Guidelines for Investment Promotion of Local Governments in Kosovo

Guidelines for Investment Promotion of Local ... - Demi USAID Guidelines for Investment Promotion of Local ... - Demi USAID

<strong>Guidel<strong>in</strong>es</strong> <strong>for</strong> <strong>Investment</strong> <strong>Promotion</strong><strong>of</strong> <strong>Local</strong> <strong>Governments</strong> <strong>in</strong> <strong>Kosovo</strong>


<strong>Guidel<strong>in</strong>es</strong> <strong>for</strong> <strong>Investment</strong> <strong>Promotion</strong><strong>of</strong> <strong>Local</strong> <strong>Governments</strong> <strong>in</strong> <strong>Kosovo</strong>This publication was prepared by the United States Agency <strong>for</strong> International Development(USAID) Democratic and Effective Municipalities Initiative Program <strong>in</strong> <strong>Kosovo</strong>. The views<strong>for</strong> International Deveopment or the United States Government.


<strong>Guidel<strong>in</strong>es</strong> <strong>for</strong> <strong>Investment</strong> <strong>Promotion</strong> <strong>of</strong> <strong>Local</strong> <strong>Governments</strong> <strong>in</strong> <strong>Kosovo</strong>Contents1. BACKGROUND ..................................................................................................................52. KEY ELEMENTS OF INVESTMENT ..................................................................................5 .....................................................................................................................52.2 Different modalities <strong>of</strong> <strong>in</strong>vestments ...............................................................................62.3 <strong>Investment</strong> drivers ........................................................................................................62.4 Location decision-mak<strong>in</strong>g process ...............................................................................72.5 How <strong>in</strong>vestments contribute to economic development ...............................................83. FRAMEWORK FOR INVESTMENT PROMOTION ............................................................93.1 Why Municipalities Should Engage <strong>in</strong> <strong>Investment</strong> <strong>Promotion</strong> .......................................94. INVESTMENT ATTRACTION FRAMEWORK ....................................................................114.1 Strategy .........................................................................................................................114.2 Organization .................................................................................................................124.3 Market<strong>in</strong>g .......................................................................................................................134.4 Investor Target<strong>in</strong>g ..........................................................................................................144.5 <strong>Investment</strong> Facilitation ...................................................................................................154.6 After-care and Policy Advocacy .....................................................................................165. MONITORING AND EVALUATING THE SUCCESS ..........................................................175.1 Assess<strong>in</strong>g the Progress .................................................................................................173


<strong>Guidel<strong>in</strong>es</strong> <strong>for</strong> <strong>Investment</strong> <strong>Promotion</strong> <strong>of</strong> <strong>Local</strong> <strong>Governments</strong> <strong>in</strong> <strong>Kosovo</strong>2.2 <strong>in</strong> a local company. It is the most direct method a <strong>for</strong>eign company can use to ga<strong>in</strong> market shareand resources overseas, as well as strategic corporate assets such as brands and research anddevelopment (R&D). In developed countries, M&As have been the biggest component <strong>of</strong> FDIthe full or partial sales <strong>of</strong> equity <strong>in</strong> state-owned enterprises to <strong>in</strong>vestors. It is essentiallyan acquisition <strong>in</strong>volv<strong>in</strong>g a state-owned rather than private company. This has been animportant component <strong>of</strong> FDI <strong>in</strong> emerg<strong>in</strong>g markets.new projects established <strong>in</strong> a location by a <strong>for</strong>eign <strong>in</strong>vestor.<strong>in</strong>vestments made when a company purchases an exist<strong>in</strong>g productionfacility to launch a new production activity. these <strong>in</strong>clude jo<strong>in</strong>t ventures, strategic alliances, licens<strong>in</strong>g, franchis--brand<strong>in</strong>g, market<strong>in</strong>g, technology, and access to markets to local companies.It is important to note that FDI may be undertaken by <strong>in</strong>dividuals as well as bus<strong>in</strong>ess entities. This isparticularly the case <strong>in</strong> develop<strong>in</strong>g economies <strong>in</strong> the <strong>for</strong>m <strong>of</strong> diaspora <strong>in</strong>ward <strong>in</strong>vestment.2.3 Research on FDI 4 -Market-seek<strong>in</strong>g FDIResource/asset-seek<strong>in</strong>g FDI2.3.1 company will consider FDI better to serve the local market. Initially, the company will likely establishor regional markets, <strong>in</strong> order to lower costs and better adapt products <strong>for</strong> the local market. In servicessectors, be<strong>in</strong>g close to customers is typically more important; market-seek<strong>in</strong>g FDI is there<strong>for</strong>e very important.In addition to market-seek<strong>in</strong>g FDI better to serve local markets, preferential trade agreementsgive access to other markets (<strong>in</strong>clud<strong>in</strong>g those <strong>of</strong> developed countries) and hence can be a key drivervarious preferential trade agreements.2.3.2 This corporate strategy emphasizes differences <strong>in</strong> unit costs among locations as the key driver <strong>for</strong> FDI,and is especially seen <strong>in</strong> <strong>in</strong>vestment by companies from developed countries <strong>in</strong>to develop<strong>in</strong>g countries<strong>in</strong> order to lower costs. As companies <strong>in</strong>creas<strong>in</strong>gly have regional strategies, a company will <strong>of</strong>ten lookcompanies consider not only unit costs <strong>in</strong> the local market but also its size and growth potential <strong>in</strong> determ<strong>in</strong><strong>in</strong>gwhere to <strong>in</strong>vest. As a result, market size and companies when decid<strong>in</strong>g where to <strong>in</strong>vest. Exchange rate changes and corporate tax levels can also4 John H. Dunn<strong>in</strong>g, “Location and the mult<strong>in</strong>ational enterprise: a neglected factor,” Journal <strong>of</strong> International Bus<strong>in</strong>ess Studies, 29 (1)(1998), pp. 45-66.5


<strong>Guidel<strong>in</strong>es</strong> <strong>for</strong> <strong>Investment</strong> <strong>Promotion</strong> <strong>of</strong> <strong>Local</strong> <strong>Governments</strong> <strong>in</strong> <strong>Kosovo</strong>-2.3.3 This corporate strategy seeks to exploit natural resources or technological assets abroad. Resourceseek<strong>in</strong>g FDI <strong>in</strong>volves companies expand<strong>in</strong>g <strong>in</strong>ternationally to access raw materials available <strong>in</strong> a hostnames, to <strong>in</strong>crease their ownership advantages, or establish<strong>in</strong>g themselves <strong>in</strong> a location to ga<strong>in</strong> ac-ities<strong>for</strong> technology development, <strong>in</strong>novation and learn<strong>in</strong>g. A rich <strong>Kosovo</strong> with resources and assetsappeals to highly strategic <strong>in</strong>dustries with great potential impact <strong>in</strong> economic growth.2.4 -consider the wider region <strong>for</strong> <strong>in</strong>vestment.palitiesto consider <strong>for</strong> <strong>in</strong>vestment. For some types <strong>of</strong> projects, e.g. natural resources and privatization,the <strong>in</strong>vestor may only have one location option, but <strong>for</strong> most projects the <strong>in</strong>vestor will have a largernumber <strong>of</strong> location options.Figure 1: Location decision-mak<strong>in</strong>g process10. Undertakes due diligence andnegotiations8. Gathers further data11. Makes <strong>Investment</strong>5. Gathers <strong>in</strong><strong>for</strong>mation9. Selects preferred location & ‘back up’us<strong>in</strong>g ‘qualify<strong>in</strong>g’ factors4. Draws up long lists <strong>of</strong> location options<strong>in</strong> region7. Visits short listed locations, meets IPA6. Analyzes long list us<strong>in</strong>g, ‘disqualify<strong>in</strong>g’factors = Identifies shortlost2. Appo<strong>in</strong>ts advisors/brokers1. The <strong>in</strong>vestor decides to <strong>in</strong>vest <strong>in</strong> an<strong>in</strong>ternational region3. Investor def<strong>in</strong>es project assumptionsSource: PriceWaterhouseCooper6


<strong>Guidel<strong>in</strong>es</strong> <strong>for</strong> <strong>Investment</strong> <strong>Promotion</strong> <strong>of</strong> <strong>Local</strong> <strong>Governments</strong> <strong>in</strong> <strong>Kosovo</strong>consultants <strong>in</strong> the location decision process also shows why a municipality should be target<strong>in</strong>g consultantsas well as the <strong>in</strong>vest<strong>in</strong>g companies directly.Once the <strong>in</strong>vestor has drawn-up its list <strong>of</strong> locations to consider, it will collect data and analyze theselocations to identify a short list <strong>of</strong> <strong>of</strong>ten just 2-3 locations. 5 Company driven projects may decide tovisit all possible locations and then draw the short list. The municipality may be contacted <strong>in</strong> step 5 toprovide <strong>in</strong><strong>for</strong>mation and data to the company. The <strong>in</strong>vestor and/or its consultants will visit the short-list<strong>of</strong> locations <strong>for</strong> more detailed analysis and select the preferred location. Further due diligence will bedone on the locations, <strong>in</strong>clud<strong>in</strong>g negotiations with suppliers, partners and possibly the municipalityitself if <strong>in</strong>centives are sought. The effectiveness <strong>of</strong> a municipality <strong>in</strong> <strong>in</strong>vestment facilitation can <strong>of</strong>ten becritical <strong>in</strong> secur<strong>in</strong>g the <strong>in</strong>vestment.2.5 There has been extensive research on the contribution <strong>of</strong> FDI to economic development. Inward <strong>in</strong>--<strong>in</strong>direct jobs <strong>in</strong> suppliers and partners. FDI is <strong>of</strong>ten more export <strong>in</strong>tensive than domestic <strong>in</strong>vestment and canlead to local company exports through foster<strong>in</strong>g <strong>in</strong>ternational supply cha<strong>in</strong> opportunities <strong>for</strong> localcompanies supply<strong>in</strong>g <strong>for</strong>eign <strong>in</strong>vestors.<strong>in</strong>creas<strong>in</strong>g <strong>in</strong>vestment <strong>in</strong> domestic companies. In some regions with strong manufactur<strong>in</strong>g bases,programs to foster local supply l<strong>in</strong>kages with <strong>for</strong>eign companies have led to domestic <strong>in</strong>vestment <strong>for</strong>eign <strong>in</strong>vestors on average have higher productivity than domestic companies,which raises overall productivity and there<strong>for</strong>e competitiveness <strong>of</strong> the local economy. Atwhich <strong>in</strong>creases the roots <strong>of</strong> the <strong>for</strong>eign <strong>in</strong>vestors <strong>in</strong> the municipality, reduc<strong>in</strong>g the risk that they MNEs are typically more R&D <strong>in</strong>tensive, and control much <strong>of</strong> global <strong>of</strong> <strong>in</strong>vestment is a key source <strong>of</strong> R&D <strong>for</strong> an economy, and there are multiple spillovers to localenterprises and research <strong>in</strong>stitutions. At the same time, local companies, through work<strong>in</strong>g (andcompet<strong>in</strong>g) with <strong>in</strong>ward <strong>in</strong>vestors, are exposed to the latest management practices, which canencourage local companies to implement new productivity-rais<strong>in</strong>g practices. FDI can <strong>in</strong>tensify local market competition, creat<strong>in</strong>g the stimulus <strong>for</strong> <strong>in</strong>novation. FDI can be a key source <strong>of</strong> <strong>for</strong>eign exchange <strong>in</strong> countries with low sav<strong>in</strong>gsor access to capital. Foreign owned companies may generally pay higher wages – which has multipliereffects <strong>for</strong> the local economy.creat<strong>in</strong>g additional capital <strong>in</strong>vestment and direct employment, wealth and exports, <strong>in</strong>ward <strong>in</strong>vestmentcan act as a powerful catalyst <strong>for</strong> follow-the-leader <strong>in</strong>vestment, supply cha<strong>in</strong> development, clusterdevelopment, and rais<strong>in</strong>g the brand value <strong>of</strong> a location. At the same time, <strong>of</strong> course, FDI can havenegative effects, such as crowd<strong>in</strong>g out domestic enterprises, abusive transfer pric<strong>in</strong>g, de-localization<strong>of</strong> R&D, negative competition, environmental effects, and the like. This is why it is essent<strong>in</strong>al to havea well thought out development strategy <strong>for</strong> recruitment. If a project does not meet the criteria set <strong>for</strong>thpossibilities and deal with them through appropriate policies.5 There are tools such as www.fdibenchmark.com and www.competitivealternatives.com that assist <strong>in</strong>vestors (and IPAs) <strong>in</strong> collect<strong>in</strong>gdata and benchmark<strong>in</strong>g locations <strong>for</strong> different sectors and <strong>in</strong>vestment projects.7


<strong>Guidel<strong>in</strong>es</strong> <strong>for</strong> <strong>Investment</strong> <strong>Promotion</strong> <strong>of</strong> <strong>Local</strong> <strong>Governments</strong> <strong>in</strong> <strong>Kosovo</strong>3. FRAMEWORK FOR INVESTMENT PROMOTION 6 , as well as the rationale and importance <strong>of</strong> this activity.3.1 3.1.1 <strong>Investment</strong> promotion can have a big impact on the level <strong>of</strong> <strong>for</strong>eign direct <strong>in</strong>vestment <strong>in</strong> a location.World Bank studies 7 The net present value 8 <strong>of</strong> pro-active <strong>in</strong>vestment promotion is almost $4 <strong>for</strong> every $1 expended.FDI can make a strong contribution to the local economy. It is estimated that US$1 <strong>in</strong> FDI leads toUS$1 <strong>in</strong> domestic <strong>in</strong>vestment. Also, research shows that, <strong>in</strong> some <strong>in</strong>dustries, one manufactur<strong>in</strong>g FDIjob creates 3 <strong>in</strong>direct jobs <strong>in</strong> the local economy, and the productivity <strong>of</strong> <strong>for</strong>eign <strong>in</strong>vestors 9 than domestic <strong>in</strong>vestors. Micros<strong>of</strong>t estimated that <strong>for</strong> every $1 the corporation <strong>in</strong>vests <strong>in</strong> a country,3.1.2 A key reason why <strong>in</strong>vestment promotion can make an impact on the level <strong>of</strong> <strong>for</strong>eign direct <strong>in</strong>vestmentis that companies only have imperfect <strong>in</strong><strong>for</strong>mation on which municipalities to <strong>in</strong>vest <strong>in</strong> around theworld. When consider<strong>in</strong>g municipalities <strong>for</strong> new <strong>in</strong>vestment, companies do not have knowledge <strong>of</strong>They have <strong>in</strong>vested <strong>in</strong> be<strong>for</strong>e.Their competitors have already <strong>in</strong>vested <strong>in</strong>.Major customers or suppliers have a presence <strong>in</strong>.Appear <strong>in</strong> location attractiveness rank<strong>in</strong>gs.They have read positive reports about <strong>in</strong> the bus<strong>in</strong>ess press and media.They have visited on bus<strong>in</strong>ess trips or even on vacation.They have family roots <strong>in</strong>.Are proactive and have a market<strong>in</strong>g strategy.While there is grow<strong>in</strong>g <strong>in</strong>terest <strong>in</strong> <strong>in</strong>vest<strong>in</strong>g <strong>in</strong> emerg<strong>in</strong>g markets, companies have very little experienceor other emerg<strong>in</strong>g regions <strong>of</strong> the world. The <strong>in</strong><strong>for</strong>mation base <strong>of</strong> companies is far from perfect, and thedecision-mak<strong>in</strong>g process can be subjective and biased. As the International F<strong>in</strong>ance Corporation (IFC)any activity that <strong>in</strong>creases the <strong>in</strong><strong>for</strong>mation pool and the awareness a company has <strong>of</strong> a municipality<strong>in</strong>creases the likelihood <strong>of</strong> that municipality be<strong>in</strong>g considered <strong>for</strong> <strong>in</strong>vestment. Likewise, <strong>in</strong>vestment ad-6 Structured accord<strong>in</strong>g to Henry Loewendahl’s “A framework <strong>for</strong> <strong>in</strong>vestment promotion,” Transnational Corporations, 10 (1) (2001),pp. 1-42.7 Louis T. Wells and Alv<strong>in</strong> G. W<strong>in</strong>t, “Market<strong>in</strong>g a country: promotion as a tool <strong>for</strong> attract<strong>in</strong>g <strong>for</strong>eign <strong>in</strong>vestment,” FIAS OccasionalPaper No. 1 (Wash<strong>in</strong>gton, D.C.: Foreign <strong>Investment</strong> Advisory Service, 1990) and their 2000 update “Market<strong>in</strong>g a country: promotionas a tool <strong>for</strong> attract<strong>in</strong>g <strong>for</strong>eign <strong>in</strong>vestment,” FIAS Occasional Paper No. 13 (Wash<strong>in</strong>gton, D.C.: Foreign <strong>Investment</strong> AdvisoryService, 2000).8 “Net present value” is the difference between the cost <strong>of</strong> an <strong>in</strong>vestment and the discounted present value <strong>of</strong> all futureearn<strong>in</strong>gs from that <strong>in</strong>vestment.9 Loewendahl, Barga<strong>in</strong><strong>in</strong>g with Mult<strong>in</strong>ationals, op. cit.8


<strong>Guidel<strong>in</strong>es</strong> <strong>for</strong> <strong>Investment</strong> <strong>Promotion</strong> <strong>of</strong> <strong>Local</strong> <strong>Governments</strong> <strong>in</strong> <strong>Kosovo</strong>which municipalities they recommend their clients <strong>in</strong>vest <strong>in</strong>, reduc<strong>in</strong>g further the range <strong>of</strong> municipalitiesan <strong>in</strong>vestor will consider <strong>for</strong> <strong>in</strong>vestment.local companies from the same country may also not have access to full <strong>in</strong><strong>for</strong>mation on <strong>in</strong>vestmentopportunities <strong>in</strong> small and medium-size municipalities with<strong>in</strong> their country; the pr<strong>in</strong>ciples <strong>of</strong> <strong>in</strong>vestmentpromotion can be applied equally to attract<strong>in</strong>g domestic <strong>in</strong>vestors from other parts <strong>of</strong> the country.Indeed, many municipalities have a strong focus on attract<strong>in</strong>g <strong>in</strong>vestment from domestic companieselsewhere <strong>in</strong> their country. Domestic <strong>in</strong>vestment is a very important element <strong>of</strong> <strong>in</strong>vestment attraction.and attract <strong>in</strong>vestment should tackle all three levels. Domestic <strong>in</strong>vestment is covered more through ourBus<strong>in</strong>ess Retention and Expansion publication.3.1.3 Almost every country has set up a dedicated <strong>in</strong>vestment promotion agency to promote and facilitate<strong>in</strong>ward <strong>in</strong>vestment <strong>in</strong>to the country, i.e. <strong>Investment</strong> <strong>Promotion</strong> Agency <strong>of</strong> <strong>Kosovo</strong> (IPAK). It is there<strong>for</strong>e-<strong>in</strong>vestments <strong>in</strong> a country occur locally, it is <strong>of</strong> paramount importance <strong>for</strong> the municipality to coord<strong>in</strong>ateall <strong>in</strong>vestment promotion activities with the national IPA. And vice versa, the national IPA should partnerwith all municipalities <strong>in</strong> carry<strong>in</strong>g out <strong>in</strong>vestment promotion and attraction ef<strong>for</strong>ts. There are severala) Each municipality has its own unique competitive advantage and economic development objectives,and it knows them best. These may not always align with those <strong>of</strong> the national IPA, which will bepromot<strong>in</strong>g only a limited number <strong>of</strong> sectors, <strong>in</strong> which the country as a whole has the strongest competitivenessand prospects <strong>for</strong> <strong>in</strong>ward <strong>in</strong>vestment. There are likely to be niche opportunities <strong>for</strong> <strong>in</strong>ward<strong>in</strong>vestment <strong>in</strong> each municipality, which are outside the core focus <strong>of</strong> a national IPA. A city can promotethese opportunities to <strong>in</strong>ward <strong>in</strong>vestors.b) A municipality, due to its proximity and sole focus on its territory, understands its strengths and weaknessesbetter than the national IPA. As a result, the local government has a key role <strong>in</strong> provid<strong>in</strong>g<strong>in</strong><strong>for</strong>mation on its competitive advantage to the national IPA and <strong>in</strong>vestors and <strong>for</strong> promot<strong>in</strong>g the municipalitymore effectively.c) Facilitat<strong>in</strong>g <strong>in</strong>vestors can only be successful when an <strong>in</strong>vestor understands the local environment andhas access to, and the support <strong>of</strong>, local decision-makers. Municipalities usually understand all the localprocesses and are the local decision-makers, and so they can assist <strong>in</strong>vestors with this knowledgeand their contacts.d) For many municipalities, attract<strong>in</strong>g domestic <strong>in</strong>vestment can be equally if not more important thanattract<strong>in</strong>g <strong>for</strong>eign <strong>in</strong>vestment. UNCTAD data show that, <strong>for</strong> least developed countries (LDCs), FDIlocal companies 11 .12 The pr<strong>in</strong>ciples and techniques <strong>of</strong> attract<strong>in</strong>g <strong>for</strong>eign <strong>in</strong>vestment can be applied toattract<strong>in</strong>g domestic <strong>in</strong>vestment. The national IPA does not have a remit <strong>for</strong> domestic <strong>in</strong>vestment, andit is up to the municipality to identify, prospect and facilitate <strong>in</strong>vestment by companies from the samecountry.10 UNCTAD, World <strong>Investment</strong> Report 2008, op. cit.9


<strong>Guidel<strong>in</strong>es</strong> <strong>for</strong> <strong>Investment</strong> <strong>Promotion</strong> <strong>of</strong> <strong>Local</strong> <strong>Governments</strong> <strong>in</strong> <strong>Kosovo</strong>Macroeconomic policies, which set a positive framework <strong>for</strong> the attraction <strong>of</strong> <strong>for</strong>eign <strong>in</strong>vestment.Key policies <strong>in</strong>clude an appropriate trade and payments regime, as well as a tax and <strong>in</strong>centivesregime.But the municipal policy context is important as well. While the national policy context will have a sig-a critical role <strong>in</strong> determ<strong>in</strong><strong>in</strong>g which municipality with<strong>in</strong> the country w<strong>in</strong>s an <strong>in</strong>vestment. Key parts <strong>of</strong> theProvision <strong>of</strong> essential <strong>in</strong>vestment <strong>in</strong> the physical <strong>in</strong>frastructure. The supply <strong>of</strong> sites and properties<strong>for</strong> <strong>in</strong>dustrial and commercial use, good quality roads and other transportation l<strong>in</strong>ks (<strong>in</strong>clud<strong>in</strong>g agood quality airport) are dist<strong>in</strong>ct advantages <strong>for</strong> attract<strong>in</strong>g <strong>in</strong>ward <strong>in</strong>vestment.Provision <strong>of</strong> essential <strong>in</strong>vestment <strong>in</strong> the energy and communications <strong>in</strong>frastructure, to ensurereliable supply <strong>of</strong> electricity, gas, water, telecommunications, and Internet.<strong>Investment</strong> <strong>in</strong> the human <strong>in</strong>frastructure, <strong>in</strong> particular <strong>in</strong> the education system, to provide a welltra<strong>in</strong>edand educated work<strong>for</strong>ce to <strong>in</strong>vestors.Tprovide an attractive enabl<strong>in</strong>g framework <strong>for</strong> <strong>for</strong>eign and, <strong>for</strong> that matter, domestic <strong>in</strong>vestors. The municipalityalso needs to work closely with related national and local agencies. Build<strong>in</strong>g strong l<strong>in</strong>ks withthe <strong>Investment</strong> <strong>Promotion</strong> Agency <strong>of</strong> <strong>Kosovo</strong> (IPAK) helps position the municipality <strong>for</strong> <strong>in</strong>ward <strong>in</strong>vestmentand also provides support and advice <strong>for</strong> the <strong>in</strong>vestment promotion ef<strong>for</strong>ts <strong>of</strong> the municipality. Atthe local level, <strong>in</strong>vestment promotion should be closely coord<strong>in</strong>ated with the economic developmentpriorities <strong>of</strong> the local government. Ultimately, the municipality should be at the table across the entireprocess <strong>of</strong> <strong>in</strong>vestment promotion.4.1.2 Successful <strong>in</strong>vestment promotion requires clear strategic direction and effective market<strong>in</strong>g. A sector-basedstrategy allows municipalities to focus limited resources on the sectors that make the biggestcontribution to the local economy and <strong>in</strong> which the probability <strong>of</strong> actually be<strong>in</strong>g able to secure<strong>in</strong>ward <strong>in</strong>vestment is the highest.The sector strategy should identify sectors <strong>in</strong> which the municipality is best placed to attract <strong>in</strong>vest-That <strong>of</strong>fer the largest market opportunities <strong>in</strong> terms <strong>of</strong> volume <strong>of</strong> contestable FDI the municipalitycan attract (i.e. size and growth <strong>of</strong> the FDI market).requirements <strong>of</strong> <strong>in</strong>ward <strong>in</strong>vestors <strong>in</strong> the sector (i.e. location advantages).Where the municipality has dist<strong>in</strong>ct strengths <strong>in</strong> the sector compared to other municipalities thatare compet<strong>in</strong>g <strong>for</strong> an <strong>in</strong>vestment (i.e. competitive advantages).4.2 A municipality needs to create an effective unit, with<strong>in</strong> its <strong>Local</strong> Economic Development Department,that is responsible <strong>for</strong> attract<strong>in</strong>g <strong>in</strong>ward <strong>in</strong>vestment. USAID Democratic Effective Municipalities Initiativehas supported all its partner municipalities <strong>in</strong> develop<strong>in</strong>g appropriate organizational structuresand capacities <strong>in</strong> <strong>in</strong>vestment promotion and economic development. Ultimately, municipalities need tocooperate at some level with IPAK to align all endeavors <strong>in</strong>to high per<strong>for</strong>m<strong>in</strong>g organizations. Municipalitiesand IPAK should break through bureaucracy and maximize the potential <strong>of</strong> <strong>in</strong>vestment promotionendeavors <strong>in</strong> <strong>Kosovo</strong>.11


<strong>Guidel<strong>in</strong>es</strong> <strong>for</strong> <strong>Investment</strong> <strong>Promotion</strong> <strong>of</strong> <strong>Local</strong> <strong>Governments</strong> <strong>in</strong> <strong>Kosovo</strong>4.2.1 A common element <strong>of</strong> successful <strong>in</strong>vestment promotion is the establishment <strong>of</strong> a dedicated unit with<strong>in</strong>the economic development department <strong>of</strong> the municipality. There are three key preconditions <strong>for</strong> thetract<strong>in</strong>vestment).Operational autonomy will be greater if functional responsibilities <strong>for</strong> a given area are clearly assignedto a s<strong>in</strong>gle unit (i.e. a dedicated unit with<strong>in</strong> the economic development department <strong>of</strong> themunicipality <strong>for</strong> attract<strong>in</strong>g and facilitat<strong>in</strong>g <strong>in</strong>vestment).The unit requires <strong>in</strong>dependent access to expertise and <strong>in</strong><strong>for</strong>mation <strong>in</strong> order to act autonomouslyown market<strong>in</strong>g and research resources and <strong>in</strong>-house experts).Direct access to decision makers to be able act quickly.Th to stakeholders, both public and private. For example, utility providers, <strong>in</strong>dustrial parks, educationestablishments and pr<strong>of</strong>essional advisors, such as accountants, lawyers, real estate agents and con-the unit and economic development department should be able rapidly to mobilize senior municipalleaders to meet with an <strong>in</strong>vestor to create policy certa<strong>in</strong>ty and demonstrate the seriousness with whichthe project is viewed. For major projects, m<strong>in</strong>isters from the national government may also be <strong>in</strong>volved.To be effective at <strong>in</strong>vestment promotion, it is recommended that a s<strong>in</strong>gle, dedicated unit with<strong>in</strong> theeconomic development department <strong>of</strong> the municipality be created with a clear mandate <strong>for</strong> attract<strong>in</strong>gand facilitat<strong>in</strong>g <strong>in</strong>vestment <strong>in</strong>to the municipality.4.2.2 When develop<strong>in</strong>g a unit with<strong>in</strong> the economic development department <strong>of</strong> the municipality, the nationalIPA should be <strong>in</strong><strong>for</strong>med about its existence so that i maximum coord<strong>in</strong>ation and synergy between thenational and local governments is ensured. <strong>Kosovo</strong> also has regional development agencies, whichhave a geographical remit wider than the municipality; <strong>in</strong> this case, the regional development agencyfrom the resources, expertise and experience <strong>of</strong> the national IPA, while at the same time the nationalIPA has much to ga<strong>in</strong> from cooperat<strong>in</strong>g with the municipality. There is no set rule <strong>for</strong> how a municipalityshould work with the national <strong>in</strong>vestment promotion agency. It depends on the resources and scope<strong>for</strong> cooperation <strong>of</strong> each organization. Cooperation may occur through an <strong>in</strong><strong>for</strong>mal or <strong>for</strong>mal partner<strong>in</strong>gagreement or, <strong>in</strong> some cases, the national IPA may post a member <strong>of</strong> its staff permanently <strong>in</strong> the mu-coord<strong>in</strong>ation. The national IPA may even take on the exclusive role <strong>of</strong> promot<strong>in</strong>g the municipality overseasif and when the municipality itself is unable to do so, with the local government focus<strong>in</strong>g on de-rather than conduct<strong>in</strong>g <strong>in</strong>vestor target<strong>in</strong>g activities itself.4.3 To create awareness <strong>of</strong> the municipality as a location <strong>for</strong> new <strong>in</strong>vestment among potential <strong>in</strong>vestorsand multipliers (organizations that advise <strong>in</strong>vestors, such as consultants, lawyers and realestate companies).To provide sales and market<strong>in</strong>g materials to <strong>in</strong>vestors to demonstrate that the location is an excellentcandidate <strong>for</strong> their <strong>in</strong>vestments.12


<strong>Guidel<strong>in</strong>es</strong> <strong>for</strong> <strong>Investment</strong> <strong>Promotion</strong> <strong>of</strong> <strong>Local</strong> <strong>Governments</strong> <strong>in</strong> <strong>Kosovo</strong>Market<strong>in</strong>g as an awareness creation tool aims to build the image <strong>of</strong> the location and put it on the <strong>in</strong>ves-<strong>in</strong>vestors can recognize. Brand and image can be very important <strong>in</strong> attract<strong>in</strong>g <strong>in</strong>ward <strong>in</strong>vestment asoverall perceptions by companies and multipliers (<strong>in</strong>vestment advisors) <strong>of</strong> a particular location mayThere are different market<strong>in</strong>g techniques to create awareness <strong>of</strong> a location, from develop<strong>in</strong>g an <strong>in</strong>ward<strong>in</strong>vestment website, to host<strong>in</strong>g events, to conduct<strong>in</strong>g a public relations campaign. While evidencethe level <strong>of</strong> resources required and how much value market<strong>in</strong>g produces. This is especially the case<strong>for</strong> public relations, which is generally very expensive; a municipality should be cautious when consider<strong>in</strong>gpublic relations campaigns as the cost may not justify the results. A good quality website andcarefully planned <strong>in</strong>vestor target<strong>in</strong>g (see section below) is typically more effective <strong>in</strong> attract<strong>in</strong>g <strong>in</strong>warderat<strong>in</strong>gan <strong>in</strong>ternational brand image and reputation.Sales and market<strong>in</strong>g materials and data can vary from general <strong>in</strong><strong>for</strong>mation on a location (e.g. on amore effective they are <strong>in</strong> conv<strong>in</strong>c<strong>in</strong>g an <strong>in</strong>vestor to <strong>in</strong>vest.4.4 “Merchants have no country. Themere spot they stand on does not constitute so strong an attachment as that from which they drawtheir ga<strong>in</strong>.” Jefferson emphasized the footloose nature <strong>of</strong> <strong>in</strong>ternational companies. It is this mobilitythat provides the possibility to attract <strong>in</strong>ward <strong>in</strong>vestment – but at the same time creates competitionbetween countries and municipalities <strong>for</strong> this <strong>in</strong>vestment.by perceptions. Through direct market<strong>in</strong>g, <strong>in</strong><strong>for</strong>mation can be provided to companies on commerciallyviable bus<strong>in</strong>ess opportunities <strong>in</strong> a location, and encourage an <strong>in</strong>vestor to consider <strong>in</strong>vest<strong>in</strong>g.To contact the tens or even hundreds <strong>of</strong> thousands <strong>of</strong> companies that may potentially want to <strong>in</strong>vestMarket<strong>in</strong>g resources have to be focused on companies with the highest potential <strong>for</strong> <strong>in</strong>vestment <strong>in</strong> acity.Investor target<strong>in</strong>g is a technique to attract <strong>in</strong>ward <strong>in</strong>vestment <strong>in</strong> greater quantity and quality, mak<strong>in</strong>gFocuses ef<strong>for</strong>t on the best prospects.Can greatly <strong>in</strong>crease <strong>in</strong>vestor and broker (<strong>in</strong>vestment advisors) awareness.Investors respond best to material relevant to them.Can help develop local <strong>in</strong>dustry clusters.Cost effective – takes time more than money.Can be outsourced to specialist providers where resources allow.Experience demonstrates that the most successful methods <strong>of</strong> <strong>in</strong>vestor target<strong>in</strong>g <strong>in</strong>volve establish<strong>in</strong>gl<strong>in</strong>ks to exist<strong>in</strong>g <strong>in</strong>vestors, bus<strong>in</strong>esses and personal networks with target companies and <strong>in</strong>termediaryorganizations, <strong>in</strong>clud<strong>in</strong>g <strong>in</strong>dustry associations and <strong>in</strong>vestment multipliers like real estate companiescompanies will have immediate FDI projects that the host location can compete <strong>for</strong>.The key to successful <strong>in</strong>vestor target<strong>in</strong>g is stay<strong>in</strong>g <strong>in</strong> contact with the targeted companies on a susta<strong>in</strong>edbasis, so that, when they do have an <strong>in</strong>vestment project, the municipality is well positioned tobe considered <strong>for</strong> the <strong>in</strong>vestment.13


<strong>Guidel<strong>in</strong>es</strong> <strong>for</strong> <strong>Investment</strong> <strong>Promotion</strong> <strong>of</strong> <strong>Local</strong> <strong>Governments</strong> <strong>in</strong> <strong>Kosovo</strong>4.5 No matter how effectively a municipality markets its location, targets <strong>in</strong>vestors and generates <strong>in</strong>vestmentleads, this is unlikely to result <strong>in</strong> realized <strong>in</strong>vestment unless there is effective <strong>in</strong>vestment facilitationand prospect handl<strong>in</strong>g. The aim <strong>of</strong> <strong>in</strong>vestment facilitation is to convert an <strong>in</strong>vestment <strong>in</strong>quiry <strong>in</strong>to<strong>in</strong>quiries, most agencies assign a key account contact or project manager to every serious <strong>in</strong>vestment<strong>in</strong>quiry or potential project. This enables clear leadership and coord<strong>in</strong>ation. They act as the centralpo<strong>in</strong>t <strong>of</strong> contact <strong>for</strong> the <strong>in</strong>vestor. As well as be<strong>in</strong>g able to develop pr<strong>of</strong>essional respect and personalrapport with the <strong>in</strong>vestor, the project manager needs good contacts with government bodies and privatesector advisors to facilitate the project.4.5.1 -4.5.2 Depend<strong>in</strong>g on the size and complexity <strong>of</strong> an <strong>in</strong>vestment, the <strong>in</strong>vestor may request <strong>in</strong><strong>for</strong>mation rang<strong>in</strong>gfrom site and property availability, to local supplier quality, to the number <strong>of</strong> graduates <strong>in</strong> certa<strong>in</strong> discipl<strong>in</strong>es,to the nature <strong>of</strong> the transport and communications <strong>in</strong>frastructure, to the availability <strong>of</strong> energyresources and prices, and to labor costs, labor availability and recruitment costs. Accurate <strong>in</strong><strong>for</strong>mation,always cit<strong>in</strong>g the source <strong>of</strong> data, should be supplied <strong>in</strong> a well presented <strong>for</strong>mat as quickly as possible,which <strong>of</strong>ten depends on the quality <strong>of</strong> l<strong>in</strong>ks between the municipality and other stakeholders, especiallynational government.4.5.3 Successful <strong>in</strong>vestment locations develop ready-made packages <strong>of</strong> <strong>in</strong>centives and services <strong>for</strong> rapidresponse to <strong>in</strong>quiries that also cater to sectoral <strong>in</strong>itiatives. The <strong>in</strong>vestor should be presented with highquality, customized <strong>in</strong><strong>for</strong>mation, effectively and succ<strong>in</strong>ctly address<strong>in</strong>g all <strong>in</strong><strong>for</strong>mation and project-spe-<strong>of</strong> high quality photographs <strong>of</strong> sites or build<strong>in</strong>gs and location maps can be provided. It is important tostress that municipalities should not overcommit.4.5.4 An <strong>in</strong>vestor is likely to make one or more visits to the proposed location, and it is very important thatthe city <strong>in</strong>vestment promotion agency or department facilitates this process together with other keystakeholders. As well as <strong>in</strong><strong>for</strong>mation provision, an <strong>in</strong>vestor will want to look at potential sites <strong>for</strong> the<strong>in</strong>vestment. The pr<strong>of</strong>essionalism <strong>of</strong> the municipality <strong>in</strong> prepar<strong>in</strong>g an it<strong>in</strong>erary and coord<strong>in</strong>at<strong>in</strong>g visitscan be crucial <strong>for</strong> w<strong>in</strong>n<strong>in</strong>g the <strong>in</strong>vestment.4.5.5 services <strong>of</strong>fered can <strong>in</strong>clude consult<strong>in</strong>g, expedit<strong>in</strong>g applications and permit process<strong>in</strong>g, screen<strong>in</strong>g orevaluat<strong>in</strong>g the project, and provid<strong>in</strong>g <strong>in</strong>centives negotiation and approval. The speed and cost <strong>of</strong> obta<strong>in</strong><strong>in</strong>gpost-approval permits, licenses and plann<strong>in</strong>g permissions are <strong>of</strong>ten crucial to an <strong>in</strong>vestor. Theeven years, but throughout the process it is important <strong>for</strong> the project manager to ma<strong>in</strong>ta<strong>in</strong> a relationshipwith the <strong>in</strong>vestor.14


<strong>Guidel<strong>in</strong>es</strong> <strong>for</strong> <strong>Investment</strong> <strong>Promotion</strong> <strong>of</strong> <strong>Local</strong> <strong>Governments</strong> <strong>in</strong> <strong>Kosovo</strong>4.6 This section generally addresses issues related to bus<strong>in</strong>ess retention and expansion (BR&E) ef<strong>for</strong>tsundertaken <strong>in</strong> <strong>in</strong>vestment promotion.4.6.1 After-care refers to the post-<strong>in</strong>vestment services that a municipality can and should <strong>of</strong>fer to exist<strong>in</strong>g<strong>in</strong>vestors. It is a key area <strong>of</strong> policy <strong>for</strong> many municipalities <strong>for</strong> generat<strong>in</strong>g new <strong>in</strong>vestment and <strong>for</strong> ex-a) b) Most FDI is <strong>in</strong> the <strong>for</strong>m <strong>of</strong> re-<strong>in</strong>vestment or expansions by exist<strong>in</strong>g <strong>in</strong>vestors. The knowledge that thew<strong>in</strong>n<strong>in</strong>g an <strong>in</strong>vestment, especially <strong>in</strong> municipalities located <strong>in</strong> develop<strong>in</strong>g countries.c) <strong>in</strong>vestment site is a key method <strong>of</strong> lead generation. Develop<strong>in</strong>g good l<strong>in</strong>ks with local managers hasare good promotional tools.d) Hav<strong>in</strong>g a good relationship with exist<strong>in</strong>g <strong>in</strong>vestors opens the possibility to work with these <strong>in</strong>vestors toattract overseas suppliers to locate <strong>in</strong> the municipality. This type <strong>of</strong> cooperation can have major eco-e) Likewise, a municipality can work with exist<strong>in</strong>g <strong>in</strong>vestors to utilize local companies <strong>in</strong> their supplycha<strong>in</strong>, to strengthen l<strong>in</strong>kages and the success <strong>of</strong> domestic bus<strong>in</strong>esses. In some municipalities withvery successful local supplier l<strong>in</strong>kage programs, the new bus<strong>in</strong>ess generated <strong>for</strong> local suppliers hasexceeded the value <strong>of</strong> the <strong>in</strong>itial <strong>in</strong>vestment by the <strong>for</strong>eign <strong>in</strong>vestors.4.6.2 Policy advocacy <strong>in</strong>volves consult<strong>in</strong>g with exist<strong>in</strong>g <strong>in</strong>vestors to identify the key obstacles to future <strong>in</strong>vestment<strong>in</strong> the municipality and to propose recommendations <strong>for</strong> improv<strong>in</strong>g the attractiveness <strong>of</strong> theerthan those that perhaps only one or two companies mention.ment,and issues relat<strong>in</strong>g to utilities and operational requirements. Policy recommendations may lookat areas related to <strong>in</strong>frastructure, property and skills development. Some <strong>of</strong> the obstacles may have todo with national legislation or policies which require close l<strong>in</strong>kages between the municipality, national<strong>in</strong>vestment promotion agency and government, if these are to be addressed. Many obstacles relat<strong>in</strong>gto land, site, utilities, <strong>in</strong>frastructure, and labor supply should be addressed by the municipality.15


<strong>Guidel<strong>in</strong>es</strong> <strong>for</strong> <strong>Investment</strong> <strong>Promotion</strong> <strong>of</strong> <strong>Local</strong> <strong>Governments</strong> <strong>in</strong> <strong>Kosovo</strong>5. MONITORING AND EVALUATING THE SUCCESSThere are several key metrics a municipality can use to monitor and evaluate success. These metricsNumber <strong>of</strong> FDI projects recorded <strong>in</strong> the municipality.Amount <strong>of</strong> capital <strong>in</strong>vested by <strong>for</strong>eign companies <strong>in</strong> the municipality.Number <strong>of</strong> jobs created by <strong>for</strong>eign companies <strong>in</strong> the municipality.To assess an after-care program, the above metrics can be broken down by new and expansion <strong>in</strong>vestments.A further breakdown can be made <strong>for</strong> FDI by key account <strong>in</strong>vestors. Other relevant metrics,Number <strong>of</strong> <strong>in</strong>vestment <strong>in</strong>quiries (e.g. through the website).Number <strong>of</strong> <strong>in</strong>vestment leads generated.Number <strong>of</strong> site visits.The success <strong>of</strong> a municipality can also be measured by periodically look<strong>in</strong>g at key milestones achieved.uationmetrics should be l<strong>in</strong>ked to the annual <strong>in</strong>vestment targets <strong>of</strong> the municipality. Most municipalitiesreport their results with respect to attract<strong>in</strong>g <strong>in</strong>ward <strong>in</strong>vestment on an annual basis. A municipalitytime. However, the database is not a tool <strong>for</strong> evaluat<strong>in</strong>g per<strong>for</strong>mance. Rather, it can be used to analyzementpromotion strategy.5.1 To check progress with respect to <strong>in</strong>vestment promotion, a self-evaluation framework is provided be-Strategy and organizationMarket<strong>in</strong>g and <strong>in</strong>vestor target<strong>in</strong>g<strong>Investment</strong> facilitationAfter-care and policy advocacy5.1.1 <strong>for</strong> attract<strong>in</strong>g FDI. It should be used to ensure that the municipality has effective <strong>in</strong>vestment promotionand organization strategies. It can also be used to identify the key areas that need to be addressedover time.16


<strong>Guidel<strong>in</strong>es</strong> <strong>for</strong> <strong>Investment</strong> <strong>Promotion</strong> <strong>of</strong> <strong>Local</strong> <strong>Governments</strong> <strong>in</strong> <strong>Kosovo</strong>Table 1: Self-assessment framework <strong>for</strong> strategy and organization arrangementsDimensionPolicy contextObjectivesSector/marketstrategyOrganizationFactorCoord<strong>in</strong>ation with municipal <strong>in</strong>vestment promotionunit/economic development departmentJo<strong>in</strong>t promotion with national IPAPolicy advocacy, status, visibility, and controlClear functional mandateAgreement with respect to bus<strong>in</strong>ess plann<strong>in</strong>g, budgetand targetsSector target<strong>in</strong>g strategy and researchMarket (geographic) strategy and researchL<strong>in</strong>ks to wider economic development strategyCoherent, effective structure <strong>of</strong> the <strong>in</strong>vestment promotionagencyRecruitment and development <strong>of</strong> relevant skills andpeopleSales focus and customer orientationEffectiveness <strong>of</strong> currentarrangements (score <strong>of</strong> 1to 5; 5=best practice)S5.1.2 Coord<strong>in</strong>ation with national and overseas stakeholdersments<strong>for</strong> attract<strong>in</strong>g FDI. It should be used to ensure that the municipality has effective market<strong>in</strong>g and<strong>in</strong>vestor target<strong>in</strong>g strategies. It can also be used to identify the key areas that need to be addressedover time.Table 2: Self-assessment framework <strong>for</strong> market<strong>in</strong>g and <strong>in</strong>vestor target<strong>in</strong>g arrangementsDimensionSector researchandmarket<strong>in</strong>gmaterialsImage-build<strong>in</strong>gandawarenesscreationFactorSWOT assessment <strong>of</strong> each target sectorClear market<strong>in</strong>g themeMarket<strong>in</strong>g messages <strong>for</strong> each sectorBrochure/fact sheet <strong>for</strong> each sectorSales presentation <strong>for</strong> each sectorHigh quality <strong>in</strong>ward <strong>in</strong>vestment websiteVisibility and commitment <strong>of</strong> seniorNetwork<strong>in</strong>g with <strong>in</strong>vestment <strong>in</strong>termediaries(brokers and <strong>in</strong>ternational organizations)Event/trade show program with effectiveplann<strong>in</strong>g, monitor<strong>in</strong>g and evaluationEffectiveness <strong>of</strong> currentarrangements (score <strong>of</strong> 1to 5; 5=best practice)17


<strong>Guidel<strong>in</strong>es</strong> <strong>for</strong> <strong>Investment</strong> <strong>Promotion</strong> <strong>of</strong> <strong>Local</strong> <strong>Governments</strong> <strong>in</strong> <strong>Kosovo</strong>Investor target<strong>in</strong>gand lead generationContact<strong>in</strong>g, prospect<strong>in</strong>g, and mak<strong>in</strong>gpitches to companiesRelationship-build<strong>in</strong>g with target companiesPolicies to attract talent back homeEffective customer relationshipmanagement system5.1.3 should be used to ensure that the municipality has an effective <strong>in</strong>vestment facilitation approach. It canalso be used to identify the key areas that need to be addressed over time.DimensionApprovalsIncentivesProject handl<strong>in</strong>gFactorRoadmap to assist <strong>in</strong>vestorsOne-stop shop serviceClear approval systemsSpeedy and predictable approvalsFDI database systemsCoherent and predictable <strong>in</strong>centives policyClear role and ability <strong>of</strong> the city IPA to negotiate<strong>in</strong>centivesEffective coord<strong>in</strong>ation <strong>of</strong> project handl<strong>in</strong>g with thenational IPA and related m<strong>in</strong>istriesCoord<strong>in</strong>ation with other city stakeholders (real estate,recruitment, suppliers, etc.)Due diligence on <strong>in</strong>quiriesInquiry prioritizationQuality and consistency <strong>of</strong> proposals made <strong>for</strong> <strong>in</strong>vestorsCustomer relationship management and key accountmanagement systemsEffectiveness <strong>of</strong> currentarrangements (score <strong>of</strong> 1to 5; 5=best practice)18


<strong>Guidel<strong>in</strong>es</strong> <strong>for</strong> <strong>Investment</strong> <strong>Promotion</strong> <strong>of</strong> <strong>Local</strong> <strong>Governments</strong> <strong>in</strong> <strong>Kosovo</strong>5.1.4 ments<strong>for</strong> attract<strong>in</strong>g FDI. It should be used to ensure that the municipality has effective aftercare andpolicy advocacy. It can also be used to identify the key areas to address over time.DimensionAfter-carePolicy advocacyFactorPriority <strong>of</strong> after-care <strong>in</strong> FDI strategy and organizationCoherent after-care policy and organizational deliveryarrangementsClear framework <strong>for</strong> policy advocacySupplier attraction and supplierdevelopment and l<strong>in</strong>kage program<strong>for</strong> FDI (e.g. property, <strong>in</strong>frastructure and education<strong>in</strong>itiatives)Clear monitor<strong>in</strong>g and evaluation <strong>of</strong> overallEffectiveness <strong>of</strong> currentarrangements (score <strong>of</strong> 1to 5; 5=best practice)Monitor<strong>in</strong>gand Evaluationorganization and FDI per<strong>for</strong>manceClear monitor<strong>in</strong>g and evaluation <strong>of</strong> eventsand trade showsClear monitor<strong>in</strong>g and evaluation <strong>of</strong> aftercareprogram19


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