VEDA 2013 FALL CONFERENCE

Bringing the Global Economy Back to Virginia:

Global FDI Trends and Best Practices

October 2013

AGENDA

Introduction to OCO

What is FDI and Why is it Important?

Global Trends in FDI

FDI Attraction Today

Best Practice Examples

Summary

3

Clients include US locations such as North Carolina, North East Ohio, San Jose, Milwaukee, Missouri, Florida; plus numerous EDOs across the world

OCO’s services include:

– Consulting

Strategy; benchmarking; organization

development; marketing / propositions;

client training

– Outsource Solutions

Trade & investment support and lead

generation

– Analytics

Business intelligence , research, insight, and

profiling; in-house software solutions (CRM,

Websites, pipeline development)

Economic development consultancy incorporated in 2001, 45 staff in 5 international offices

Introduction to OCO

4

What is FDI and Why is it Important?

FORMS

FOREIGN DIRECT INVESTMENT An enterprise making a cross border investment that directly involves a capital spend or creation of

jobs. This can be a new investment, or an expansion of an existing facility.

Wholly Owned

(Greenfield) Partnership Joint Venture

Merger / Acquisition

Share Acquisition

DEFINING….

PROJECTS FLOWS / CAPEX STOCKS JOBS

5

What is FDI and Why is it Important?

The US is by far the

largest recipient, and

source, of international

investment

Virginia is in the top

15 state for FDI

projects in the US

In 2013:

- Irish company Greencore created

350 jobs

- UK company Rolls Royce created

140 further jobs

- Indian company Aditya Birla Minacs

created 250 jobs

Foreigners invested $269 billion

in nominal terms in US

businesses and real estate in

2009

In 2010, foreign firms

employed over 200,000

people in Virginia

6

66%

34%

Investment

from Overseas

Investment from

within the USA

Source: fDi Markets from the Financial Times – No. Projects 2007 - 11

What is FDI and Why is it Important?

7

3%

33%

51%

80%

100%

9%

1980

1990 2000

2005

2009

2012 $698 bn

$2,078 bn

$7,511 bn

$11,674bn

$18,312 bn

$22,813 bn

Global Trends in FDI Global FDI Stock

8

M&A is an increasingly important gauge of global FDI, and tends to react faster than greenfield, expansions and other forms of FDI to the prevailing market conditions....

Global Trends in FDI Considering M&A

-

200 000

400 000

600 000

800 000

1 000 000

1 200 000

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Value of Cross-Border M&A Sales, 2003 - 12 ($m)

Primary Manufacturing Services

Source: UNCTAD

9

2.0

2.2

2.4

2.6

2.8

3.0

3.2

3.4

3.6

3.8

4.0

8,000

9,000

10,000

11,000

12,000

13,000

14,000

15,000

16,000

17,000

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

Millio

ns

Total Projects Estimated Jobs

Global Trends in FDI The Outlook for Greenfield

Source: fDi Markets & OCO Analytics

10

Global Trends in FDI Evolution of Destinations

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

FDI Flows

Developing Economies Developed Economies

Source: UNCTAD

11

Source: OCO Annual Report 2012

Global Trends in FDI Evolution of Destinations

12

Global Trends in FDI No. Projects, 2012

13

Global Trends in FDI Estimated Job Creation, 2012

14

• USA - Business Services; Financial Services; ICT

• UK - Business Services; Financial Services; ICT

• GERMANY- Food & Drink;

Advanced Manufacturing • JAPAN - Advanced

Manufacturing; Electronics; Automotive; Chemicals

• FRANCE – ICT; Food & Drink

• SPAIN- Financial Services, Clean

Energy • INDIA- ICT; Financial Services;

Business Services • SWITZERLAND • NETHERLANDS • ITALY • CANADA- ICT; Metals; Financial

Services Business Services • SWEDEN • CHINA- Telecoms; Financial

Services; Advanced Manufacturing

• SOUTH KOREA

• UNITED ARAB EMIRATES - Financial Services; Real Estate

• RUSSIA – Energy; Financial Services; Metals; ICT

• BRAZIL – Metals; ICT; Food & Drink

• TURKEY - Financial Services; Real Estate

• CZECH REP - ICT

TIER 1 TIER 2 TIER 3

Global Trends in FDI Where’s the Next Project Coming from?

15

Tier One

Tier Two

Tier Three

Business

Services, ICT Financial Services

Advanced

Manufacturing Electronics,

Advanced

Manufacturing Real Estate

Food & Drink

Clean

Technology

Business

Services, ICT

Telecoms,

Manufacturing

Global Trends in FDI Where’s the Next Project Coming from?

16

Source: fDi Markets and OCO Global

43%

23%

57%

77%

0% 20% 40% 60% 80% 100%

2003

2010

Location Determinants for All Projects 2003 & 2010

Cost Factors Quality Factors

Global Trends in FDI Know the Factors that Really Matter

17

Until 70s

“Facilitation”

80s

“Image building” / Communication

90s

“Targeting”

Today

“Solutions”

• Liberalize FDI regimes

• Reduce barriers to inward investment

• Strengthen standards of treatment for foreign investors

• Enhance functioning of markets

• Actively seek to attract FDI by ‘Marketing’ their countries

• Establishment of investment agencies

• Proactive approach towards attracting FDI

• Targets foreign investors at sector and firm level

• Adopt private sector sales and marketing practices across the organisation

• Scope of services enlarged to include M&A, alliances, joint ventures and equity stakes

• Development of clusters

• Development of value propositions

POLICIES

So at What Stage are Virginia EDOs?

FDI Attraction Today The Model Continues to Evolve….

18

Each year there are typically 10,000 global EDOs competing for just over 15,000 projects.

Increasing number of EDOs together with increasing sophistication

Corporations are bored of IPAs who don’t know their business.

SURVIVAL OF THE FITTEST!

“We are interested in expansion overseas but we have not enjoyed good experiences with agencies in the past. They tend to come in and talk about a lot of things but never deliver anything of real worth to us as a company.”

Clear Orbit Inc (Supply Chain/Enterprise Software)

“EDO solicitations were taking too much time and distracting us from our core business. We have established a Government Relations division to filter out the noise. Only EDOs that understand our business model will get through.”

Citigroup, New York

“We are fast approaching a world where we will ask EDOs for a prequalification screening/tender response before we agree to work with them. There’s too much amateurism out there and we don’t know where our data ends up.”

American Express

FDI Attraction Today The Investment Climate

19

FDI Attraction Today What are Other States Doing?

Which States Directly

Assist in Overseas

Markets?

0

21

3

18

8

Limited / no evidence of international activity

Some evidence of trade missions / international

engagement

Regular trade missions and single trade office

Less than 6 offices, more trade focus

6+ FDI (and Trade) offices

0 20 40 Breakdown of State’s International Activity

Has an international investment / trade office

Does not have an international investment / trade office

20

Kansas City, Missouri, has built its reputation as

a hub for data center solutions. As of now it

hosts over 20 major data centers of such

companies as Master Card International, AT&T

and Bank of America. The city built its

proposition around main location drivers for

data centers:

– Availability of suitable facility or site

– Robust telecommunication infrastructure

– Reliable electricity supply

The Think Kansas City web-site features an

extensive data bank of available property with

full description and rates. When investors look

for outsourcing solutions, the agency provides

them with quotes from qualified data center

providers within 24 hours from submission of

requirements.

http://www.thinkkc.com/

Best Practice Examples At the Community Level

21

The Partnership is responsible for attracting new business, jobs and investment to the three-state, 15-county region at the intersection of Ohio, Kentucky and Indiana.

Marketing the region domestically and internationally.

Generating and managing prospects, identifying retention issues and opportunities and partnering with local communities to win projects.

Best Practice Examples At the Community Level

22

A leading destination for quality business attraction in Michigan

New focus on FDI

Developing intelligence research, marketing collateral, lead generation efforts

SPARK CEO is Chair of IEDC, with an ambition to support members in developing their FDI programs.

Best Practice Examples At the Community Level

23

Best Practice Examples At the State Level

24

ORGANISATION ISSUE TO BE ADDRESSED

SOLUTION IMPACT

The Missouri Partnership

How to optimise resources and achieve

most impact most economic development

Development of a composite score to

evaluate project opportunities using:

– Job numbers

– Capital – Average salaries

Adapting our offer to

suit different target markets, e.g.

promoting M&A to Chinese investors

Assessment of long term impact of projects defines levels of support

Good pipeline of

clients from emerging markets

Trade clients evolving

to M&A opportunities

Best Practice Examples At the State Level

25

Best Practice Examples At the National Level

26

FDI is not a panacea for economic recovery but

it does play a role

FDI does not just happen after a mission to

Europe, it takes time and commitment

Strategic investors do not respond to ‘quality of

life’ or ‘incentives’ alone: you need a business

case

Research the pool of potential companies you

intend to prospect - and get targeting

Learn from, recognise and cultivate your

existing investors

Skills and talents are the new battle front for FDI

Universities and centers of excellence have an

increasingly vital role to play

Summary