Effective Investment Promotion Agency
The Critical Success Factors
Investment promotion agencies (IPAs) are a critical entity for bringing into reality the economic development goals of a government. Be it at Federal, State or City level, their primary role is to design and implement an effective investment promotion strategies that enable a state to attract, keep and expand quality investments in the domain.
When IPAs do their jobs well, the state is able to build an engine that creates jobs, increases revenues, builds infrastructure and improves overall productivity. With the current economic upheavals in Nigeria: consistently depressed GDP growth, high level of unemployment and increasing rate of poverty, there is a need to have effective investment promotion agencies (IPAs) across the country.
For an IPA to be effective in delivering on its mandates, certain critical factors have to align. These include the political will and personality of the governor, quality of board members, competence of the management, talents and attitudes of the agency’s staff, cooperation of state ministries and other agencies of government, and favorable external conditions.
The Personality and Political Will of the Governor
The first determinant of the effectiveness of a state’s IPA is the personality of the governor, in terms his or her disposition to business.
Some governors believe in the power of free enterprise to transform lives, and they translate that believe into concrete actions to have such enterprises from outside and within the country come into the state and operate successfully.
Some other governors are socialist in nature and thus, do not give much attention to encouraging private enterprise let alone offering a package of supports that make those enterprises thrive.
There are other governors who believe in the power of private enterprises for accelerated development but act in a contrary way. They consistently evolve policies that threaten the survival of private enterprises, mainly for immediate gratification, e.g. quickly shoring up IGR by over-taxing businesses, or for political convenience, e.g. victimizing business entities that belong to or have sympathy for opposition figures.
For IPAs to be effective, it is ideal that the state governor’s personality is pro-business. However, being pro-business is just a piece of the puzzle; the governor must have the political will to do whatever it takes, regardless of political consequence to him or his sponsors, to radically reform the business environment, bring investment into the state and provide needed supports to protect and expand those investments.
An important element of the political will that IPAs require to succeed is the governor’s stance on corruption. Where the governor is corrupt, or is surrounded by cronies and highly corrupt people, the business environment would be undermined — legal framework circumvented, business supports and policies for political patronage etc. — and such atmosphere drives away quality investments.
In Nigeria, Governors Nasir El-Rufai (Kaduna State), Kayode Fayemi (Ekiti State) and Sule (Nasarawa State) are the leading lights when it comes to political will to attract and expand investment in their states.
The Board of the IPA
The most effective IPAs have a dedicated board with leaders and members that are well-networked and well-versed in the world of investment attraction. The board should be there primarily for one and only one purpose: open doors of investment opportunities for the state.
Members of the board should ideally be people that have influence and can deploy such influence to bring investments into the state. Other role they are expected to play is to ensure the effectiveness of the agency.
Board members should be appointed purely on the basis of their ability to add value. The most potent way to ground an IPA and make it ineffective is to have them directed by political hacks and patrons.
Board members don’t have to be indigenes of the particular state: HRM, Muhammadu Sanusi II, is the co-chair of the Kaduna State Investment Council and he is not from the state. Same goes for Mr Jimi Lawal, Senior Councilor (on Investment) to Kaduna State Governor and a member of the board.
The situation in Nasarawa State is similar where Professor Ajayi Konyinsola, who is not an indigene of the state, heads the state’s investment and economic advisory council, aka, IPA. What is important is that Council members bring value and help the state achieve its strategic investment objectives.
The Management Team
The effectiveness of most IPAs lies in the team managing its daily affairs.
The head (often titled Executive Secretary or Director General) must be a reform-minded true professional (preferably not a core politician), a team-player that understands, at emotional level, the critical roles that the agency is set up to do.
He/she must also have the energy, competence (especially intellectual capacity to comprehend and apply best practices around the world), skills (strategic, leadership, communication, marketing, networking, human relations etc.) and attitudes (listening, positive spirit, open-mind, tolerance etc.) to effectively pilot the affairs of the agency.
From the profiles of the people heading IPAs that have been most effective in Nigeria — Umma Aboki (Kaduna), Akin Oyebode (Ekiti) and Ibrahim Abbdullahi (Nasarawa) — the ES/DG/Special Adviser should possess an advance degree and experience in any of business administration, management, marketing, economics, finance, entrepreneurship, law or investment banking.
An academic with the right attitude and consulting experience in Trade, Investment and Competitiveness could also do well in the role.
The Staff
Ultimately, the success of the state IPA rests in the hands of the men and women that are at the forefront and directly interface with the investing community on a daily basis.
From the secretaries and customer service officers who answer the investors phone and handle inquiries, to the communication director who publishes press releases and speaks on behalf of the agency, to the marketing and community engagement specialists who organizes investment events, to drivers who chauffeur investors around for site visits — everyone has to be on top of their games.
The staff of the agency, just like the board and the management, must be carefully selected against set criteria. They must not be core civil servants that have been cultured in destructive office politics, sycophancy and brown-nosing or ass-kissing behaviors.
They must be development-oriented people, who would go the extra miles to help the agency achieve its goals. Above all, whatever their specific role in the organization is, they must have excellent customer service behaviors.
The sources from where a pool of talents could be head-hunted include other state IPAs, relevant development agencies, consulting firms, industries traditionally known to have excellent customer service culture like banks, marketing agencies, and so on.
Regardless of their level of experience, new hires need to be properly oriented and brought up to speed on the visions of both the state economic development team and that of the IPA.
They need to be familiar with the state’s investment potentials, priority sectors, incentives being offered and the state’s unique value proposition. They should also be trained and retrained on the specific skills required to do well in their particular roles.
In terms of remuneration package, staff compensation should be as good as it could be. It must be comparable to what is on offer by reputable international consulting firms. To enrich their jobs and keep them motivated, meaningful investment projects should be entrusted to them to manage and given necessary resources to succeed.
A fair and transparent KPIs, along with commensurate rewards for exceptional performance, must be established.
Lastly, an objective, regular and high-integrity performance review system must be in place to monitor and evaluate the performance of each staff. Preferably, this system must be administered by a team of both senior executive and a reputable outside consultants.
Do not forget to establish an appropriate staff service conditions and regulations to guide against unnecessary liabilities such as sudden or irregular resignation.
Other Ministries, Departments and Agencies (MDAs)
It must be understood that investment promotion is a team sport. The IPAs alone cannot achieve the state’s strategic investment promotion objectives. They need to work with, get the buy-in and cooperation of other MDAs, including security agencies.
An important job of an IPA is advocacy for change of attitudes (on the part of civil servants) and reforms in the business environment. These are matters that involve many state officials and rank and file that are not under the control of the management of the IPA.
All the efforts and initiatives of an IPA, no matter how innovative and exciting, could be truncated by just one MDA who refuses to do the right things. Thus, it is important for the executive of the IPA to work hand-in-hand with heads of other MDAs and security outfits.
These heads of MDAs need to be involved, early on, perhaps by way of special committee (called Investment Promotion Council), in all decisions relating to investment in the state. This Council should ideally be headed by the Governor or a Senior Government Official not below the rank of the Deputy Governor.
The Council will serve many purposes: a vehicle to formulate and get everyone’s buy-in into the state’s strategic investment objectives, as well as to secure commitments of key MDAs in the implementation of the objectives. The Council needs to meet regularly to monitor and evaluate everyone’s commitments as well as address issues arising from the implementation of the investment objectives.
Special Entities and Institutions within the State
A multitude of factors go into making the business environment conducive for investments in any state. Among these factors include: the prevailing security situation; availability, access to and affordability of land and other factors of production; cooperation of host communities;, effectiveness of the judiciary; and quality of research and innovation centers.
Deliberate efforts need to be made to properly orient and carry along institutions like the traditional rulers, the judiciary, universities and higher education, trade associations and local chamber of commerce, workers unions, and indeed every resident of the state to exhibit behaviors and take actions that are most conducive for investments.
External Factors: Federal Government Policies and Regional Competition/Cooperation
A state is, to a large extent, only as conducive for investment as the entire country or region is. Decisions taken by the Federal Government could have a consequential impact on the achievement of any state’s investment objectives.
A point in question is the recent decision of the Federal Government to reduce import duties on cars — from 35% to under 5%. This runs against the interest of the automobile assembly companies whose investment commitments Kaduna State recently secured.
Same goes for Innoson Motor Vehicle and the Asaba-based GIG Group — local investors who recently made significant investments in car assembly plants. In just a single breath, policy and goal misalignment between the states and FG can lead to investments worth billions of Naira chased away from several states.
Another important external factor critical to the success of IPAs is the level of competition and cooperation among states that share borders with each other. Rivalry for investments among neighboring states could bring out the best in each state and make them individually more attractive to investors.
But when those rivalries become unnecessarily toxic — like the ones that sometimes happen between Cross River and Akwa-Ibom states, Kano and Kaduna states, Lagos and Ogun states or Benue and Nasarawa states — such rivalries could and do undermine the work of the respective state’s IPA and chase away investments from the region altogether.
More so, rivalries and sheered lack of cooperation among states can worsen security situation in a particular region and make it difficult for any state to achieve significant progress in investments.
Conclusion
By and large, investment promotion anywhere in the world is a complex and multi-stakeholders exercise. To succeed, the agency charged with the responsibility needs the cooperation and the commitment of both internal and external stakeholders. But over and above, the agency needs to have the governor’s full backing and commitment to all reforms needed to improve the business environment.
