recommendations for attracting foreign direct investment · recommendations for attracting foreign...
TRANSCRIPT
Recommendations for attracting
Foreign Direct Investment Kelvin Mahabir – President, invesTT
July 9, 2012
Agenda
• What is FDI?
• Why is FDI important?
• The Investment Process
• Trends in FDI
• FDI Drivers
• Trinidad & Tobago’s Investment Climate
• Investment Promotion - invesTT
• Trinidad & Tobago’s Attractiveness
• Addressing FDI location determinant factors
• The way forward
What is FDI
An investment made by a company or entity based in one country, into a company or entity based in another country.
FDI represents:
• Investment in production facilities
• Increase in investible resources and capital formation
• Means of transferring/developing:
• production technology
• skills
• innovative capacity
• organizational and managerial practices
• Access to international networks
Why is FDI important? BENEFITS TO SOCIETY
Increases employment Creates more opportunities for nationals, mitigates “brain-drain” Encourages repatriation of skilled workers and investment New job creation through development, diversification and expansion of current skill sets
Promotes national culture Positive impact on the national psyche, confidence, positioning Investment into cultural businesses Increased sponsorship of cultural events
BENEFITS TO BUSINESS Supports invention and innovation Encourages invention and innovation Generates intellectual property Brings and employs state of the art technologies Establishes needs and requirements for education and development Development of New Technology and Knowledge Contributes to the fulfillment of people’s aspirations
Fosters entrepreneurship / creation of new business Decreases risk for businesses to enter the market Encourages entrepreneurship and investment Allows for entry of new players (entrepreneurs) into market where there are gaps Stimulates business services and organizational development at the local level through
o Clustering o Creation of ancillary services
Builds productive capacity
Why is FDI important? BENEFITS TO THE ECONOMY
Increased performance of economy Creates vital links to the global economy Grows and expands local economy Provides a growth base for government revenues,
including taxes, and development planning Increases national competitiveness Stimulates the primary and secondary financial
markets Stimulates infrastructure development and
utilization Contributes to poverty alleviation and crime
reduction Attracts and employs capital Increases foreign exchange – Exports Imports Contributes to capital stability, repatriation of
funds and capital flows Increases standard of living and quality of life
Stimulates the domestic demand cycle, through enhancement and creation of new products and services
Streamlines the Economy toward Competitive Advantages
Promotes sustainability Spread of risk through diversification of the
economy Creates stable income and growth Less dependence on a single industry susceptible
to exogenous shocks (i.e. hydrocarbons) Increases our capacity to create new products and
services Basis for social, economic, technological, and
cultural stability Productively employs land capital Creates momentum for continuous investment
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The Investment Process – Investor’s Decision Is the country on the investor’s radar?
What is the country’s market size/ what markets does this country have access to?
What is the investment climate like?
Can I build a profitable business?
How does this country compare to other countries?
What is the time it will take me to get up and running?
What can I get from investing in this country?
The Investment Process – invesTT’s Evaluation
Create country
awareness
•Country Branding
• Investor Sourcing
Facilitate investors
•Provide information to investor
•Host site visits and local meetings
Evaluate investment
proposal
• Is the project in line with developmental objectives?
•Does the project bring sufficient value & benefits to T&T
Land investment
•Negotiate terms of investment
• Investment indicated by a signed lease
Trends in FDI • Global FDI flows surpassed the pre-crisis average in 2011
• Pre-crisis average 2005 to 2007 – US $1.47 Trillion • FDI flows 2011 – US$ 1.52 Trillion • In services sector, FDI rebounded to some $570 billion after falling sharply in 2009 and 2010
• More FDI flowing into developing and transition economies • Open & Transition economies – 19% in 2000 to 52% in 2010 • Developed economies – 81% in 2000 to 48% in 2010
• Outward FDI • Developing economies – declined by 4%
• Flows from Latin America & Caribbean – fell by 17% largely due to repatriation of capital
• Transition economies – rose by 19%
• Cross-border M&As increased by 53 per cent in 2011 to $526 billion
• Greenfield investment projects held steady at $904 billion in 2011 • Developing & transition economies - 2/3 value of greenfield investments
• Top 5 industries - extractive industries, chemicals, utilities, transportation and communications, and other services (largely driven by oil and gas field services)
• Sovereign wealth funds (SWFs) –significant potential for investment in development • $125 billion in cumulative flows in 2011
Factors associated with FDI Inflows
Adapted from: Attracting FDI – How Much Does Investment Climate Matter, http://www.worldbank.org/fpd/publicpolicyjournal
Location determinants for FDI - Worldwide
Trinidad & Tobago can greatly improve its chances of attracting FDI through improvements to the investment climate!
Understanding Trinidad & Tobago’s Investment Climate - Doing Business
Trinidad & Tobago’s “Doing Business” improved from 76 to 68 out of 183 countries
Trinidad & Tobago Competitiveness
Source: World Competitiveness Report 2011/12
Investment Promotion
invesTT
• Trinidad and Tobago’s IPA aligned to the Ministry of Trade, Industry & Investment
• First point of contact for investment opportunities in T&T
• Investor Sourcing, Facilitation and aftercare services
• Mission – “To grow T&T’s non-Oil & Gas sectors significantly and sustainably”
• Vision – “To be the #1 ranked Investment Promotion Agency in the Americas and Caribbean, leading the creation of a sustainable, diversified economy”
• Sector focus
• ICT
• Creative Industries
• Maritime Services
• Light Manufacturing
• Clean Technologies
Addressing T&T’s Attractiveness
• Basic requirements
• Issue of crime, government bureaucracy, work ethic and productivity, corruption, infrastructure, inflation, financing etc. must be addressed
• Export transactions, i.e. port improvements, customs handling must be improved
• Education of workforce must be aligned to business needs
• National Development
• Investment policy needs to be developed, guided by a National Development framework (e.g. Malaysia Plan which is in its 10th Edition)
• The Economic Development Board (EDB) is the institution best suited to lead this initiative
Addressing the issues of investment location determinants by invesTT
• Effective market size
• Cooperating with regional IPAs
• Provision of information to investors on existing trade agreements and how these can be leveraged
• Investment Climate
• Working with Ministries and regulatory agencies to improve Trinidad & Tobago’s “Doing Business” and “Competitiveness” Rankings
• E.g. investors who work through invesTT can see a reduction in the time it takes to get construction permits
• The Ministry of Trade, Industry and Investments through TTBizLink will have a significant positive impact on the investment climate
• Facilitating online transactions related to trade and business
• Includes applications for: Work permits, Registering a business, Fiscal incentives, Import duty concessions, Certificates of origin
Addressing the issues of investment location determinants by invesTT
• Availability of a skilled workforce
• Conducting surveys e.g. BPO sectors
• Working with Universities and agencies on needs of investors
• Presence of cluster, partner, or supplier
• Working with the TTMA in the area of “Food and Beverage” and “Printing and Packaging”
• Redesign of parks to be developed
• Infrastructure and logistics
• Contributing to a sector development plan for Maritime Services
• Completion of Phase I of Tamana
Addressing the issues of investment location determinants by invesTT
• Lower costs
• Provision of information to investors on where Trinidad and Tobago has certain cost advantages
• Technology and R&D Infrastructure
• Sourcing investors which can bring new technology to the country and which have a strong R&D focus
• Quality of life, language skills
• Working with EMA to examining the impact that an investment will have on the environment
• Evaluating investment projects for social impact (type and quality of jobs)
• Natural resources, real estate
• Continued development of Tamana and new industrial estates
The way forward • A World Bank report validates that the steps that invesTT has taken
thus far are in fact in the right direction regarding investment promotion
• Items to be addressed immediately to increase T&T’s attractiveness for FDI:
• Development of a National Investment Policy
• Strengthen the EDB as the implementing and coordinating body for National Development policy
• Appoint invesTT as the lead Investment Promotion Agency (IPA) outside energy and financial services
• Realign mandates of other non-energy IPAs to follow the leadership of invesTT – establish IPA coordination framework and protocols
• Appropriately resource invesTT
The way forward
• Take steps to reduce the time to:
• Start a business
• Get construction permits
• Register a property
• Address the issues of crime, government bureaucracy, work ethic and productivity, corruption
• Focus on improving the services sector
• This is a significant part of GDP
• One of the areas which is attracting more FDI
• Tourism is becoming more important – limited by current room stock
Attractiveness of Trinidad & Tobago - Responsibilities
• The work of invesTT • To be Trinidad & Tobago’s leading IPA
• The role of the EDB, and Ministry of Planning • Policy and Sector development focus • Education and training of workforce alignment with needs of businesses and sectors being
developed
• Government – focus on enhancing the investment climate • Infrastructure e.g. ports, traffic, telecommunications • Doing business – Customs, business registration, permits • Quality of life – crime, environment • Market access – aligning trade agreements with sector development initiatives e.g. services
sectors to serve foreign markets • Reduce bureaucracy • Appropriate funding of implementation agencies
• Private Sector • Further development of clustering initiatives by TTMA, • Provide guidance on workforce training needs • Cooperation amongst businesses - Register for partnerships, value-chain participation
