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Export Competitiveness: Export and Investment Promotion

  Export Promotion

Since its establishment in 1964, International Trade Centre(ITC) has been instrumental in developing EPAs in several developing countries to focus on a range of export development activities. The initial criticism against the EPAs was that they lacked strong leadership and were too bureaucratic and protectionist.

Over the last decade, the structure and activities of EPAs changed in the direction towards free market and export-orientation. Furthermore, asymmetric information and other market failures give justifications for the role of EPAs. Currently, EPAs globally have been offering services such as: (i) country image building, (ii) training and capacity building on logistical and regulatory issues, and (iii) market research and promotion.

An evaluation of EPAs suggests that EPAs contribute better in developed countries than in developing countries and regions. Since developing countries might have little capacity to manage EPAs effectively, they should share export promotion activities with other activities such as investment promotion or export financing. Developing country EPAs should also focus their activities on on-shore export services rather than country image or marketing and market research activities.

Global experience also suggests that EPAs should have a large share of the executive board in the hands of the private sector, but they should also have a large share of public sector funding.


  Papers

Export Promotion Agencies: What Works and What Doesn’t
Author: Daniel Lederman, Marcelo Olarreaga, Lucy Payton

Source:  The World Bank

 

This paper studies the impact of existing EPAs and their strategies, and the results suggest that on average EPAs have a strong and statistically significant impact on exports. However, there is heterogeneity across regions, levels of development and types of instruments. Furthermore, there are strong diminishing returns, suggesting that as far as EPAs are concerned small is beautiful.

Export and FDI promotion institutions: Are there any success stories?
Author: Héctor Reyes Retana
Source:  Seminar on Policies to Promote Export Growth and Diversification, May 9, 2006, the World Bank

This is a brief introduction about the performance of Mexico’s National Bank for Foreign Trade (BANCOMEXT). BANCOMEXT promotes the collaboration between private and public sector, and successfully supports Mexican exporters to extend their export chains.


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  Investment Promotion

Investment promotion plays a key role in attracting Foreign direct investment (FDI) and thus in improving the export competitiveness of developing countries by providing capital, technology, industry expertise as well as access to international markets and MNC supply chains. Some successful trading economies, such as the Czech Republic, realize over half of their export volume from foreign-owned ventures.

Smart proactive investment promotion should be based on a well-founded strategy emphasizing reforms of the business environment as well as the comparative advantages of the location (e.g., access to factors of production, local labor skills, logistical considerations) is critical to success in attracting and retaining inward investment.

Here you will find information on best practices in investment promotion and a variety of links to major national and international organizations involved in promoting inward investment or providing information and technical assistance.


  Papers

Marketing a Country: Promotion as a Tool for Attracting Foreign Investment
Author: Wells, Louis T., Jr.,  Wint, Alvin G.  
Source: Foreign Investment Advisory Service Occasional Paper 13, March 2000, The World Bank

This study is about the promotional techniques and structures that countries employ in their competition to attract foreign direct investment. Four basic investment promotion techniques are discussed and recommended: image building, investment generation, investor services, and policy advocacy.

Competing for FDI: Inside the Operations of Four National Investment Promotion Agencies
Source: FIAS and MIGA Publication, 2004, the World Bank Group


This publication explores the characteristics of four IPAs: their histories, mandates, leadership, roles, structures, strategies, challenges, and activities. Researchers provided in-depth information from
CzechInvest in the Czech Republic, Uganda Investment Authority in Uganda, the Foreign Investment Promotion Agency in Tunisia and PROESA in El Salvador.

The Impact of Intel in Costa Rica

Source: FIAS and MIGA Publication, 2006, the World Bank Group

This publication focuses on the post-investment years by tracing a series of impacts, directly and indirectly attributable to the introduction of Intel in Costa Rica . Beyond its obvious direct effects on the country's economy in terms of GDP, FDI, and trade growth, Intel's investment decision was the catalyst for a realignment of Costa Rica 's competitive platform as an investment location.

World Investment Report 2006: FDI from Developing and Transition Economies: Implications for Development

Source: United Nations Conference on Trade and Development, 2006, UNCTAD

Foreign direct investment in 2005 grew for the second consecutive year, and it was a worldwide phenomenon. It was spurred by cross-border M&As, with increasing deals also undertaken by collective investment funds. The bulk of regulatory changes have facilitated FDI and persisted in 2005.

  Case Studies
FDI Promotion Center -- FIAS's knowledge portal for investment promotion practitioners
fdipromotion.com
Foreign Investment Advisory Service publications
MIGA FDI Publications
FDI.net -- MIGA's online portal for international corporate investors
  Web sites
World Association of Investment Promotion Agencies
UNCTAD Department of Investment, Trade and Enterprise Development
Locomonitor (Private sector operated investment projects database)
World Bank Finance and Private Sector Department FDI Topic Page
Development Gateway FDI Topic Page

  Linkages to Global Buyers
Clustering and participating in a global value chain are increasingly considered by development scholars and policymakers as possible strategies to enhance firms’ competitiveness in international markets. Recent changes in production systems, distribution channels and financial markets, accelerated by the globalization of product markets and the spread of information technologies, suggest that more attention needs to be paid to external linkages. Gereffi’s global value chain approach (1994) helps us to take into account activities taking place outside the firm’s production system or the cluster and, in particular, to understand the strategic role of the relationships with key external actors.

Research on the relationships between global buyers and local producers is of particular relevance to developing countries. Due to their low labor costs, developing countries are supposed to specialize in the export of labor-intensive products. Even when such trade is liberalized, developing countries do not automatically gain access to international markets, because the chains which producers feed into are often governed by a limited number of buyers. Therefore, understanding how the governance of chains influences the prospects of producers seems critical. Since neither the producers' capabilities nor the governance of chains are static, we tried to capture changes over time.

Stressed is the role played by Global Value Chain leaders, particularly by the buyers, in transferring knowledge along the chains. For small firms in less developed countries, participation in value chains is a way to obtain information on the need and mode to gain access to global markets, promote process and product upgrading, and adopt foreign technologies.

The literature emphasizes the differences in organization of global value chains and their effects on small local producers. For example, unlike producer-driven chains, where profits come from scale, volume and technological advances, in buyer-driven chains profits come from combinations of high-value research, design, sales, marketing and financial services that allow the retailers, designers and marketers to act as strategic brokers in linking overseas factories and traders with product niches in their main consumer markets. Profitability is greatest in the concentrated parts of global value chains that have high entry barriers for new firms.


Recommended Reading

New Challenges for Developing Country Suppliers in Global Clothing Chains, a Comparative European Perspective
Palpacuer, Gibbon and Thomsen, 2005

The Global Apparel Value Chain: What Prospects for Upgrading by Developing Countries?
Gereffi and Memedovic, 2003

Policy Implications of Trends in Agribusiness Value Chains
Humphrey, 2006

The Impact of European Market Changes on Employment in the Kenyan Horticulture Sector
Humphrey, McCullough and Ota, 2004

Horticulture Commodity Chains: The Impact of the UK Market on the African Fresh Vegetable Industry
Dolan, Humphrey and Harris-Pascal, 1999

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