Foreign direct investments (FDI) promotion has become a hot topic in recent years. Almost every OECD country has one agency dealing with FDI, with many countries having created an IPA (Investment Promotion Agency) or reformed an existing one in the last decade.

Generally speaking, the central task of IPAs is to attract foreign investors, to help them in their entry and operations in host countries and to provide various after-investment services to retain investments, while at the same time giving policy advice to their governments and keeping the development interests of their economies in mind.

For instance, the Israeli IPA is Invest in Israel, which is a business authority on a government platform and a one-stop-shop for foreign investors. It counts on 45 Israeli economic missions around the world that conduct investment promotion, among other tasks. Large scale foreign investments have been made in Israel in recent years, with a significant portion of these investments related to knowledge and technology-intensive sectors.

Given the significant influence of FDI over the economy of the target country, one would expect a wealth of high-level policy research about the topic. However, the subject is still insufficiently explored.

In attempting to tackle this challenge, the OECD is running in recent years a workgroup named the IPA Network. One of the first products of these networks is the “Mapping of investment promotion agencies in OECD countries” report. This report, based on a comprehensive survey, provide comparative evidence across agencies, categorize their profiles, and explain existing trends and practices in investment promotion and facilitation.

The survey emphasizes the changing nature of investment promotion undertaken by IPAs: “While in the 1980s and 1990s, IPAs were primarily engaged with disseminating information on their country’s investment opportunities and business climate, the Internet has made a great amount of information directly available to investors and IPAs have had to engage in more sophisticated activities to gather business intelligence and attract multinational enterprises. IPAs currently offer a wide array of different services – far beyond information dissemination – to both potential and existing investors and are also often involved in business climate reforms.”

Here are some other important findings that emerged from this paper:

1.    Multiple policy mandates: most IPAs have at least one other mandate or a little less than six different mandates on average. The most common combination of mandates is for export promotion and innovation promotion. Other key mandates reflect the role of IPAs in promoting investments that support socioeconomic objectives, including the promotion of regional development, green investment and domestic investment.

2.    Size does matter for budgeting but it is also a matter of priorities. The median budget is $12 million, which is a huge difference from the average ($69 million). This is because countries with relatively high GDP have the means to invest more in their IPAs. However, there are exceptions to this rule, such as Ireland that invests much more than could be expected of a country of its economic size.

3.    A tendency towards autonomous structures: most IPAs are structured as autonomous public agencies, while only 30% of them are regular governmental departments within a ministry. This allows them more agility and ability to be competitive to draw talent.

4.    Focus on investment generation and facilitation: Most OECD agencies focus on activities aiming at generating and/or facilitating investment leads, while only a minority focuses on image building. However, a substantial minority tries to balance between those different types of activity.

5.    Focus on “quality investments”: The majority of IPAs apply some kind of prioritization strategy, such as prioritizing certain types of investors (e.g. financial vs. strategic investors) or certain types of projects (e.g. R&D vs. Manufacturing); some use both criteria.

6.    It takes a network to promote foreign investments: OECD IPAs typically operate in a dense and complex network of public and private stakeholders, as they interact with 25 different organizations on average in the framework of their activities.

The findings of OECD research can be seen as an attempt to map the current state of affairs around IPAs. The organization continues to further knowledge and share industry best practices, linking certain patterns of activity to preferred outcomes, as part of its IPA Network project. Invest in Israel is happy to be an active participant in this network, and tracks closely with its activity in order to be aware of this important body of knowledge for its strategy.