TRADE, INVESTMENT AND COMPETITIVENESS EQUITABLE GROWTH, FINANCE & INSTITUTIONS NOTES Lessons in Investment Promotion: The Case of Invest India Joe Phillips, Armando Heilbron and Priyanka Kher © 2021 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW, Washington DC 20433 Telephone: 202-473-1000; Internet: www.worldbank.org Some rights reserved This work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. 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Examples of components can include, but are not limited to, tables, figures, or images. All queries on rights and licenses should be addressed to World Bank Publications, The World Bank Group, 1818 H Street NW, Washington, DC 20433, USA; e-mail: pubrights@worldbank.org. Photo Credits: Invest India and Shutterstock.com Editing: Barbara Balaj Design and Layout: FPS Groups >>> Contents Abstract 3 Introduction 4 Reform Journey and Outcomes 9 Results 15 Current and Future Obstacles 16 Conclusions 19 References 20 LESSONS IN INVESTMENT PROMOTION: THE CASE OF INVEST INDIA <<< 1 Armando Heilbron (aheilbron@worldbank.org) is the Investment Promotion Workstream Leader in the Investment Climate Unit of the Finance, Competitiveness and Innovation Global Practice of the World Bank Group, based in Washington D.C., USA. Priyanka Kher (pkher@worldbank.org) is a Private Sector Specialist in the Investment Climate Unit of the Finance, Competitiveness and Innovation Global Practice of the World Bank Group, based in Washington D.C., USA. Joe Phillips (joe.phillips@alloutlocation.com) is a Senior Investment Promotion consultant with the Investment Climate Unit of the Finance, Competitiveness and Innovation Global Practice of the World Bank Group based in London, UK. The authors would like to thank Roberto Escoto, Managing Director at Apex Brazil; Andreas Hora, Coordinator at WAIPA; Anuj Mathew, Senior Economic Adviser at the UK Department of International Trade; Robert Whyte, Senior Investment Promotion Expert and Harsh Jhanjaria, IFC Operation Officer for peer reviewing this note. They are also grateful to Deepak Bagla, Managing Director and CEO; Dushyant Thakor, Senior Vice President; and Mitali Khachi, Manager of Invest India, as well as World Bank colleagues Christine Zhenwei Qiang, Ivan Nimac, Sudip Mozumder and Nandita Roy for their valuable inputs, contributions and support to publishing this case study. The support provided to Invest India described in this paper was part of an IFC advisory services program funded by the Facility of Investment Advisory Services (FIAS) of the World Bank. Lastly, thanks to Barbara Balaj for her editing services and to FPS Groups for design and production services. >>> Abstract Foreign direct investment (FDI) can contribute significantly responded to its challenges, to now deliver sustained towards India reaching its aspiration of 8 percent growth success evidenced by facilitating USD 31 billion of per annum. Prior to 2009, India did not have a national FDI and direct creation of nearly 303,900 jobs. In dedicated organization with a specific mandate to promote part, Invest India has contributed to India’s stellar FDI and facilitate FDI. Invest India was then established, but performance in 2020, when the country reached another it was not until 2015 that it was empowered to ramp up record of USD 64 billion, against a global drop of 35% its investment promotion efforts, with the resources and (UNCTAD 2021). While some challenges still remain, reach to be fully active in the FDI marketplace. Invest India’s journey provides valuable learnings for other investment promotion agencies (IPAs), which in Invest India’s journey can be described against 9 critical the context of the Covid-19 crisis, will need to be in a success factors (CSFs) that chart how the agency period of review and reform. LESSONS IN INVESTMENT PROMOTION: THE CASE OF INVEST INDIA <<< 3 >>> Introduction Economic context at Invest India’s Hamden and Heilbron 2020; Wells and Wint 2000; World Bank 2020). If poorly designed, FDI-related institutions, inception in particular IPAs can be constrained by incompatible For India to reach eight percent growth per annum to functions housed in the same institution, inadequate which the Government of India (GoI) aspires, a substantial resource allocation, conflicts of interest, duplication or gaps increase in private investment is required. FDI in particular in service delivery, and poor coordination, all of which can can play an important role. In addition to generating capital lead to weak FDI performance (Heilbron and Whyte, 2019). flows and employment, it can bring in innovative technology, Prior to 2009, India did not have a dedicated agency with a managerial innovations, build skills, and increase specific mandate to promote and facilitate FDI. Investment competition in domestic industry to enhance productivity promotion functions were shared among a number of (Echandi, Krajcovicova, and Qiang 2015; Saurav and Kuo government agencies and business associations at the 2020). It is also essential to enable India to strengthen its national level, although none of them had this at the core participation in and further benefit from global value chains. of their mandate. There was a perception that investment However, these benefits are not automatic, and deliberate, opportunities were being lost. While some State level targeted measures need to be taken to attract, retain and investment promotion agencies did exist, they were not maximize benefits of FDI. feeding into an overall common national goal. Investment Promotion Agencies (IPAs) can play a Between 2010-2014, India’s FDI inflows remained under pivotal role in helping countries attract and realize the USD30 billion (with the exception of 2011-12). India’s share development benefits of FDI (Charlton and Davis 2007; of FDI as a percentage of GDP, relative to peers tended Cho 2003; Crescenzi, Di Cataldo, and Giua 2019; Harding to lag. Indeed, figures 1 and 2 show that while Indian FDI and Javorcik 2011; Harding and Javorcik 2013; Miškinis flows have remained at a slightly higher level relative to and Byrka 2014; Morisset and Andrews-Johnson 2004; GDP since 2009, Vietnam, Malaysia and Brazil remain Nelson 2009; Pietersen and Bezuidenhout 2015; Sabha, some way ahead. FIGURE 1 - FDI inflows into India (2000-2019) 60 4 AVG. 10-14 AVG. 15-19 3.5 50 30 44 As Percentage of GDP 3 40 2.5 USD Billion 30 2 1.5 20 AVG. 10-14 AVG. 16-19 1 10 1.6% 1.8% 0.5 0 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Year FDI Inflows (USD Billion) % of GDP Source: WDI Note: Green area – Early years of Invest India. Purple area – strengthening Invest India. At the time of publication, UNCTAD released FDI inflow data showing that Indian FDI inflows reached a record of USD 64 billion in 2020. 4 >>> LESSONS IN INVESTMENT PROMOTION: THE CASE OF INVEST INDIA FIGURE 2 - India trails most comparators in FDI (as a percentage of GDP, 2000-2019) FDI as Perccentage of GDP 12 10 8 6 4 2 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Year India Brazil China Malaysia Turkey Vietnam Source: WDI Note: Green area – early years of Invest India; Purple area – strengthening Invest India. Nevertheless, India fared well during the Covid-19 pandemic compared to other countries. In June 2021, UNCTAD released FDI inflow data showing that Indian FDI inflows reached a record of USD 64 billion in 2020, despite a global drop of 35% and very few countries showing growth. Reason for the creation and upgrading Invest India’s journey can be mapped along nine CSFs1 (figure 3) and provides helpful insights for other countries that aim to of Invest India upgrade their investment promotion activities. These 9 factors In 2009, Invest India was established as a public private provide a framework throughout this note and are relevant for joint venture company of the former Department of countries and IPAs of all sizes. In fact, while India is a large Industrial Policy and Promotion (DIPP) of the Ministry country, this case study illustrates what can be achieved even of Commerce and Industry, the Federation of Indian with access to what is a relatively modest budget. Chambers of Commerce and Industry (FICCI), and state governments of India. However, it was not until 2015 that Assessing Invest India at Inception Invest India was empowered to ramp up its investment Invest India’s success did not come easily. Specifically, it promotion efforts, with the resources and reach to be fully faced a few challenges at inception (2009-2015), across active in the FDI marketplace. the 9 critical success factors: Transformation of Invest India: Drivers CSF 1. Establishing high level government support - of Reform India’s intention to explicitly target FDI was first expressed in 2008 in the Scheme for Investment Becoming a leading IPA is a long-term goal which many Promotion (SIP) launched under the XI Five Year countries struggle to achieve despite trying different Plan 2007-2012. The Scheme was administered approaches. Following international good practice, it by the DPIIT to promote foreign investment into was not assigned any regulatory functions. It was also the country and create a dedicated investment given sound financial support from DIPP, now renamed promotion agency (that is, Invest India). However, Department for Promotion of Industry and Internal as is the case in many countries, the GoI had Trade (DPIIT) and a functioning Board, with more than multiple agencies that were competing for half of its members coming from the private sector. The attention. Invest India was one of these, with organisation now has more than 300 dedicated staff low prominence within the Government from and is highly focused on delivering its investment the outset. This made it difficult to demonstrate promotion mandate. commitment to investors, and consequently it was able to gain little traction with them. 1 For more on the World Bank’s critical success factors (CSFs) for investment promotion agencies see Heilbron forthcoming. “Investment Promotion Agencies for Impact.“ LESSONS IN INVESTMENT PROMOTION: THE CASE OF INVEST INDIA <<< 5 FIGURE 3 - Critical Success Factors for Investment Promotion Agencies HIGH LEVEL A CLEAR, UNCONTESTED SOLID SIGNIFICANT AND ROBUST NATIONAL- GOVERNMENT MANDATE FOR GOVERNANCE SUSTAINED FINANCIAL SUBNATIONAL SUPPORT INVESTMENT FOR THE IPA RESOURCES FRAMEWORK PROMOTION 1 3 5 7 9 2 4 6 8 IPA STRATEGY A HIGH DEGREE OF MANAGEMENT AND A STRONG INVESTOR- FOCUSED ON INSTITUTIONAL AND KEY PROMOTION STAFF CENTRIC SERVICES COMPETITIVE SEGMENTS FINANCIAL AUTONOMY WITH STRONG PRIVATE ORIENTATION SECTOR EXPERIENCE Source: adaptation of Heilbron and Whyte 2019; and Heilbron forthcoming. hire staff against specified and transparent job CSF 2. Developing an IPA strategy with a focus on qualifications. But for Invest India, as CSF 7 below competitive segments - While Make in India’s describes, prior to 2015 the issue was more about strategic vision combined with the SIP laid out availability of funding, to the extent that the degree a vision of placing India among the leading of autonomy was somewhat moot. manufacturing nations and for investment to be a pillar of the overall strategy, it did not translate CSF 5. Maintaining solid governance for the IPA – directly into an actual investment promotion A strong and active board with private sector strategy. This meant that the specific objectives of representation is key to maintaining an IPA’s the agency were not fully articulated. Not having autonomy, as well as ensuring that the views of such a strategy or clarity on agency priorities, investors – who are ultimately the customers of focus sectors, or sequencing, also made it difficult the IPA – are at the forefront of decision making. to align and develop strong relationships with Invest India’s board was constituted in 2010 and relevant private and public stakeholders, many had a good balance of 12 private and public sector of which are needed to support the investment representatives. However, due to the constricted promotion process (e.g. government departments staffing and budget constraints, the agency’s that cover labor, tax, land, immigration, etc.). activities were largely reactive to incoming investment requests. Accordingly, the Board was CSF 3. Ensuring a clear, uncontested mandate for advising the IPA on the way forward, keeping in investment promotion - At the national level, mind the limitations to launch new initiatives. other government agencies, particularly those with a sectoral focus were competing and / or CSF 6. Recruiting management and key promotion duplicating some of Invest India’s own activities. staff with strong private sector experience - For example, the Tourism Development given the agency’s limited high-level government Corporation was targeting investors in the own support and autonomy, Invest India initially was tourism sector, while also investing in tourism unable to hire the right type of skilled resource. infrastructure itself. Having this resource is vital to providing added value services to the investor, who will typically CSF 4. Guaranteeing a high degree of institutional expect the IPA’s staff to have some understanding and financial autonomy - This is important of the company’s business, and specialist so that the IPA is able to make decisions on a knowledge of the sector in the location. These relatively independent basis. For example, to 6 >>> LESSONS IN INVESTMENT PROMOTION: THE CASE OF INVEST INDIA services go far beyond simple administrative CSF 8. Maintaining a strong investor-centric support; hence the right staff make-up is one services orientation - providing high quality that includes relevant private sector experience. services to the companies is the core function Yet the agency only had around 5-6 staff until of IPAs. However, Invest India was essentially 2014. It required substantial effort from Invest reactive for many years and, even as recently India’s CEO and Managing Director to convince as 2015, had no more than a handful of staff the Government to hire staff with requisite job reactively answering investor queries, with qualifications. Moreover, this increase in staff little or no traction with potential or existing numbers was still not going to be enough to offer foreign investors. This meant that the breadth the breadth of experience and specialization and quality of services being delivered was not required by the investor marketplace. sufficient for the agency to have the economic CSF 7. Maintaining significant and sustained financial impact that it had the potential to bring. resources - Invest India was created as a public The World Bank Group’s Comprehensive private joint venture company with an annual Investor Services Framework (CISF) budget of approximately USD 150,000 in its first 3 recommends that good proactive IPAs deliver years, including for salaries and travel expenses. a range of services that can be defined within This can be contrasted with UK Trade & Investment, the four categories2 and four stages of the then the agency for the UK, whose inward investment life cycle (figure 4). The numbers in investment budget in 2008/09 was GBP£73.3 the diagram indicate the percentage of IPAs that million (then approximately USD 135 million) or deliver services in these categories and stages, to the higher than USD 1 million budgets of 82 based on a WBG survey in 2017. Like many percent of IPAs (Sanchiz and Omic 2020). While IPAs, Invest India’s challenge was to provide the UK is an extreme example, this demonstrates consistent service delivery, while broadening the the significant shortage of funding of the newly scope of its services beyond the initial stages formed Invest India agency, despite India’s vast of the lifecycle, so that it was providing holistic population and geography. With a limited budget, support to investors. However, this was hard to Invest India was less able to compete for talent achieve while the other seven critical success with the private sector, and ultimately in the global factors described above were not in place. marketplace to win investment projects. FIGURE 4 - Comprehensive Investor Services Framework Percentage of Responding IPAs Stages Entry Retention Linkages Attraction and and and Category establishment expansion spillovers Marketing 92 52 39 20 Information 94 61 49 23 Assistance 78 78 63 29 Advocacy 93 53 36 22 Source: Heilbron and Aranda-Larrey, 2020. 2 The CISF defines four service categories within investment promotion: 1. Marketing services, to build a positive image for the investment destination with a strong value proposition to investors; 2. Information delivery across all stages; 3. Hands-on Assistance to contribute to the investment success from decision-making, to entry, establishment, operations and expansion; and 4. Advocacy to improve the investment climate and ecosystem. This note italicizes the key word when referring to these services. For further details, please see Heilbron and Aranda-Larrey 2020. LESSONS IN INVESTMENT PROMOTION: THE CASE OF INVEST INDIA <<< 7 the distinct mandate combined with varying levels CSF 9. Developing a robust national-subnational of administrative capacity, caused confusion and framework - National-subnational relationships duplication between state IPAs and Invest India’s are critical, both politically, but especially in role. State IPAs were also promoting investment terms of being able to offer incoming investors but had a limited relationship with Invest India. seamless service from point of interest, through In fact, some of them had greater budget and to location selection, establishment, expansion reach to investors than the national agency. The and linking with the domestic economy. This point challenge was amplified by states inevitably is particularly important given the sheer scale of having different characteristics (e.g. Karnataka’s India - a solitary office in one city is unlikely to tech value proposition versus wellness and be able to adequately cover the promotion needs tourism in Uttarakhand), and consequently of the whole country. India’s federal structure different priorities. Moreover, some state IPAs added an additional set of challenges. The had extremely limited capacity, therefore the task 28 states have a mandate on several matters for Invest India to engage them was quite different affecting investment (e.g. land, tax, environment, to that of the more developed state agencies. employment issues etc.). So, at the regional level, 8 >>> LESSONS IN INVESTMENT PROMOTION: THE CASE OF INVEST INDIA >>> Reform Journey and Outcomes Invest India implemented several good practices in order of Understanding with other institutions, such as to give India the best chance of success in attracting FDI. with Ministries (e.g. Ministry of Food Processing A high-level view of key events is shown in the timeline Industries, Embassies (e.g. Indian Embassy below (figure 5), with details then provided for each CSF: in Korea) and subnational governments (e.g. Government of Assam) as discussed further in CSF 1. High level government support: Such support CSF 9 below. was essentially the catalyst which gave the agency an ability to address its other challenges. There was also a strong emphasis on aligning A new CEO with private sector experience was the IPA’s goals and activities with the Sustainable appointed and was immediately given direct Development Goals (SDGs) from United Nations access to senior government officials. Conference on Trade and Development (UNCTAD). This meant proactive targeting of sectors and CSF 2. IPA strategy with a focus on competitive investors that clearly contribute to some of these 17 segments: Invest India took a concept note goals such as gender equality and tackling climate that included a set of strategic and institutional change, rather than towards investors who do not guidelines around the 9 CSFs, provided by the share that commitment. This commitment has been World Bank Group in 2015. This allowed the recognized, as the agency won the United Nations’ agency to be highly targeted in its activities and award for excellence in promoting investments in its relationships with other institutions. It also led sustainable development for the collaboration with to Invest India signing a range of Memorandums Vestas on the Ahmedabad Blade factory in 2018. FIGURE 5 - Timeline of Key Events in the Invest India Journey • Make in India • Dedicated office • Invest India campaign space in manages the India launched New Delhi pavilion at World Startup India Economic Forum campaign launched and accompanies the Government delegation 2014 2016 2018 2009 2015 2017 2020 • Invest India • New action plan, • Private • Work created budget, salary shareholding commenced on • Shareholding: 51% structure broadened (17% Central Single with FICCI and approved by the each with FICCI, Window System 49% with the Board of Directors CII and NASSCOM) • Secretariat of Central • Support from • State IPA Capacity- Empowered Government WBG begins Building project Group of (DPIIT) launched with Secretaries and WBG Project • Expanded office Development space Cells established Source: World Bank Group, based on Invest India inputs Note: DPIIT= Department for Promotion of Industry and Internal Trade; FICCI= Federation of Indian Chambers of Commerce and Industry; CII = Confederation of Indian Industry; IPA=Investment Promotion Agency; WBG= World Bank Group; NASSCOM = National Association of Software and Service Companies. LESSONS IN INVESTMENT PROMOTION: THE CASE OF INVEST INDIA <<< 9 Invest India now uses a two-fold approach needs of the PA efforts and is used to build (‘top-down’ and ‘bottom-up’) for identifying the relationship with investors while tracking competitive sectors. It uses parameters that their projects’ progress through the life cycle, look at Invest India’s recent successes in terms from being a potential opportunity to becoming of FDI project wins, jobs and enquiries; and the operational and beyond. country’s competitive strengths in terms of raw • The India Investment Grid (IIG) is a portal to material availability, skill availability and existing present to the marketplace the specific investible clusters. For certain sectors such as electronics, projects that exist across the country. This pharmaceuticals and food processing which are allows the whole country, including lesser-known seen as having high potential, Invest India has set locations or investment offers, to gain exposure. up larger teams that work in close coordination with the Line Departments / Ministries of the GoI. • The rapid development of the online platform This enables them to also advocate for policy to assess state IPAs is also an achievement, changes to the business environment that are which would not have happened so quickly specific to these sectors. without this autonomy. CSF 3. A clear, uncontested mandate: The solidifying CSF 5. Solid governance for the IPA: From 2014 to of high-level government support ensured that 2017, while the Board’s composition remained Invest India was officially mandated to lead unchanged, it was more engaged than before with the country’s national investment promotion what was by then a larger agency, more capable efforts as the single point of contact for foreign of implementing its mandate. Then from 2017, investors, not only with a legal mandate for as Invest India further strengthened, the Board investment promotion, but also at the practical was restructured and its membership expanded level by publicly clarifying its role. The strength to include 15 people. This included new higher of the mandate was also reinforced by not profile members, who have been engaged and assigning Invest India any regulatory functions, actively participated since their appointment. The which follows international good practice. Board still maintains an equal public-private mix, but on the public side, representatives come from CSF 4. A high degree of institutional and financial a broader range of government agencies. It now autonomy: Through government support and plays a clear role in policy advocacy, developing sufficient funding, Invest India became semi- the agency’s action plan, including target setting, autonomous. The Government ensured the and provides guidance in connecting with required flexibility and rapid response to satisfy external stakeholders. the needs of investors and successfully win more and better investment. CSF 6. Management and key promotion staff with strong private sector experience: Invest India’s The ability to implement a set of specific functional autonomy has allowed the flexibility to digital initiatives provides some evidence of hire individuals from the private sector. As such, this autonomy. These tools cut across various it appointed a corporate-driven leadership, with elements of the investor life cycle and include: high-caliber management and staff at all levels and • The website, which demonstrates various functions of the organization recruited from major aspects of international good practice, both management consultancies. It started with a focus in terms of the quality of its design, and the on staff in investor assistance before moving to specific and detailed sectoral content that it marketing and information categories of the CISF. offers – hence it is used as the key marketing By hiring such skilled staff, Invest India was quickly tool. It also became a key information platform able to become a much more credible competitor to during its Covid-19 response (Box 1). its peer IPAs. There is now a clear structure in place for promotion, centered on specific country, sector, • An Investor Relationship Management and state teams working in coordination across the System (IRMS) was developed to meet the investment life cycle (figure 6). 10 >>> LESSONS IN INVESTMENT PROMOTION: THE CASE OF INVEST INDIA BOX 1 - Service reorientation in a time of crisis In response to the Covid-19 crisis, Invest India rapidly set-up a Covid-19 specialized online platform since March 2020 and ahead of many of its national peer IPAs. Its online Business Immunity Platform was its primary and comprehensive response tool to help investors get real-time updates on India’s response to the crisis. Continuously evolving, it operated 24/7 with a dedicated team responding to queries in a matter of hours; offering logistics support; helping ensure demand of essential healthcare equipment is met; curating the latest information on various central and state government initiatives; sharing best practices on response mechanisms put in place by leading Indian companies and providing information on State and National relief funds. Invest India’s Business Immunity Platform Moreover, the platform brought together key Government stakeholders, industry champions and logistic providers to identify and fill the supply shortages required to combat the virus. As of June 8 2020, over 10,000 enquiries had been received from companies, with more than 3 million visitors, which demonstrates the demand for this support. Source: Invest India The organization also boasts a flat structure that upon technology. These investors are typically enables its young staff to be empowered. As of newer companies with younger senior staff - June 2021, 52 percent of Invest India’s staff who require agility in their interactions with IPAs. are women. Ninety percent have private sector The staff’s digital proficiency has helped Invest experience, and 60 percent have postgraduate India respond better to the challenges posed by degrees. There are also incentives for Covid-19. employees that help to drive good behaviors The agency has also taken the time to ensure and support the retention of talent. Of the they are building proper capacity in investment 305 staff in total, there are 231 staff focused promotion through training, which they on investment promotion activities, with the recognize is important irrespective of staff’s past remainder involved in separate innovation and experiences. Starting by identifying the skills and Start Up India agendas (figure 7). experience needed to implement Invest India’s Invest India’s staffing practices mirror those vision, a skills enhancement and training program of consulting firms and the direction of FDI in was created, also pointing to appropriate sources general, where increasingly projects are built of learning and their associated cost. In parallel, LESSONS IN INVESTMENT PROMOTION: THE CASE OF INVEST INDIA <<< 11 FIGURE 6 - Invest India Investment Promotion Organisational Chart and Roles Country Team Country Team (West) (East) Sectors Team States Team Country Teams Sector Team States Team Targeting strategy Identifying target Supports the Western Services State for key investor investor accounts state Europe China Infrastructure Coordinators accounts and creating with their Targeting account specific investor strategy outreach exercise Pharmaceuticals State Americas MENA Automotive Teams Electronics Manages the Information and Coordination with relationship assistance: the state Implementation Textiles, with knowledge government for Facilitation & UK Japan & Ireland & Oceania Oil & Gas, the investor sharing, location grounding of Metals & Mining analysis projects etc. Germany & Defense Eastern Europe South Korea Chemicals Manages the Supports with Supports with relationship investor investor partnership Long term with aftercare aftercare Russia Food the investor & CIS Processing Taiwan Typical order of team engagement with companies through the investor journey Source: Adapted from Invest India. Note: Country team refers to those working on a particular target market, e.g. China, and manages the relationship with the investors across the lifecycle. Sector Team refers to those developing and working on strategic segments to promote. States team works with subnational IPAs. CIS= Commonwealth of Independent States; MENA = Middle East and North Africa; UK= United Kingdom. FIGURE 7 - Invest India Staff Breakdown3 305 30 52% 65% 32% EMPLOYEES YEARS WOMEN POST GRADUATE HAVE GLOBAL Average Age DEGREES WORK EXPERIENCE Consulting Finance 0-3 YRS 3-7 YRS 30% 10% 28% 40% Industry Expertise 15+ YRS 26% 9% Marketing 7-15 YRS Others 4% 23% 30% Source: Invest India. 3 Source: Invest India. Includes all employees working for the agency, even in non-investment-promotion areas. 12 >>> LESSONS IN INVESTMENT PROMOTION: THE CASE OF INVEST INDIA it conducted capacity building activities for state the marketplace and generate leads. The IPAs. In particular, the World Bank Group had marketing team is slick and professional, with delivered three workshops on good practices in the knowledge about how to make an impactful investment promotion since 2018, attended by 20 message and are highly savvy in social media State IPAs. It is the staff’s dynamism, enthusiasm (figure 8). This is reflected in its greater and adequate skills that has secured the buy-in international prominence than many of its peers. of the States but equally importantly, of investors. The agency is also highly active in direct CSF 7. Significant and sustained financial marketing including outreach campaigns across resources: Invest India receives sound financial a targeted range of platforms, together with and institutional support from DPIIT and other each year participating in 50 events, hosting 40 funders. This allows Invest India to deliver and roundtables, carrying out 30 roadshows, and continue building its credibility with both private directly targeting 1,000 potential investors. sector beneficiaries, and the public sector at both Their proactivity spans from marketing and national and subnational levels. In fiscal year research in identifying new potential investors, 2020-21, total annual spending for investment to reaching out to them, then providing promotion was around USD 12.5 million including prompt information and assistance. During the salaries, of which around 30% was spent on the Covid-19 outbreak, Invest India was amongst marketing / information categories of the CISF, the first national IPAs to establish a web-based 30% on the assistance category, and 30% on response platform (Business Immunity Platform, related IT requirements which apply across all box 1) focused on investor retention. It is categories (e.g. the website). The remaining expected that this structured, intensive support 10% spreads across various other promotion to existing investors would remain important activities. This represents a significant increase post-Covid-19. since the agency’s formation and has allowed recruitment of a critical mass of skilled staff, Another area has been Invest India’s growing from less than 10 employees to the 305 effectiveness in treating new potential investors of today. It also allows Invest India to have a as VIPs, particularly during initial site visits. proper business-like headquarters office to use This is a major chance to impress the investor, when welcoming prospective investors. yet many IPAs do not consistently provide this level of service, from meeting the investor at CSF 8. A strong investor-centric services orientation: the airport, to offering the investor a program of This is an area in which Invest India has activity during the visit that combines both focus achieved solid progress, mostly because young, on the investment opportunity, and an opportunity consultancy-experienced staff perform very to enjoy the destination itself. professionally in responding to investors. It now performs particularly strongly in the “Attraction” All of the above services are underpinned by and “Entry & Establishment” stages of the World Standard Operating Procedures, the maintenance Bank Group’s CISF. While the agency started of an Investor Relationship Management system with a narrow focus on assistance services in (IRMS, with a custom-made CRM software) to the “Attraction” stage, increased resource and help Invest India staff provide a more personal government support allowed Invest India to service to investors, and regular investor surveys broaden the range of activities across all stages. to gain real-time feedback. For example, in “Attraction”, the website Robust national-subnational framework: CSF 9. described above is just one aspect of Invest Invest India recognized early on the importance India’s strong commitment to marketing their of making subnational IPAs their partners. location and the offer. But the agency also Effort was made to gain a better understanding uses a range of video content, collateral, and of the situation in each state, in terms of event attendance to get the India brand into competitiveness for attracting new investment, LESSONS IN INVESTMENT PROMOTION: THE CASE OF INVEST INDIA <<< 13 FIGURE 8 - Invest India Social Media Activity Country / Average # Languages Platforms Highlights From Social Media Regions Daily Posts 1 India English 102 • 12 handles on Twitter, 13 on LinkedIn, 12 on Facebook, 1 each on 2 Japan Japanese & English 15 Instagram, KOO & YT / Content in 9 languages 3 Korea Korean & English 15 • World’s most active IPA on social 4 USA English 15 media • 46% increse in followers from March 5 UK English 15 2020 to March 2021 6 France French & English 15 • ~7,000 posts monthly 7 Germany German & English 15 • Content themes 8 Netherlands Dutch & English 15 • Production Linked Incentive Schemes 9 GCC Arabic & English 15 • FDI into India 10 Taiwan Mandarin & English 15 • One District - One Product / Vocal for Local 11 Sweden Swedish & English 15 • Policy reforms / EODB Measures / 12 Switzerland German, French, 15 Aatmanirbhar Bharat English • India and the World 13 China Mandarin 5 • Exclusive Investment Forums and 14 Israel & LATAM Hebrew, Spanish & Recently other events and Roadshows Portuguese launched Source: Invest India. Note: EODB= Ease of Doing Business; GCC= Gulf Cooperation Council; LATAM= Latin America and capacity to support incoming investors. other assistance requested by the state. As of Thereafter, it sought to level up the capacities June 2021, Invest India conducted workshops of all IPAs in the country. A capacity assessment with 8 states. The initiative generated a was conducted based on a standardized productive “race to the top” towards improving methodology in 2017. Confidential reports investment promotion capacities and service describing areas of strengths as well as tailored delivery. advice on areas for improvement were given to There is also more productive collaboration 21 states participating in the assessment. As a between Invest India and state IPAs in attracting result of this activity, the DPIIT showed significant investment. Today, Invest India provides more interest, leading to Invest India implementing direct assistance to states, not only jointly an updated version of the assessment. The supporting investment projects in a reactive new assessment was conducted using an manner, but also in terms of strategic activity. online portal to simplify and strengthen the For example, the state of Assam launched a validation process. Customized confidential new “Invest Assam Foundation” IPA, with Invest reports have been shared with each of the 20 India participating in its Board and providing participating states, and followed by one-to-one organizational structure, targets, budgeting, and workshops and coaching sessions with each other types of advice. state IPA to provide strategic guidance on the recommendations mentioned in the report and 14 >>> LESSONS IN INVESTMENT PROMOTION: THE CASE OF INVEST INDIA >>> Results Since the agency’s rejuvenation in 2015, Invest India USD 30 billion level between 2012-14 (figure 1). Post 2015, has received several awards in investment promotion FDI inflows continued increasing, albeit at lower rates from UNCTAD, WAIPA and the Annual Investment except in 2020 when FDI inflows reached a record of USD Meeting (AIM). 64 billion, and made India one of the very few countries with increased FDI inflows that year (UNCTAD 2021, just In terms of pipeline, by mid-June 2020, Invest India had released at the time of publication). In terms of projects, fDi responded to more than 260,000 business requests from Markets records that India attracted 701 projects in 2019, 159 countries and 38 sectors, 85 percent of which were of which 157 were high quality headquarters and R&D answered within 72 hours. Working with more than 1,400 investments. Contrast this to 2009, where total numbers companies, the IPA had generated a project pipeline of of projects were slightly higher at 758, but just 111 of these USD 162 billion, of which an estimated USD 31 billion has were high value investments. This demonstrates the value been implemented, with 303,900 direct jobs being created of Invest India in helping to attract those investments that out of a total number of 3,067,150 jobs in the pipeline and bring the greatest economic impact, such that their role having contributed to making India a top-ten greenfield is not simply to attract as many projects as possible, but destination in the world in 2019.4 instead is quality and value-led. This has been explicitly FDI inflows into India increased to over USD 40 billion recognized by global investors across sectors. 2015 onwards, reflecting a 33% increase from the Vivo's supply chain entry into India Perstop breaks ground in India 4 Source: Invest India and the Financial Times fDi Markets database. LESSONS IN INVESTMENT PROMOTION: THE CASE OF INVEST INDIA <<< 15 >>> Current and Future Obstacles While Invest India has achieved transformational results in Hence India is facing not only an increased breadth of a short timeframe, a sustained success requires sorting a competition, but one that is also becoming more credible. few obstacles and constantly adapting to the evolving needs Addressing Invest India’s current situation and upcoming of the FDI market, particularly in the current global context: challenges can again be shaped around the same 9 critical • Continuously shrinking investment flows, even success factors. This is summarised in figure 9 and areas of before the Covid-19 crisis: since 2016, investment attention are discussed in more detail below. It is important was slowing globally5. The Covid-19 crisis significantly to note that Invest India does not have any significant exacerbated this, with UNCTAD confirming a 35 challenges (Red) and it continues diligently working on all percent decrease in global FDI in 2020 and WBG these CSFs, given it is still quite a young IPA. Of note, no analysis showing a 42 percent decrease in the value future obstacles were identified for CSFs 5 and 6. of greenfield projects in developing countries in 2020 CSF 1. High level government support: The agency versus the previous year,6 thereby adding to the needs to become more deeply embedded within pressure on IPAs worldwide, including Invest India. So the machinery of government so that it becomes far, India has beaten the global trend during 2019 and more immune to changes in government. 2020 by attracting increasing FDI inflows (UNCTAD Arguably, Invest India’s case is becoming stronger 2021, released at the time of this publication). However, in the face of a political transition as data shows continued efforts are required from the national and India is sustaining high levels of FDI inflows in subnational IPAs to keep the FDI momentum going. great part due to efforts of its IPA. • Still getting FDI below India’s potential: as noted CSF 2. IPA strategy with a focus on competitive earlier, peer countries are achieving greater flows of segments: While Invest India is strategically FDI, given their relative size (figure 2). For example, aligned to the Make in India initiative, received as a percentage of GDP, India saw a 0.3 percentage- strategic guidelines in 2015, and has a detailed point decline since 2016. Encouragingly, India was one action plan, there are some elements that most of the very few countries which achieved increased FDI good practice IPAs would have developed inflows in 2020 (UNCTAD 2021, released at the time of further. There is strong evidence of a strategy this publication). As such, the ratios may have improved around priority countries and sectors, together for India relatively to its GDP and against comparative with a detailed set of key performance indicators countries, which is a testimony to the impact Invest India and description of the marketing tools that will is having. Nonetheless, more can be done for India to be used. Yet the action plan does not describe reach its FDI potential. While Invest India is only part how sectors will be reviewed / updated, or how of the solution (e.g. alongside policy reforms, further support to subnational IPAs will vary depending strengthening of subnational IPAs, etc.), as the national on the capacities of each IPA. agency it should continue identifying areas where it can further improve India’s relative FDI performance. The absence of more detail in parts of the action plan may represent a risk, as it means that activities • Competition: at the same time, India’s peers continue to are not necessarily appropriately focused around prioritize their own investment promotion activities and are specific opportunities and there is no formal becoming increasingly sophisticated in these activities. consultation process on these specific aspects 5 Source: UNCTAD 2021. World Investment Report. 6 Based fDi Markets, from the Financial Times’ database. 16 >>> LESSONS IN INVESTMENT PROMOTION: THE CASE OF INVEST INDIA FIGURE 9 - Dashboard (RAG7 Status Table) of Invest India Today RAG of Current RAG Upcoming CSF CSF Name Comment Status Challenges No. 1 High-level Maintained, but Covid-19 may create challenges with an expected government support drop in FDI flows. A political change could also pose risks. 2 IPA strategy Well aligned with GoI, but some strategic gaps in Invest India’s investment promotion action plan remain. 3 Clear mandate Well established for promotion, but there is a risk of dilution from taking on additional roles. 4 Autonomy Good degree of institutional and financial autonomy, although subject to political change . 5 Solid governance Established board, including strong private sector presence. 6 Private sector Experienced, private sector staff and management in place. experience 7 Financial resources Sustained, but still small budget, from multiple sources. 8 Investor-centric Highly effective marketing activity, but more can be done, services especially in retention and expansion activities. 9 National-subnational Many developed relationships, but a formal mechanism for framework national-subnational coordination is not in place. Source: Authors’ Analysis. Note: CSF= Critical Success Factor; IPA= Investment Promotion Agency. RAG status of ‘Red, Amber, Green’. Green indicates Invest India now has a few challenges in this CSF. Amber indicates some moderate challenges. Red indicates significant challenges. with key stakeholders. This may result in agencies other activities such as the Startup India Hub and and teams working in silos. The challenge around India Investment Grid. So far, it has been possible ensuring strategic alignment without a national to manage these various mandates by keeping strategy, becomes more pronounced in the promotion in a separate strategic business unit. subnational context - where the 28 subnational Invest India also indicates this combination state IPAs have varying capacities and priorities creates synergies and each mandate is managed (see CSF 9). Can a country like India properly with separate budget and resources. Invest ramp up FDI attraction without a consolidated India needs to ensure that its core purpose of national FDI strategy? investment promotion and facilitation does not get diluted in the future. Thus, which mandates The agency could also benefit from drafting an should Invest India keep, add, or shed to more updated corporate plan towards Invest India 4.0. effectively attract FDI into India? This should consider changes in global FDI trends, particularly in light of the Covid-19 crisis8, together CSF 4. A high degree of institutional and financial with India’s FDI priorities and current performance. autonomy: Invest India now maintains a high level of autonomy. Now, as funding comes from CSF 3. A clear, uncontested mandate: While Invest a range of different government sources, Invest India’s investment promotion mandate remains India’s activities must link to the specific interests strong, the agency is increasingly involved in of the funding source – e.g. one pot of funding 7 RAG status of ‘Red, Amber, Green’, where green indicates Invest India now have few challenges in this CSF, amber indicates some minor challenges, and red indicates significant challenges. 8 Post Covid-19 actions have actually started in investor targeting, such as the new Exclusive Investment Forum - a set of webinars led by senior sectoral staff to help investors navigate the range of options and locations to choose from within India. LESSONS IN INVESTMENT PROMOTION: THE CASE OF INVEST INDIA <<< 17 must be assigned for roundtables and roadshows, are likely to become more important than ever while another for State IPA capacity building. as a way of maintaining investment stock and Notwithstanding some restrictions, the overall generating expansions pipeline. So together budget is still split for practical purposes into with its subnational partners, the agency should different activities such as attraction (roadshows, reassess its offer and prioritize retention and roundtables etc.), entry and establishment, support expansion activities, especially during and after for state IPAs etc. Going forward, the question is the Covid-19 crisis. Similarly, advocacy is an area how Invest India can have an even higher degree in which Invest India is already engaged, but it of autonomy and get funding for initiatives that could still provide more advisory support to GoI. strengthen its core investment promotion mandate, CSF 9. Robust national-subnational framework: Invest not dilute it. See CSF 3 above and CSF 7 below.9 India recognizes the significant challenge around CSF 7. Significant and sustained financial resources: the subnational agenda, in optimizing coordination Despite increased budgets and sustained resources with state IPAs and broadening its scope. For as per its annual plan of activities, arrangements context, in 2008, 43% of all FDI projects that came for a long-term sustainable budget for Invest India to India went to the leading three states for FDI in still need to be finalized. Compared to peers, Invest the country. By 2019, the share to these same states India is lagging in having a direct representation had reached 48%, and had been above 40% every in priority target markets. To give an example, year in between,10 demonstrating that it does not Invest India considers the IPA of Vietnam, as a key appear that FDI is becoming more evenly spread competitor. This agency has representation in 10 across the country. Hence despite some of Invest locations overseas to interact directly with investors. India’s efforts to support the subnational agenda, For Invest India to replicate this, assigned budget there is still much regional disparity in levels of would need to increase substantially. It has been success. Therefore, going forward, Invest India has able to diversify its source of funding from several another dilemma: should it treat all states equally, or Ministries, which strengthens funding sustainability, should it keep helping states with the best chance of albeit with the qualification described in CSF 3 and investment success, or should it concentrate more CSF 4 above about broadening its mandate and on helping states with the most need of support with losing some autonomy. the intention of leveling them up? Thus, how could Invest India further increase, Currently, Invest India is not selecting one of secure, clarify and align its funding commensurate these approaches in particular over another, with its core FDI promotion mandate for a country as it is engaged in supporting 25 states in a the size of India? wide range of activities that are intended to be tailored to the needs of each state. For example, CSF 8. A strong investor-centric services orientation: in July-September 2020, Invest India organized Invest India has shown to be very strong in 11 webinars in five sectors, where the top 8-12 marketing, which is demonstrated in a well- states for each sector were given the opportunity known ‘brand’, with investors being well looked to present. Efforts to establish a greater local after during the investor lifecycle. However, how presence within India are ongoing. This includes can the IPA improve its investor service delivery, having three offices open across the country especially in the current Covid-19 context? by March 2022, while a senior staff based in The agency’s service delivery once the investor Guwahati has recently been appointed to focus has established (i.e. “Retention & Expansion” on the North East region, which has an untapped and “Linkages & Spillovers” stages of the CISF) potential. Yet despite all this activity, as described could be strengthened. For the reasons above in CSF 2, there is currently no formal mechanism (i.e. FDI trends and competition), these services to define responsibilities between national and subnational investment promotion. 9 Of note, no future obstacles were identified for CSFs 5 and 6. 10 Source: fDi Markets, from the Financial Times. 18 >>> LESSONS IN INVESTMENT PROMOTION: THE CASE OF INVEST INDIA >>> Conclusions This case study has touched on a range of good practices and Uruguay were also amongst the few that attracted adopted by Invest India that have helped ensure the record levels of FDI in 2020 (UNCTAD 2021). Much of agency’s success. They have shown that becoming a this success is grounded on their IPAs having high level top-notch IPA can be achieved in a brief period with an governmental support (CSF 1), thereby enabling many of initially modest budget, as long as policy makers and the other CSFs. IPA management align with the critical success factors Yet the task for all IPAs, including Invest India, is (CSF). Other IPAs have shown that their performance can far from over as the Covid-19 crisis continues to be remain strong despite the challenges that the pandemic an unprecedented demonstration of an IPA’s need has brought. In addition to India, countries like Sweden, to continuously reevaluate its strategy, institutional Israel, the United Arab Emirates, New Zealand, Estonia framework and investor service offering. LESSONS IN INVESTMENT PROMOTION: THE CASE OF INVEST INDIA <<< 19 >>> References Charlton, A., and N. Davis. 2007. “Does Investment Promotion Work?” BE Journal of Economic Analysis & Policy 7 (1). Cho, J. W. 2003. “Foreign Direct Investment: Determinants, Trends in Flows and Promotion Policies.” Investment Promotion and Enterprise Development Bulletin for Asia and the Pacific 1: 99–112. Crescenzi, R., M. Di Cataldo, and M. 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