Eurada News nº398 – March 2020
EDOs & COVID19 – 10 action points to take now to contain the damage to investment attraction
Carolina Arriagada Peter, a senior FDI consultant, proposes in this article 10 useful measures Economic Development Organisations should take into account to tackle the challenges posed by the coronavirus pandemy.
The black swan of 2020, as Coronavirus is often referred to, is spreading faster than anyone imagined. UNCTAD estimated mid-March that we should expect anything between 5% to 15% of COVID-related decline across the Foreign Direct Investment (FDI) industry. However, last Thursday March 26th, it released a new number, with a forecast of a 30-40% drop.
With almost every country in the world affected by COVID19 there is no place to hide, nor formula with which to evade business disruptions. Sequoia called CEOs to move to business survival mode, quoting Darwin surmising that those who survive “are not the strongest or the most intelligent, but the most adaptable to change.” Foreign investors know this. What nobody knows just yet is exactly how it will affect their particular company or their location. The work of many Economic Development Organisations (EDOs) and International Promotional Agencies (IPAs) is at risk: a proportion of the business they worked so hard to attract in the first place are likely to leave, downsize or divest.
What can EDOs/IPAs do to minimise risk? In my Aftercare/Business Retention consultancy specialising in helping countries retain investors, I have seen on the ground that the business support industry isn’t well-prepared to deal with sudden changes in the business environment. Very few IPAs/EDOs have crisis management plans in place. Coronavirus does not allow us to afford such a luxury. The costs of not looking after foreign investors is simply too high.
Below are ten action points that EDOs/IPAs should take now to contain the impact of COVID-19:
- Don’t panic – share your insights. Countries need to act as they see fit to contain the virus. Industry disruption is part of that. Your local business support stakeholders are dependent on you to be a steady hand and represent foreign investors/business in these circumstances. EDOs/IPAs must rise up and work closely with other business support organisations – both public and private, and offer insights, access and strategic thinking on how to address the crisis.
- Communication is vital. From my experience working with countries facing crisis, the number one request from foreign investors/business is for better communication: their need is for communication to be clear, well organised and frequent. Investors understand that uncertainty reigns, however they have little patience for mixed messages, poor communications or radio silence. Your communication work will help established investors make better-informed decisions, limit risk, and systematically improve their planning. If in doubt, over-communicate.
- Show you care. If you have not done so already, make an effort and contact as many established investors as you can. Reassure them that your country/city/place cares about their wellbeing and values their presence. Some locations might write letters signed by the senior government authority, others send surveys, organise webinars, etc. But please don’t broadcast one way-information. Have a dialogue. Listen to their needs. And even when you don’t have all the answers, there might be some specific requirements that fall within your scope.
- Look at your data. The same UNCTAD report estimates that the hardest-hit industries will be automotive, energy, airlines and consumer-facing. Has your local medical office identified areas of your territory or country that are at higher risk of infection? Cross-reference all the information you can gather with you existing data and this may help you identify which investors are likely to be affected first, and therefore with whom you should prioritise contact.
- Think strategic sectors. When things get tough, and they will, EDOs/IPAs have to focus their attention in strategic sectors and support those companies that are key to keeping the economy afloat. Close coordination with public sector emergency services is key to amplify efforts.
- Think in phases. COVID19 will affect business in different ways and it is important to recognise the various phases of disruption. The first phase focusses on keeping safe and helping investors look after their employees and clients. This will include adjustments such as remote working and flexible working hours. In retail, this could mean controlled access to premises to restrict exposure to other shoppers and protect more vulnerable customers. The second phase is about helping investors continue business as (un)usual. With disruptions in supply chains, the workforce not being able to show up in factories and logistics affected by international shipping restrictions, companies including foreign investors need to think creatively about how to address those shortages. The length and depth of the COVID19 crisis is not clear, but what is clear at this stage is that unfortunately all businesses will be faced with serious decisions. This phase is about keeping the subsidiary that is in your country afloat. Focus goes on accessing liquidity, achieving flexibility on contractual commitments and supporting new ways of working together among stakeholders.
Considering these different phases will help you segment better, deploy resources and prioritise.
- Take action; fast. With many countries declaring a state of emergency, there is no time to lose. Work alongside public offices to help design measures for immediate action to alleviate the pressure on local companies. From setting up an Aftercare One-Stop-Shop, to a government-backed unit to support companies facing distress. From strengthening SME support to working alongside critical suppliers to keep an industry active. There is no textbook to follow, but many demands to address. Take action. Fast.
- Put values at the core. Crises are overcome by people and people are driven by values. Put them at the core of your work. Share real stories about how the community is working together. Highlight cases that speak about ingenuity in adversity or creative approaches to keeping positive despite COVID19. Interview foreign investors who are going the extra mile to support their local communities. In times of unprecedented challenges new, lateral and inclusive thinking is gold. Encourage it and pivot; the future of your location depends on it.
- Find your feet & voice. EDOs/IPAs have an important role to play when it comes to articulating public action and helping foreign investors navigate uncertainty. However, your own organisation will have to excel first. Your own capacity to deliver services while working remotely will be tested. Your ability to provide customer service and be relevant will face scrutiny. And there will be a space for leadership; yours. Take it.
- Join or set up a COVID19 recovery task force. Think beyond the crisis. EDOs/IPAs should be part of #COVID19recovery task forces. A crisis of this magnitude can’t be addressed single-handedly. Make sure you are part of something bigger. A broad mix of skills and capabilities will be necessary to enable your city or community to rise up stronger and these will come from your extended stakeholder family, foreign investors included. The private sector plays an important role in any such event; make sure they are by your side so that you are back to business as usual faster. And if nothing of that nature exists already, then set it up and lead.
Irrespective of the number of COVID patients in your country, current investors will know first-hand whether your location supported them. And future investors will know how your location managed this crisis and will incorporate that insight into future decision-making. In other words; future investment attraction starts with looking after your established foreign investors today.
Written by Carolina Arriagada Peter, senior FDI consultant specialised in retaining investors. She is the Managing Director fo Cities & Collaboration, a boutique consultancy dedicated to linking Trade & Investment with sustainable development. Her upcoming book “Aftercare Explained” is the first in the industry to look how to retain and grow foreign investors and is due to be released this year.