19 Jan Dear World Leaders in Davos
I know you are all together now and I have been thinking to write this letter a long time and wanted to send it to Santa Claus as my wish list for 2017, but thought it may be best to send it directly to you.
We have been working in the field of Foreign Direct Investment (FDI) for many years and I am sure FDI is on the agenda in Davos as it relates to economic development, human progress, sustainability, politics and is often seen as the panacea for many economic challenges countries face.
We work with your governments to secure or create new jobs through FDI projects that are often initiated by the same companies run by the CEOs that sit at your table in Davos. The clients of our firm come to us to help them build their next facility in emerging markets. 10-15 years ago we would just do the site selection- a relatively simple job of comparing data and coming up with a short list. However, this is no longer why investors come to us. They collect the data themselves. They come to us because they no longer understand your policies, or they want to know if they will have to pay back their (tax) incentives next year or when there is a change in your government. They hire us because government staff cannot provide the answers they are looking for, or they do not receive answers to the emails they have sent to national Investment Agencies or to other governmental institutions responsible for attracting investment. The companies also ask us why you offer many incentives but often not anything that would actually make a difference. In meetings, our clients are often offered corporate income tax incentives, but they had already mentioned that our new investment will not be booking profits in your jurisdiction so the tax incentive you just offered does not really matter.
Our clients tell us how they had never seen you, nor met you – but how they were required to hold an opening ceremony so that you could cut the ribbon in front of the cameras. After that, you left and they saw you on the news or during the next elections when you talk about job creation, attracting FDI and knowledge and capital spillover. And at the same time you never asked how the new investment is developing, or how they can support you in growing the firm in their country, or whether they can solve any of the challenges they face. In other words they ask about your after-sales support – about whether you care about their investments once they make your country a home.
They also asked you to please understand that these investments are long term and that it requires a lot of dedication and commitment. Therefore they did not understand why they received no answer when they tried to call your investment organization. They also did not understand why the information they received was not correct, outdated, or irrelevant and why the staff of these organizations is often not focused on the business case, have poor language capabilities, or provide poor or even antagonistic service. They also do not understand why your country is ranked number one in so many things while they still see so much poverty, poor hard and soft infrastructure, and limited skilled and capable staff.
Often they do not understand the terminology you use when you talk about clusters, locational incentives or knowledge spillover – and they doubt that you do, either. During the discussion with your government, they were also asked to invest in a region that had high unemployment, but they do not understand why they are held responsible for solving unemployment in one of your regions where people need to be re-educated and re-trained in order to work in the company’s facilities.
When you talk about skill levels you often mention that you have top universities and a highly educated workforce. This is impressive, but education and a university or college degree is like a driver’s license. Someone who has just passed for their driver’s exam may be technically able to drive a car but has no experience in dealing with traffic, or even in understanding how to get where they need to go. Rather, we would like to see the experience and capabilities of your labor population in specific industries.
Also in the US and Europe – where many speak of the need to keep manufacturing and to re-shore activities – which we are all willing to consider, but were you not the leaders that facilitated the globalization of our production networks to countries like China and other emerging markets? Now you ask us to come back, but we cannot find the skilled staff anymore.
We also do not understand why you want to attract FDI projects but have prohibitively prescriptive immigration policies, and where obtaining a visa or work permit for foreign staff that needs to set up the facility in your country and start operations cannot get a visa.
Today we need stability, predictability, and transparency in policies, but often we face uncertainty and complexity of policies complicated by geopolitical tensions.
On the other hand, we also tell our corporate clients that their focus on cost cutting is no long-term solution for a firm that faces competition. Rather, innovation of new products or services that provide daily life solutions to customers around the world is the solution. Cost cutting is also no solution for you: attracting FDI through low labor costs and low taxes can easily be copied by other countries. The focus on a well- educated, trained and skilled labor force as well as an entrepreneurial eco system is what makes economies thrive.
While you are in Davos, please also discuss how your policies, objectives and goals are actually experienced by the people that want to really invest in your countries, and how you can change this and really make a difference. And … yes we are still willing to invest, but please depoliticize our investment projects, and do not let your ego prevail over our FDI projects.
Dr. Douglas van den Berghe
CEO- Investment Consulting Associates (ICA)