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Understanding Investor Decision-Making Overview of the Site Selection Process

Understanding Investor Decision-Making Overview of the Site Selection Process. Robert Whyte Sydney, Australia December 2010. Drivers of Location Decisions. Most important factors influencing location of companies in 2007-2009 (% of TNC responses) Size of market (21%)

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Understanding Investor Decision-Making Overview of the Site Selection Process

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  1. Understanding Investor Decision-MakingOverview of the Site Selection Process Robert WhyteSydney, AustraliaDecember 2010

  2. Drivers of Location Decisions Most important factors influencing location of companies in 2007-2009 (% of TNC responses) • Size of market (21%) • Growth of local market (20%) • Access to international/regional market (10%) • Stable investment environment (10%) • Availability of skilled labor force (9%) • Availability of cheap labor (9%) • Access to natural resources (6%) • Government effectiveness, incentives (5%) • Others (10%) Source: UNCTAD World Investment Prospects Survey 2007-09

  3. What Investors Expect? 1. Economic reasons/motivations to invest • Market • Resources • Efficiencies • Strategic assets • Good business climate for FDI • Good business facilitation Investor surveys tell us:

  4. Investor Perceptions of Business Climates • Overall there is an optimistic outlook toward the global business environment for 2012. Level of TNC Optimism for the 2010-2012 Global Investment Environment 1: very pessimistic, 5: very optimistic Source: World Investment Prospects Survey 2010-2012, UNCTAD

  5. Investment Facilitation and the Business Environment • Good facilitation (GIPB score) by IPIs is strongly correlated to the quality of their business environments (Doing Business Rank) • But IPIs may have the biggest impact where they can provide otherwise absent transparency. This is the role of investment facilitation. • Note: GIPB assesses 183 national IPIs Weak  GIPB Score Best Practice • Top 3 GIPB in the Pacific • Fiji (67%) • Vanuatu (45%) • Tonga (40%) • Top 3 Doing Business in the Pacific • Vanuatu (60) • Samoa (61) • Fiji (62) Vanuatu Samoa Fiji Tonga Weak  Doing Business Rank Best Practice

  6. The Site Selection Process Important information:

  7. What is the Long-Listing Process Like? Define projects needs… • Select long list of countries • Broad data comparison >>> Labor Cost, Taxation, Infrastructure • Desk Research >>> Number of locations too long to visit, too expensive!! • 2-3 weeks to gather information and move to short list >>> If information not available location will most likely to fall out the list • Very often long-listing is outsourced to site location consultants >>> with few exceptions some few specialized consultants manage long listings and sometimes they also do short-listing too • Information sources are mostly online >>> often site location consultants use their own existing data from other projects • Limited contact (telephone/email) with IPI >>> only when specific information needed

  8. Business Outsourcing Long-Listing Process: Costs, People, and Business Environment A T Kearney Global Services Location Index score Financial Costs 40% People Skills and Availability 30% Business Environment 30% Compensation Costs 80% IT/BPO experience and skills 40% Country Environment 60% Labor Force Availability 20% Infrastructure Costs 10% Country Infrastructure 20% Educational Skills 15% Tax and Regulatory Costs 10% Cultural Adaptability 10% Language Skills 15% Security of IP 10% Source: A.T. Kearney Attrition Rates 10%

  9. What can the IPI do to Influence Investors? Make it onto the Long List!! • Understand company objectives in priority sectors • Target only those sectors in which country is able to compete (benchmark your location again and again) • Have quality information available to meet company needs at long-listing stage • Be able to source more detailed information for the company at the short-listing stage • Provide international business standards of customer service • Understand who makes decisions • Multipliers (site location consultants) are an IPI’s best friend! Facilitation - information, information, information

  10. Thank you. Questions

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