% 7 5 7 4 9 7 4 Total 100 25 22 25 10 26 16 10 Flexibility of labour & regulations 10 Flexibility of staff 25 2.5% 7 7 7 7 7 5 5 Working time regulations 20 2.0% 6 6 6 6 6 7 8 Hiring flexibility 20 2.0% 5 5 5 6 7 6 6 Firing flexibility 20 2.0% 7 7 7 8 8 6 6 Social climate 15 1.5% 5 5 5 7 5 8 8 Total 100 30 30 30 34 33 32 33 Infrastructure 20 Air access 5 1.0% 5 4 6 6 6 5 5 Road access 20 4.0% 7 7 7 6 7 6 7 Train access 20 4.0% 6 6 6 4 8 5 8 Waterways and seaports 10 2.0% 8 7 7 3 8 7 4 Public transport 5 1.0% 7 5 7 5 8 7 7 Quality & reliability of telecommunications 10 2.0% 8 8 8 4 8 6 7 IT infrastructure 5 1.0% 8 8 8 5 8 3 6 Reliability of power supply 15 3.0% 8 8 8 3 9 6 6 Water supply 5 1.0% 8 8 8 9 9 5 5 Gas supply 5 1.0% 8 8 8 5 9 6 4 Total 100 81 77 81 54 88 61 65 Real estate 10 Availability of large industrial sites 70 7.0% 7 7 6 8 6 8 5 Availability of industrial space 30 3.0% 7 7 7 7 7 7 7 Total 100 21 21 20 22 20 22 19 Living environment 5 Cost of living 40 2.0% 6 7 6 5 7 3 7 Attractiveness for international recruits 30 1.5% 7 6 9 3 8 3 5 Safety 10 0.5% 8 8 7 4 7 6 6 International schools 10 0.5% 6 4 5 5 5 5 6 Personal taxation for expatriates 10 0.5% 8 8 8 7 6 6 6 Total 100 35 33 35 24 33 23 30 Total 100 1 Melbourne Melbourne Adelaide Adelaide Sydney Sydney Sao Paulo Toronto / Montreal 6.9 Sao Paulo Toronto / Montreal Shanghai Shanghai 5.9 5.9 Prague Prague Stuttgart 7.0 Stuttgart Budapest 5.8 Budapest 6.3 Tokyo Kuala Lumpur Living environment Auckland Real estate Infrastructure Flexibility of labour & regulations 6 Kuala Lumpur Language skills Presence of industry Local potential to recruit skilled staff General business environment 7.1 5.8 6.0 5.8 5.7 Bangalore 5.5 25 50 75 100 125 150 175 Tokyo Kuala Lumpur Monterrey Monterrey Seoul Seoul Bangkok Bangkok Quality score (Score from 0 to 10) Detroit Detroit 7 Sydney Singapore Manchester Dublin Melbourne Brisbane Operating cost index (average = 100) Chicago San Francisco Hong Kong 15 Total 100 base 50 10.0% automotive of Presence Total 100 Presence of industry 20 Market proximity (access to customers) 50 10.0% Overall tightness in the labour market (unemployment) 15 3.0% 1.0% 5 skills similar for Competition

Basic tool: 2. Competitive position & sales manual Sales Manual Competitive map 7.5 Database Scoreboard Location Category Weight (%) Location factor Melbourne 6.5 Adelaide 6.2 6.1 6.1 Sydney Sao Paulo Toronto / Montreal 6.9 Overall weighted quality score Shanghai 5.9 5.9 General business environment 10 Economic and financial stability 10 1.0% 7 7 7 5 7 7 5 Political stability 10 1.0% 7 7 7 4 6 5 5 Business ethics & bureaucracy 5 0.5% 8 8 8 4 8 4 5 Quality of support from local government & development agencies 10 1.0% 8 8 8 4 8 5 7 Business permitting procedures 15 1.5% 7 7 7 5 7 6 6 Environmental protection regulations 10 1.0% 6 6 6 6 6 6 5 Availability of financial support for setting up (incentives) 25 2.5% 7 7 7 Total annual 8 operating 6 4 costs4 Corporate taxation 15 1.5% 5 5 5 6 6 5 5 Total 100 60 58 62 45(in USD 59 million) 49 47 Local potential to recruit skilled staff 20 Overall size of labour poor 10 2.0% 6 5 6 8 7 7 5 Presence of experienced manufacturing workers 30 6.0% 6 6 5 7 7 6 31.3 7 Presence of experienced industry-specific employees 25 5.0% 7 6 4 7 6 7 7 Presence of non-experienced staff (student population) 10 2.0% 7 6 6 7 6 9 6 Service attitude 5 1.0% 7 7 7 7 8 6 5 Competition for similar skills 5 1.0% 5 7 6 5 6 8 8 Overall tightness in the labour market (unemployment) 15 3.0% 6 6 4 6 20.0 5 7 8 Total 100 52 51 18.046 53 53 55 53 16.5 Presence of industry 20 Market proximity (access to customers) 50 10.0% 5 15.35 5 8 8 7 7 Presence of automotive base 50 10.0% 6 4 5 6 5 3 4 Total 100 11 9 10 14 13 10 11 Language skills 5 Mastery of English (as corporate language) 25 1.3% 10 10 10 9.1 3 9 38.5 3 Presence of native language speakers in other languages 50 2.5% 8 7 8 3 85.9 6 3 Language skills of local population (if relevant) 25 1.3% 7 5 7 4 9 7 4 Total 100 25 22 25 10 26 16 10 Flexibility of labour & regulations 10 Flexibility of staff 25 2.5% 7 7 7 7 7 5 5 Working time regulations 20 2.0% 6 6 6 6 6 7 8 Hiring flexibility 20 2.0% 5 5 5 6 7 6 6 Firing flexibility 20 2.0% 7 7 7 8 8 6 6 Social climate 15 1.5% 5 5 5 7 5 8 8 Total 100 30 30 30 34 33 32 33 Infrastructure 20 Air access 5 1.0% 5 4 6 6 6 5 5 Road access 20 4.0% 7 7 7 6 7 6 7 Train access 20 4.0% 6 6 6 4 8 5 8 Waterways and seaports 10 2.0% 8 7 7 3 8 7 4 Public transport 5 1.0% 7 5 7 5 8 7 7 Quality & reliability of telecommunications 10 2.0% 8 8 8 4 8 6 7 IT infrastructure 5 1.0% 8 8 8 5 8 3 6 Reliability of power supply 15 3.0% 8 8 8 3 9 6 6 Water supply 5 1.0% 8 8 8 9 9 5 5 Gas supply 5 1.0% 8 8 8 5 9 6 4 Total 100 81 77 81 54 88 61 65 Real estate 10 Availability of large industrial sites 70 7.0% 7 7 6 8 6 8 5 Availability of industrial space 30 3.0% 7 7 7 7 7 7 7 Total 100 21 21 20 22 20 22 19 Living environment 5 Cost of living 40 2.0% 6 7 6 5 7 3 7 Attractiveness for international recruits 30 1.5% 7 6 9 3 8 3 5 Safety 10 0.5% 8 8 7 4 7 6 6 International schools 10 0.5% 6 4 5 5 5 5 6 Personal taxation for expatriates 10 0.5% 8 8 8 7 6 6 6 Total 100 35 33 35 24 33 23 30 Total 100 1 Melbourne Adelaide Sydney Sao Paulo Toronto / Montreal Shanghai Prague Prague Stuttgart 7.0 Stuttgart Budapest 5.8 Budapest 7.1 Tokyo 6.3 Kuala Lumpur Tokyo 32.0 Kuala Lumpur 5.8 6.0 Monterrey Total annual utility costs 8.3 Seoul 5.8 5.7 Bangkok Quality score (Score from 0 to 10) Quality & cost rankings Weight (%) Melbourne Adelaide Sydney Sao Paulo Toronto / Montreal Shanghai Prague Living environment Real estate Infrastructure Flexibility of labour & regulations Language skills Presence of industry Local potential to recruit skilled staff General business environment Monterrey 13.4 17.3 Seoul Bangkok 5.1 Detroit 7.1 Total investment costs expressed as annual occupancy costs Total annual labour cost to employer for full operation Detroit 27.3 7 6.5 6 5.5 Kuala Lumpur Bangalore Auckland Sydney Dublin Melbourne Brisbane Singapore Manchester Chicago Hong Kong San Francisco 25 50 75 100 125 150 175 Operating cost index (average = 100) 16

EXAMPLES Benchmarking Database 17

EXAMPLES Industry review in sales manual (example automotive industry) Key industry trends (OEMs) Globalization (mainly through M&A and JVs) High inventories Excess capacity Low net margins Shift to E-business Shift to emerging markets Growing importance of branding Concern over increasing supplier size and control Key industry trends (suppliers) Specialisation Consolidation Multiple OEM / Aftermarket demands Margin / Price pressures Greater OEM expectations (i.e. design / engineering) Key sales trends Record sales last 2 years Increased volume often driven by costly incentives Increased competitiveness has pressured new car prices - hurting margins Dealer network consolidation - changing buying experience E-business trends OEMs and suppliers are creating strategies for the New Economy Exchanges promise much, but suppliers worry E-Business will impact the entire supply chain All of the players will need to adapt to rapid change Key FDI trends 300 projects 2000-Q2 2001 50% components 50% OEM Projects by type Expansions important for both OEM and components More greenfield projects are recorded for components Major source countries : US (Michigan, Illinois) Japan, Germany France, Italy, Sweden Major locations US UK, Canada, Mexico Brazil, China, Germany, Czech Republic, Hungary, Poland, Australia, Spain Major investors globally 2000-Q2 2001 BMW (Germany) Behr(Germany) DaimlerChrysler (Germany) Calsonic (Japan) Fiat (Italy) Tenneco (US) Ford (US) Dana (US) GM (US) Delphi (US) Honda (Japan) Eaton (US) Mitsubishi (Japan) Lear (US) Nissan (Japan) Scania (Sweden) Renault (France)Toyota (Japan) Siemens (Germany) VW (Germany) TRW (US) Visteon(US) Technical support HQ Logistics & Distribution R&D Manufacturing Mobile projects 18

EXAMPLES Sales Manual 19

EXAMPLES SalES Manual 20

EXAMPLES Strengths High market proximity Larger number of experienced manufacturing workers Large size of labour market Very low operating costs Flexible working time regulations, hiring flexibility and good social climate Very good air access Low cost of living Low corporate tax Strengths High market proximity Large size of labour pool Very high availability of large industrial sites Very high number students, especially in engineering Low competition for skills Low tightness in labour market Favourable working time regulations and hiring flexibility Very low operating cost Bangkok Shanghai Weaknesses Smaller automotive base Tightness in labour market Lower presence automotive employees Very low R&D levels Availability of large sites Flexibility of staff Firing flexibility Road and train access Telecoms and power supply quality and reliability Overall business environment Language and IT skills Attractiveness of location Waterways and seaports Weaknesses Size of automotive base Flexibility of staff and firing flexibility Very low levels of R&D Road and train access Language skills Waterways and seaports Telecoms and power supply quality and reliability Overall business environment IT skills Attractiveness of location Cost of living Strengths Very strong automotive base Presence of experienced manufacturing workers Strong presence of automotive employees High numbers of students in engineering subjects High R&D levels Good road and train access Good site availability High flexibility of staff Excellent IT / language skills Labour market is not tight Excellent general business environment & incentives Excellent reliability of telecoms & utilities Attractiveness of location Victoria Victoria Weaknesses Competitor locations outside of Australia have better market access Non Asia-Pacific locations have higher R&D Working time regulations are more favourable in non- Australian competitor locations Hiring flexibility is also more favourable in non-australian competitor locations Cost structure is higher than competitor locations, except Sydney Air access Defensive arguments Victoria s two major weaknesses are market proximity and operating costs - but only when competing against non- Australian locations In terms of market proximity, Victoria has several persuasive counter-arguments. First, is the strong existing base and recent investments of final manufacturers including GM, Ford and Toyota and first tier suppliers including Delphi, Bosch and Dana [(B2.1-B2.3)]. There are 84 companies in the automotive sector in Victoria- higher than all major competitors [(Data Point C3.3j)]. Second, the Australian car market is larger than that of China, South Korea, and other major competitors [Data Point C3.1b)]. In terms of labour costs, Victoria will not be able to compete for purely cost driven projects. However, the strength of the existing supplier base should facilitate cost savings in the supply chain and Victoria offers higher financial support than low cost locations. The strength of R&D should also be emphasised as this allows more flexibility for higher value added plant evolution. The overall business environment in Victoria is also excellent and there is significantly less risk compared to investing in low cost locations 21

Other more advanced tools Proposition-based profitability / project evaluation software Copyright IBM Corporation 2002

DEVELOPING RE-ACTIVE AND PRO-ACTIVE MARKETING TOOLS Objective: develop profitability tools for calculating how locations compare in financial terms to be used in pro-active targeting Key actions Financial tool show rate of return of investing in location for specific projects Calculate how much incentives to give Quantify the impact of taxes and incentives Competitor assessment and offer realignment Pay back period calculations Identifications of strengths and weaknesses in the overall financial offer Sensitivity analysis to identify changes with most impact Demonstrate understanding & expertise of investor needs & business model Challenges the investor Fine tunes requirements of the investor, to maximise impact of incentives Outcome: Ability to demonstrate to the investor how your location will impact upon their bottom-line. Challenges the investor to consider you 23

EXAMPLES 24

Resource Allocation Tool Copyright IBM Corporation 2002

DEVELOPING RE-ACTIVE AND PRO-ACTIVE MARKETING TOOLS Objective: to assess optimal location and resource allocation of overseas offices Key actions Identify key source markets in terms of: General size of outward FDI flows Specific outflow of investments in your target sectors After-care opportunities Cluster / Sector allignment Based on opportunities prioritise source markets in terms of resource allocation to this market (overseas office, staff, missions, etc.) Outcome: Structured approach to select marketing priorities and optimize spending of annual marketing budget 26

DEVELOPING RE-ACTIVE AND PRO-ACTIVE MARKETING TOOLS FDI opportunity general FDI opportunity in target sectors After care opportunity Cluster alignment Optimal resource allocation (theore Region Projects to developed world Projects to developed EUR Projects to UK Recent AWM successes recorded AWM active cases Weighted average (%) Number of projects in the target sectors/activity Developed world Number of projects in the target sectors/activity Developed EUR Number of projects in the target sectors in UK AWM successes in target sectors Number of global top 200 companies in Target sectors Weighted average (%) Number of employees Number of companies Weighted average (%) Number of headquarters in target sectors Cluster & Technology alignment Inward FDI in target sectors Weighted average TOTAL WEIGHTED AVERAGE 15 20 25 Category weight 10 60 20 10 FTEs FTEs FTEs optimal optimal optimal Factor weight 10 10 20 30 30 10 50 30 5 5 50 50 30 30 40 resource resource resource Australasia 60 22 19 5 29 0.063 43 17 14 1 14 0.017 1313 33 0.011 269 0.050 127 0.033 0.022 0.3 0.4 0.6 Benelux 159 84 15 7 3 0.030 90 48 8 1 31 0.026 9887 155 0.062 327 0.050 197 0.042 0.035 0.5 0.7 0.9 Canada 157 90 38 11 17 0.066 127 80 33 1 34 0.049 7404 59 0.032 2190 0.070 309 0.080 0.050 0.8 1.0 1.3 Central Europe 435 234 58 29 28 0.136 318 172 45 1 111 0.093 30159 465 0.186 1845 0.080 341 0.083 0.115 1.7 2.3 2.9 China 28 17 14 2 2 0.012 14 7 4 1 5 0.008 789 12 0.005 307 0.000 450 0.058 0.013 0.2 0.3 0.3 East Asia 45 24 13 2 3 0.014 38 20 11 1 22 0.017 636 9 0.004 500 0.030 118 0.028 0.015 0.2 0.3 0.4 France 228 115 24 17 11 0.067 160 81 21 1 55 0.046 27543 220 0.119 662 0.070 220 0.054 0.063 0.9 1.3 1.6 India 46 19 5 1 9 0.020 37 17 4 1 4 0.011 36 5 0.001 816 0.030 241 0.046 0.014 0.2 0.3 0.3 Japan 333 135 54 17 6 0.071 240 96 41 1 212 0.071 11064 102 0.051 925 0.070 141 0.047 0.065 1.0 1.3 1.6 Scandinavia 231 152 39 6 5 0.043 154 103 28 1 35 0.054 11366 135 0.060 882 0.070 185 0.052 0.054 0.8 1.1 1.4 South East Asia 36 12 6 2 1 0.008 31 10 4 1 10 0.009 842 11 0.005 666 0.030 295 0.051 0.013 0.2 0.3 0.3 Southern Europe 134 83 11 6 2 0.025 54 32 6 1 30 0.019 4385 97 0.034 1229 0.030 320 0.060 0.027 0.4 0.5 0.7 New England 258 183 71 2 8 0.051 233 168 63 1 29 0.093 22000 140 0.086 1497 0.090 29 0.045 0.082 1.2 1.6 2.1 Mid East 381 254 88 8 12 0.079 312 201 77 1 98 0.116 22000 140 0.086 4586 0.090 66 0.079 0.103 1.5 2.1 2.6 Great Lakes 248 184 66 30 28 0.133 202 150 51 1 91 0.084 22000 140 0.086 4164 0.090 39 0.072 0.088 1.3 1.8 2.2 South East 224 150 63 6 10 0.057 160 110 50 1 63 0.069 22000 140 0.086 4684 0.060 120 0.078 0.072 1.1 1.4 1.8 Far West 630 442 164 11 15 0.125 557 403 152 1 63 0.219 22000 140 0.086 5680 0.090 87 0.092 0.170 2.6 3.4 4.3 TOTAL 3633 2200 748 162 189 1 2770 1715 612 17 907 1 215424 2003 1 31229 100% 3285 1 1 15 20 25 27

EXAMPLE: OVERSEAS OFFICE ASSESSMENT HQs in target sectors Location of competitor IPA offices 28

Cluster Management Tools Copyright IBM Corporation 2002

Cluster management tools Objective: to map specific clusters to identify inward investment, technology linkage and joint venture, alliance opportunities Key actions Map the existing cluster, including companies, universities, and science parks Identification of companies and universities seeking foreign partnerships Technology and innovation audit to identify key competencies of location Development of marketing tools for managing and promoting the cluster Examples of cluster-based inward investment approach: Midlands in UK (region with 10 million people; focus on healthcare and IT sectors) Denmark (focus on ICT and Biotechnology sectors) Outcome: Ability to demonstrate to the investor how your location will impact upon their bottom-line. What skills are available in the region. Challenges the investor to consider you 30

EXAMPLES Key actions Audit research competence Support/incentivise spinouts Access funds for universities Create incubators Business services to startups, Encourage networking Audit company base Create science parks Product development Business support to SMEs Endogenous (domestic) Exogenous (foreign) 1. Idea 2. Start-up 3. SME growth University 1. Research alliances Incubator (biotech) Incubator (software) Incubator (engineering) 2. Spin-offs & firm alliances Science park 3.Inward investment Key economic outputs Leverage innovation base Technology development New firm creation SME growth Quality inward investment Embeddedness Critical mass 31 Key actions Audit research competence Audit start-up competence Benchmark location Market to foreign companies Market to foreign companiescompetence Facilitate research alliances Facilitate spin-offs & Market to foreign companies alliances Facilitate inward investment

Active Cluster Management Tool EXAMPLES Searchable and fully interactive database of: - Companies in cluster - R&D competencies - Science parks and incubators Full profiles of companies, R&D and science parks Can be searched to find R&D and corporate partners for foreign companies and universities Can be used to find specific technological competencies of the location, for proactive promotion Reflects shift towards micro/technology focused company targeting in the most advanced locations 32

Role of the IPA Copyright IBM Corporation 2002

The role of the IPA in the decision making process 1. The corporate perspective 2. Common & best practices 3. Intermediate point of view 34

1. The corporate perspective Information provision & marketing services by IPAs 1. Define Project Assumptions and Long-list of Location Options 1. Define Project Assumptions and Long-list of Location Options 2. 2. Analyze Analyze Long-list Long-list of of Candidate Candidate Locations Locations Identify Identify Shortlist Shortlist Main geographical focus National 3. 3. Evaluate Evaluate Short-listed Short-listed Locations Locations Select Select Preferred Preferred Location Location 4. Due Diligence and Negotiations 4. Due Diligence and Negotiations 5. Implementation 5. Implementation Local 35

1. The corporate perspective Information provision & marketing services by IPAs Location Decision Process 1. 1. Define Define Project Project Assumptions Assumptions and and Long-list Long-list of of Location Location Options Options 2. 2. Analyze Analyze Long-list Long-list of of Candidate Candidate Locations Locations Identify Identify Shortlist Shortlist 3. 3. Evaluate Evaluate Short-listed Short-listed Locations Locations Select Select Preferred Preferred Location Location 4. 4. Due Due Diligence Diligence and and Negotiations Negotiations 5. Implementation 5. Implementation Information Requested by Investor Familiarity with and/or perception of location Previous contacts with IPA s Key data available on business conditions & existing investors IPA Marketing activities & Services Location marketing through IPA HQ and overseas representations: Professional & dynamic website Conferences & seminars Company meetings Investor targeting campaigns Investor perception surveys Marketing mailings: General marketing materials (brochure, video, CDrom, news letter etc.) More specific marketing materials (sector reports, general investment guides, etc.) 36

1. The corporate perspective Information provision & marketing services by IPAs Location Decision Process 1. 1. Define Define Project Project Assumptions Assumptions and and Long-list Long-list of of Location Location Options Options 2. 2. Analyze Analyze Long-list Long-list of of Candidate Candidate Locations Locations Identify Identify Shortlist Shortlist 3. 3. Evaluate Evaluate Short-listed Short-listed Locations Locations Select Select Preferred Preferred Location Location 4. 4. Due Due Diligence Diligence and and Negotiations Negotiations 5. Implementation 5. Implementation Information Requested by Investor Direct contact with agency by investor or consultant: Need for comparative data on cost factors and qualitative factors Inquiry could be made at national or regional level IPA Marketing activities & Services 1. Investment Promotion Network IPA needs to be well networked and known among other intermediaries (e.g. other public bodies, banks, real estate agents, etc. that could be used by investor as entry point) 2. Inquiry handling structures & tools Key account manager High quality request handling procedures Sector specific investment guides, Up-to-date information databases Sales manual, etc. 37

1. The corporate perspective Information provision & marketing services by IPAs Location Decision Process 1. 1. Define Define Project Project Assumptions Assumptions and and Long-list Long-list of of Location Location Options Options 2. 2. Analyze Analyze Long-list Long-list of of Candidate Candidate Locations Locations Identify Identify Shortlist Shortlist 3. 3. Evaluate Evaluate Short-listed Short-listed Locations Locations Select Select Preferred Preferred Location Location 4. 4. Due Due Diligence Diligence and and Negotiations Negotiations 5. Implementation 5. Implementation Information Requested by Investor Direct contact with IPA by investor or consultant: Detailed financial & qualitative evaluation Validation of comparative data Site visits + interviews Additional data gathering (need greater detail or specific location information) IPA Marketing activities & Services 1. Visit handling structures Tailored marketing materials, presentations & tools: Key selling messages Bid book Financial evaluation tool Coordination of fact finding trip: interviews site visits 38

1. The corporate perspective Information provision & marketing services by IPAs Location Decision Process 1. 1. Define Define Project Project Assumptions Assumptions and and Long-list Long-list of of Location Location Options Options 2. 2. Analyze Analyze Long-list Long-list of of Candidate Candidate Locations Locations Identify Identify Shortlist Shortlist 3. 3. Evaluate Evaluate Short-listed Short-listed Locations Locations Select Select Preferred Preferred Location Location 4. 4. Due Due Diligence Diligence and and Negotiations Negotiations Information Requested by Investor Direct contact with IPA by investor: Concrete incentives proposal Intangibles Visit by senior management before final decision. IPA Marketing activities & Services Agency keep contact with investor to follow up each additional question Agency introduce investor team to senior local or national officials 5. Implementation 5. Implementation 39

1. The corporate perspective Information provision & marketing services by IPAs Location Decision Process 1. 1. Define Define Project Project Assumptions Assumptions and and Long-list Long-list of of Location Location Options Options Information Requested by Investor Direct contact with IPA by investor: Implementation assistance Supplies 2. 2. Analyze Analyze Long-list Long-list of of Candidate Candidate Locations Locations Identify Identify Shortlist Shortlist 3. 3. Evaluate Evaluate Short-listed Short-listed Locations Locations Select Select Preferred Preferred Location Location 4. 4. Due Due Diligence Diligence and and Negotiations Negotiations 5. Implementation 5. Implementation IPA Marketing activities & Services Implementation support services: Incentive procedures Land acquisition Site & building permits Work permits Etc. etc. Provide introduction to key suppliers: Property developers Recruitment agencies Equipment suppliers Etc. etc. Ongoing support & After care! 40

1. The corporate perspective Information provision & marketing services by IPAs Generally speaking the investment promotion agency responsible for a particular location is best positioned to deal with investors inquiry Step in location decision process Overseas offices of N or R IPA National IPA Step 1: Define long-list Regional IPA Step 2: Analyse long-list Local IPA Step 3: evaluate short-list Step 4: Due diligence Step 5: After care 41

2. Common & best practices Most common investment promotion structures National IPA only Often in LDC s or very small countries: Ethiopia, Tanzania, Luxembourg, BOI s in Thailand, Pakistan, etc. National & regional IPA network: Most common structure in both developed and developing countries However, this model works only well when professional project handling structures are installed at all levels. R R Federal & local IPA s: e.g. in USA, Switzerland, Germany F F N R N F F SEZ Techno pole SEZ Techno pole L R L L L 42

2. Common & best practices Best practice case - UK Department of Trade & Industry UK Government Foreign Office Scottish and Welsh governments BTI Invest.UK Committee on Overseas Promotion Private sector English Regional Development Agencies National Development Agencies Sub-regional Authorities and Agencies 43

2. Common & best practices Best practice case - Sweden ISA has a sophisticated approach to marketing which integrates efforts at the regional, national and international levels in a highly targeted fashion to promote the growth of advanced clusters Target sectors Regions Overseas offices Healthcare Hub Sweden Wood processing IT/mobile communications 4 Swedish regions 20 Swedish Regions 12 Swedish regions 5 Swedish regions US, Japan,Taiwan, UK, Germany, France US and Europe Germany, Scandinavia, Japan Japan, Europe and US The ISA develops sector projects.it is up to regions if they want to participate in a project. If so, they have to commit resources and people. ISA adjusts its target sectors over time (a learning organisation ), in response to changing market conditions, competence and ISA value added 44

2. Best practice cases general principles Investors often lack proper understanding of Investment Promotion structures available within a country Co-operation between national and regional agencies should preferably be formalised to be able to optimally serve existing and new investors. Issues to be considered when organising investment promotion on a national and regional level include: - allocation of leads - project handling - ongoing support & aftercare - reporting requirement - transfer of personnel for training and networking - joint marketing initiatives - investor offer 45

3. Intermediaries point of view Where possible, prefer to work immediately with the regional authorities concerned, without national IPA involvement. Often inform the national agency that regional agency has been approached. Or in case of a highly strategic investment project prefer to have national agencies involvement. Lack of proper inquiry handling procedures, knowledge management and visit handling procedures at IPAs influences quality and speed of an IPA s response. Key issues if working with regional agencies relate to the local versus international focus: Although regional agencies are preferred, the use of these agencies depend on inquiry and visit handling structures. If these are insufficient than national agency is preferred partner to work with Sometimes find lack of international perspective with regional agency staff to deal with large corporate investors Sometimes find lack of proper promotion material and important location information in English to serve international investors. 46

Contact Details IBM-PLI IBM Business Consulting Services Plant Location International: Key practice in IBM BCS globally for economic Wim Douw Senior consultant +32 2 416 5407 wim.douw@be.ibm.com development & investment promotion services Head office in Brussels and a New York office 30 dedicated consultants as part of a multinational, multidisciplinary team Over 40 years of experience providing advice to multinational companies and IPA s Global capability two-thirds of our corporate clients and one-third of our government agency clients are outside of Europe Conducted 500 location assessments in 2002 47