One-night-stands rarely turn out well. Bragging rights amongst friends, colleagues and acquaintances about yet another conquest all too soon become unreturned phonecalls, texts, regret, and, often, reputational damage. And before you ask, we’re not referring to what goes in the Reinvantage bedroom, but investment promotion that neglects aftercare.
The deal gets done and an investment promotion agency (IPA) announces with much fanfare that a new, multi-million-euro greenfield investment has been delivered. But the job, as smart IPAs know, is not complete. What comes next is as important as the courting process. Investment promotion is, after all, a long-term partnership (dare we say marriage?), not a one-night-stand.
The United Nations Trade and Development Agency (UNCTAD) reckons that during certain periods, up to 70 per cent of investment in industrialised countries comes from the existing investor base rather than fresh conquests. That suggests that looking after what you already have is at least as effective as chasing new prospects across three continents.
Beyond the ribbon cutting
Why, then, do most IPAs treat aftercare like, forgive the pun, an afterthought? The answer lies in the unglamorous nature of the work. Cutting ribbons and announcing shiny new investments generates headlines. Helping an existing investor to procure work permits or resolve a customs dispute does not.
“Most IPAs provide some type of aftercare support,” notes FDI Center, “but it typically receives far less attention and resources than new investment attraction or marketing.” This is incredibly shortsighted. Companies that have already invested in a location are, in UNCTAD’s phrase, a “captive audience”. They’ve got facilities, staff, supply chains. Moving is expensive and disruptive. They’d rather expand where they are, if someone bothers to help them.
The Organisation for Economic Co-operation and Development (OECD; a club of mostly rich countries) points out that IPAs in developed countries often delegate aftercare to other government bodies entirely, which explains why it gets done so poorly.
What does proper aftercare look like? Costa Rica’s IPA, CINDE, offers a template worth pinching. The agency provides what it calls ‘full-service support’ through every phase: site selection, setup, installation, and ongoing operations. Critically, it doesn’t vanish once the factory opens. CINDE has so far guided over 400 companies through the process, including 80-plus from the Fortune 500. Its staff aren’t just friendly faces at embassy cocktail parties; they’re equipped with deep sector knowledge gained from attending international events and speaking the same technical language as investors.
The South Koreans take a different tack. Their Foreign Investment Ombudsman system employs specialists (charmingly dubbed ‘home doctors’) in finance, law, taxation, customs, and labour management. These experts troubleshoot problems on a case-by-case basis, liaising with relevant government institutions to unstick whatever’s stuck. By law, the system ensures prompt responses.
Targeted aftercare
Aftercare services fall into three buckets, according to UNCTAD’s taxonomy: administrative (permits, licences, immigration support), operational (finding suppliers, accessing export schemes, locating new premises), and strategic (connecting investors with universities for R&D, advocating policy improvements, introducing senior management to high-level networks). Most IPAs manage the first well, some handle the second, almost none bother with the third. That’s a shame, because strategic services transform investors from tenants into partners.
That IPAs don’t possess the staff or budget for decent aftercare is the usual retort to criticism. In some cases, that might be fair enough. Resources are constrained. But aftercare needn’t be a blanket service offered to every investor who ever sets foot in the country. It can be targeted. UNCTAD surveyed IPAs and found the most effective ones segment their investor base, focusing resources on companies with high export intensity, significant employment, strong local supply chain integration, or expansion potential. That’s targeted aftercare, not attempting to cuddle every investor simultaneously.
Minds do appear to have been focused a little more on the issue since Covid-19. With new investment drying up, IPAs suddenly discovered that their existing investors needed help staying afloat. Agencies that had neglected aftercare scrambled to provide retention support. Some realised, belatedly, that this should have been standard practice all along. The crisis accelerated trends already underway: regionalising supply chains, virtualising operations, demanding greater flexibility. Companies that felt supported during the crisis stayed. Those that didn’t started looking elsewhere.
Cultivation, not conquest
There’s also that problem of reputation. Satisfied investors become advocates, providing testimonials and referrals from their corporate networks. Potential investors love a success story. They’re more convincing than any brochure. Dissatisfied investors talk too, just not in ways that help. Studies confirm that sectors targeted through specific investment promotion campaigns receive on average more than twice as much FDI as non-targeted sectors. But campaigns mean nothing if investors arrive, encounter problems, get no help, and leave fuming, telling all and sundry about their less-than-stellar experience.
The smart IPAs are already ahead of this. They employ customer relationship management systems, conduct regular investor surveys, and maintain constant communication. They don’t wait for investors to complain; they ask proactively what’s needed. They measure success not just by new deals signed but by expansions facilitated, problems resolved, reinvestments secured.
Investment promotion, done properly, is less about conquest than cultivation. The flashy announcement is merely the wedding. Aftercare is the marriage, less photogenic, more work, absolutely essential if the relationship is meant to last. IPAs that grasp this tend to notice that their existing investors become their best salespeople, their most reliable source of new investment, and their strongest argument for why their location works. That’s rather more valuable than another press release nobody reads.
Photo: Dreamstime.
You can find out more about best practice for IPAs in our latest Investment Promotion report.
