In it together – foreign investment in emerging markets

12 June 2015

Foreign investment in emerging markets will help to drive the recovery in the global economy. Ilker Ayci, president of the World Association of Investment Promotion Agencies (WAIPA), explains how increased cooperation, knowledge and understanding between IPAs will help international trade to flourish.

Finance Director Europe: What are the current trends in global trade, and where are today's emerging markets?

Ilker Ayci: High-income economies account for the most imports, and this has an inevitable effect on the health of global trade. There has been a gradual recovery, but weak demand from the world's richest countries still prevails and geopolitical problems, like those in Ukraine and the Middle East, also harm trade within the affected regions.In addition, China's economy grew by 7.4% in 2014, the lowest rate in nearly quarter of a century, and this performance has had a negative effect on the exports of commodity-driven economies, such as those of Russia, Brazil and South Africa.

Prices of commodities, especially oil, have been falling dramatically, and this will also affect the countries that export heavily to commodity-dominated nations.

The European Central Bank (ECB) has recently launched a quantitative easing (QE) programme and it is hoped that this will help to reinvigorate the eurozone economies. The result of QE will definitely play a critical role in determining the upcoming trends in global trade.

Every country or union will try to implement structural reforms and a variety of policies to reinvigorate their economies, and globalisation means we need cooperation and solidarity more than ever.

What global influences are enabling certain regions and countries to flourish?

Trade agreements will become more important in the near future. For instance, the Transatlantic Trade and Investment Partnership (TTIP) and the Trans-Pacific Partnership (TPP) agreements will be a key issue, directly affecting global trade.

Political and social instability in certain regions are also great impediments to trade, and hopefully investment and peace will bring benefits to the people in these areas.

How is technology becoming vital to attracting trade and investment?

Investment Promotion Agencies (IPAs) play a vital role in introducing, promoting and disseminating technology in countries. To this end, some IPAs develop useful policies and programmes to encourage partnerships between multinational corporations (MNCs) and local small and medium-sized enterprises (SMEs). Strong links between MNCs and local SMEs help secure long-term gains by ensuring that foreign direct investment (FDI) does not become footloose. The availability of good, local partners, meanwhile, makes investment environments more attractive.

"There’s no such thing as an ‘investment wonderland’, but political stability, local market efficiency, access to qualified human resources and export markets, and infrastructure remain high on any list of desirable qualities."

To enhance a country's research and development (R&D) capacity and innovation capability, IPAs have critical responsibilities, such as identifying the sectors and target companies, and taking actions accordingly, as well as helping investors after they've decided where to sink their money. This process is not easy, and must be thoroughly planned and well organised. To this end, the World Association of Investment Promotion Agencies (WAIPA) is the only international organisation that serves as an experience-sharing platform for IPAs around the world.

Please outline your brief as president of WAIPA. What are your priorities?

WAIPA is an independent organisation that currently represents more than 170 IPAs around the world. Each of them cooperates closely with their respective governments and they are all entitled to shape investment support and promotion activities in their regions. Each is working to attract foreign money by creating better investment climates; WAIPA serves nations as a platform to facilitate global FDI for more job creation, technology transfer and upgrading the standards of living.

The organisation has a five-year strategy that is designed to make it a worldwide reference point for FDI. The WAIPA General Assembly very recently approved the move of its headquarters from Geneva to Istanbul. This is not a simple relocation, but rather the first step of a transition period that will signal WAIPA's priorities: it is moving to a more business-centric location in a more connected and dynamic city. From this environment, WAIPA will work to bring IPAs and companies together.

The association's structural links will be revived, enabling it to cooperate more closely with other organisations. WAIPA's aim is to provide benefits for every member; it will continue training activities and will be covering larger areas. Furthermore, a much stronger research programme is being developed to begin serving member IPAs.

What should CFOs look for when evaluating a region in which to invest?

There's no such thing as an 'investment wonderland', but political stability, local market efficiency, access to qualified human resources and export markets, and infrastructure remain high on any list of desirable qualities. Priorities depend on the size and the content of the investment project; unlike trade, investment is a long-term decision and mostly requires costly and challenging pre-studies. IPAs are getting increasingly involved in site-selection processes, as they provide feedback to investors concerning the advantages and disadvantages of areas according to the specific requirements of projects, as well as facilitating procedural steps during every phase of the investment.

How does WAIPA define its role? What is its mission statement?

The objectives of WAIPA, as broadly reflected in the association's statutes, are to:

  • promote and develop understanding and cooperation among IPAs
  • strengthen information-gathering systems, promote the efficient use of information and facilitate access to data sources
  • share country and regional experiences in attracting foreign investment and enhancing outward investments
  • assist IPAs in advising their respective governments on the formulation of appropriate investment promotion policies and strategies
  • facilitate access to technical assistance and promote training of IPAs.

Ilker Ayci is president of WAIPA, the umbrella organisation that covers 175 national and regional investment promotion agencies from 132 countries. He is also president of the Investment Support and Promotion Agency of Turkey (ISPAT).