The Advanced Investment Certification Programme for Regions in Croatia

The Advanced Investment Certification Programme for Regions in Croatia The Advanced Information Standard:Approach and Methodology Presentation by Declan Murphy and Dražen Derado Seminar “Advanced Information Standard”, 27. i 28. listopada 2010.

Main Themes of Presentation • Background • 2. Challenges for Croatia and Regions • 3. Importance of Information • 4.ICPR standards • 5.The Advanced ICPR Modules -- Information • 6. Assessing and Certifying Progress • 7. Summary Aims and Objectives

Part 2

Recap on Comparative Performance Source: UN World Investment Report 2010

AICPR Information Modules INVESTOR INFORMATION REGIONAL INFORMATION COMPANY INFORMATION SECTORAL INFORMATION INTEGRATED WITH PROPERTY + MARKETING STANDARDS COMPETITIVE- NESS INFORMATION RESULTS + IMPACT INFORMATION

Recap on How the AICPR differs? • The AICPR Information Standard = New levels of excellence. • Six modules are the foundation for the AICPR Information Standard. • Expand existing information, new information, more comparative data • Use information in a proactive + public way, make it more accessible • New focus on competitiveness and results + impact of FDI. INVESTOR INFORMATION REGIONAL INFORMATION COMPANY INFORMATION SECTORAL INFORMATION COMPETITIVE- NESS INFORMATION RESULTS + IMPACT INFORMATION

AICPR Information Modules • INVESTOR INFORMATION • REGIONAL INFORMATION • COMPANY INFORMATION • SECTORAL INFORMATION • COMPETITIVENESS INFORMATION • RESULTS + IMPACT INFORMATION

INVESTOR INFORMATION • Under the ICPR Basic information Standard the counties were provided with the template for an ‘Investor Information Checklist’. This checklist is comprehensive and mainly an internal archive. • What information is publicly available to investors? What information can investors download from websites? And is the information up to date, available in English and other languages? And with comparative data from competing regions? Quick access is important to investors. • The Advanced Information Standard proposes the preparation of vital facts and statistics -- ‘Key Facts for Investors’ – that will provide a summary statement with key facts, comparative data – for public use and to be updated regularly (monthly or at least quarterly). • A guideline template for this ‘Key Facts for Investors’ is shown on the next page • Some counties will already have this type of information prepared and available. These notes provide a guide and check for counties.

Key Facts for Investors • Introduction – general statement, population trends + priority sectors • Economy – GDP growth, inflation, unemployment, exports/imports • Demographics – population by age group, region, workforce, skilled labour force, productivity, migration • Education – numbers in education, graduate output by discipline, public expenditure on education, other key facts and comparisons • Wages and Salaries – average industrial earnings and hours worked, same information for target sectors, social welfare contributions, comparative labour costs, personal tax rates, how wage negotiations take place • Working Hours and Holidays – employment legislation, statutory working hours (maximum, minimum, average weekly) • Telecommunications – summary statement on telecommunications infratsructure, costs of international calls (with comparisons)

Key Facts for Investors • Electricity -- Sample electricity charges, comparisons - price per kWh • Water – water rates per cubic metre in region • Oil and Gas prices – oil price per tonne, gas prices, with comparisons • Factory and Office Prices – land, factory and office rental/buy costs • Cost of Living – how Croatia/region compares with others • Transport – air, road, sea route and costs, and transit times, all with comparisons to other countries and regions • FDI in Croatia – number of companies, origin, total employment This type of clear factual information is fundamental to ‘best practice’ in providing information and successful FDI promotion. See sample Irish information template at: http://www.idaireland.com/news-media/publications/library-publications/ida-ireland-publications

FDI Determinants for Investors Surveys such as this AT Kearney survey show key issues for investors and point to how information might be developed and presented

PR0POSED ACTION + DEADLINE • Prepare ‘Key Facts for Investors’ based on recommended template. • Ensure comparative data (national and county) is included, that is, comparisons on population, type of skilled people available, wage costs, transport costs, utility costs, etc. with other countries and regions/counties. Use available surveys, etc. to guide preparation. • Ensure document is available in English (+other languages optional). • Ensure document is available in paper and electronic form. • Ensure document is accessible on website. • Deadline for completion: 30 March 2011.

REGIONAL/COUNTY INFORMATION • What county information can show the competitive advantage of the county to investors? What are the competitive strengths of the county? And opportunities provided by the county to an investor? • What are the weaknesses and threats that regions/counties face? And how can they take action to address these? • SWOT analysis undertaken with focus on opportunities and strategy for the county provides a useful method to undertake this analysis. This is an internal process for county promotion agencies to gather information and use in planning and selectively in county profiles. • A key issue is how a region/county presents and uses the information from SWOT in identifying competitive advantage for investors • The SWOT provides material for preparing a summary county profile for investors. It may include issues that go beyond the region/county.

SWOT Analysis – Why? Strengths, Weaknesses, Opportunities and Threats Key Factors based on relative position with competing countries and regions/counties. Regions and counties can undertake this internal analysis to identify their comparative status and how they might take action to deal with facts and issues that impact on investors.

Presenting SWOT: An Example Strengths Weaknesses Reform undertaken + improved business environment Skills for new industries GDP growth but decline 2010 Opportunities Rising labour costs Progress with Privatisation Decline in foreign inflows and impact FDI achieved To date Economic environment Weakness of Local supplier industry Competition from other regions Threats Local Engineering Skills but Need Upgrading Need for National Policy

Regional Competitiveness A one-stop guide for understanding regional competitiveness and performance, relying on comparative statistical information at the sub-national level, graphs and maps. This third edition provides the latest comparable data and trends across 2,000 regions in 30 OECD countries, including a special focus on the spatial dimension for innovation. www.oecd.org/gov/regional/statisticsindicators OECD, EU, World Bank and other sources provide useful data that can assist in finding competitiveness comparisons with other regions and competitors for FDI

PR0POSED ACTION + DEADLINE • Undertake a SWOT analysis ideally with inputs from local experts and local sources e.g. Chambers, private firms, surveys available, etc. • Use the SWOT analysis to identify regional/county strengths and opportunities that should be highlighted to investors • Use the Swot Analysis to identify threats and weaknesses that local policy makers need to address and prepare an ‘answer’ to investors on such issues. Note: SWOT is internal document. • Prepare a summary regional profile (3-4 pages) for use with investors • Ensure document is available in English (other languages optional), available in paper and electronic form and accessible on website. • Deadline for completion: 30 March 2011.

COMPANY INFORMATION • Regions/counties should ensure that information on companies in the region (and nationally) are part of their information archive, e.g.: • Company listing that shows separately all FDI companies and has short profiles of major companies and that can show categories: • Greenfield • Expansion projects • FDI companies with various business functions e.g. R&D, etc. • FDI companies with regional H.Qs. in the region • Press announcements on FDI companies • Major indigenous companies that are potential business partners and/or potential product, component and service suppliers – short profiles on each • Database of indigenous companies that are qualified/interested in linkage i.e. supplying FDI companies. In the longer term regions can work to build more linkage and therefore the Advanced Information Standard seeks that regions/counties begin to build this database.

FDI Company Listing • An up-to-date list of FDI companies is vital for a number of reasons: for promotion, for meetings with potential new investors, for media enquiries and for policy making. This is a simple task but is often not done well by many investment promotion agencies • The list should contain (as a minimum): • Company Name • Location in Croatia • Origin (country of origin) • Investment (if company is willing to publicise) • Jobs • Project activity • Contact – name and contact details of person in company • The list should be in English and accessible on website.

Short Co Profile 1: Kostal • Kostal Ireland, a subsidiary of a German group, opened its first Irish plant in Co. Limerick in 1981 as an integrated manufacturer of automotive electronic systems including window lift controllers, vehicle climate control and steering column controls. This site currently employs over 870 people. • The company opened a second manufacturing site at Mallow in Cork plant in 1998 where it now employs 440 people. This site is recognised as one of the most advanced electronic manufacturing sites in Ireland (and by extension Europe) focusing on complex integrated auto electronics assemblies and as a new product pilot production plant for the group. • Kostal Ireland employs over 1,300 and is the largest German manufacturer in Ireland and a major employer in the Southwest region. Activities carried out at its Irish sites include manufacturing, product development, software development, financial shared services, supply chain management, IT support, manufacturing process consultancy and research.

Short Co Profile 2: Moffett 1. Moffett forms part of the truck-mounted forklift division of Hiab along with sister companies Kooi (Holland) and Princeton (US). 2. Moffett Engineering, Dundalk was originally an Irish owned company and established by the Moffett family in 1945. It is now part of the Hiab division of Cargotec Corporation a leading cargo handling company headquartered in Finland. Current employment is 300 people. 3. Moffett Engineering Ltd is responsible for the design, manufacture and global distribution of the Moffett Mounty product within the truck mounted forklift division of Hiab.

Short Co Profile 3: Liebherr • Liebherr International AG, the German, family owned, leading manufacturer of cranes and construction machinery has been in Ireland since 1958. By the mid-1970s the Irish facility had responsibility for worldwide R&D, design, manufacturing, marketing, installation and after-sales service of Liebherr’s container cranes. • The facility has continuously improved its technical ability and in 2004 Liebherr Ireland started a strategic expansion of RDI activities to develop new products from concept, to production, to product launch and to manage on-going enhancements and modifications. The company employs 560 people in Ireland

Short Co Profile 4: Apple 1. Apple’s Irish operation was set up in 1980 to manufacture the Mac computer. The facility has become a centre of excellence across a broad range of functions – advanced manufacturing, financial shared services, supply chain management, customer and technical support, telesales, treasury, software testing and localisation. The successful integration into Ireland of functions and processes previously located in various locations across Europe has added real value to Apple Inc. 2. The availability of a highly skilled, multi-disciplinary workforce has been a key factor in Apple’s ongoing expansion of its Irish operation. Apple’s Irish facility is now the headquarters fro the Europe, Middle East and Asia region and employ 1,400 people

Czech Republic: Supplier Databases CzechInvest has created specialized sector and company databases covering the automotive, aerospace, electronic &electrical engineering, ICT, engineering, subcontracting plastics, subcontracting metal, materials &packaging and healthcare industries. The databases are freely available on the CzechInvest website and make it possible for you to easily search for partners and suppliers by sector characteristics, modules, key technologies and locations as well as by using fulltext search. To link foreign investors with potential suppliers, CzechInvest organises supplier days. At these events, foreign companies can communicate their supply needs. Suppliers, in turn, have an opportunity to offer their products and services. CzechInvest has experience with organising both larger events for 15 multinationals and 200 potential suppliers and smaller meetings between a foreign investor and a few suppliers.

PR0POSED ACTION + DEADLINE • Prepare Company listing that shows all FDI companies and has short profiles of major companies and that can show categories: • Greenfield • Expansion projects • FDI companies with various business functions e.g. R&D, etc. • FDI companies with regional H.Qs. in the region • Maintain a dossier of press announcements on FDI companies • Major indigenous companies that are potential business partners and product/service suppliers – prepare short profiles on each • Database of indigenous companies that are qualified/interested in linkage i.e. supplying FDI companies. In the longer term regions can work to build more linkage and therefore the Advanced Information Standard seeks that regions/counties begin to build this database • Ensure documents are available in English (other languages optional), available in paper and electronic form and accessible on website. • Deadline for completion: 30 March 2011.

SECTORAL INFORMATION • What sectors have the best prospects of delivering new FDI and new jobs to your region/county? Counties need to address this question. • Priority sectors for attracting FDI to the region. What are they? Have they been identified and examined? How does the region meet the needs of such sectors and in particular what are the ‘Key Success Factors’ for individual sectors? What competitive advantages does the region offer to such sectors? Selection of target priority sectors + gathering information on these are therefore important tasks. • Sector profiles – short format on target sectors that explains region’s advantages for target sector; sector surveys undertaken can help. Investors are always interested in who in their sector is represented in a region if they are considering investment there. • Sector studies – more elaborate format. This type of study can be time consuming to undertake and often relates more to industrial and regional policy in the region.

Building Sectoral Information 2. Sectoral Profiles Of Target Sectors and Key Success Factors 3. Sectoral Studies that chart future regional development

Establish Priority Sector Process 3. Sector Studies 2. Sector Profiles 1. Rationale for Priority Sector Selection and Sector Information The Advanced Information Standard seeks progress at least on the first two stages

Growth of Services Globally • Services are the world’s biggest business today. Consider this reality when selecting priority target sectors. • 2 out of 3 people at work in Ireland are in the services sector; 4 out of every 5 jobs added to the workforce since 2000 stemmed from services… more jobs emerging in international services. Services account for three fifths of gross value added; service exports in 2009 were EUR 85 billion compared to EUR 18.3 billion in 2000 i.e. 43% of total exports. By 2025 market services are projected to employ more than 750,000 people (30% of total workforce), and represent 70%+ of exports and 60% of net output.

Global Growth in Services Software Development Services and Products International Financial Services Global Business Services Media + Entertainment Services Data Processing (incl. Teleservices) Educational and Training Services Publishing Technical and Consulting Services: Design, Engineering, Architectural Services Commercial Laboratories Pharma Healthcare Services Administrative H.Qs. R&D Services

Key Success Factors: Example Medical Technologies • Low Corporation Tax • Availability of Technical and Managerial talent • Sophistication of the local sub-supply, sub-contract and services industry • High levels of productivity and moderate cost base • English speaking member of EU / Euro Zone Member • Research capability in 3rd level colleges and universities • Identifying KSFs in target sectors and including this in sector information is important for promotion

PR0POSED ACTION + DEADLINE • Establish rationale for Priority Sector Selection (The SWOT and studies, surveys, etc. can assist in this process). • Assemble sectoral and cluster information in regions/counties • Prepare sectoral profiles of target sectors and identify key success factors for these sectors. • Ensure documents are available in English (other languages optional), available in paper and electronic form and accessible on website. 5. Deadline for completion: 30 March 2011.

COMPETITIVENESS INFORMATION • National, regional and county statements on competitiveness are important elements of information that regions/counties should use and contribute to as they proceed with work on the Advanced Information Standard • The work on SWOT and sectoral profiles, for example are sources of insight and information on the ‘competitiveness of counties’. • The process of gathering information on county competitiveness and using this in promoting new investment is a long term and continuous task. However it is a task that should commence under the Advanced Information Standard (it is recognised that some counties will already have made progress here). • Utilising information from the Croatian National Competitiveness Council and comparisons with other EU and OECD country regions, using World Bank (‘Doing Business 2010’) studies are examples of sources that counties can use in building the ‘Competitiveness Information’ module. This typeof information can enhance other work, for example, the ‘Key Facts for Investors’.

National Competitiveness Council “The Croatian public knows very well that the regions of Croatia are unequally developed, but it knows much less about the reasons behind those differences and what are the strong and weak points of the competitiveness of local economies. “The Regional Competitiveness Index of Croatia, 2007” for the first time provides detailed insight into the competitiveness of Croatia’s regions and counties by evaluating the competitiveness of the business environment and the business sector itself. It also provides a means of comparing the causes of the differences and the identification of the potential of and limitations on individual counties and regions. The goal of the document is to encourage all participants – the business sector, local communities, counties and government administrative organs – to implement measures and activities to increase competitiveness on the basis of the numerous quantitative and qualitative data in order to ensure greater employment and prosperity. Since the private sector has the most important role in increasing competitiveness, we invite business leaders to be ambitious, to focus on improving their business operations, and to seek out and take advantage of new opportunities.” Source: ‘Regional Competitiveness Index Croatia 2007’, NCC

Using Expert Reports • The World Competitiveness Scoreboard presents the 2010 overall rankings for the 58 economies covered by the WCY. The economies are ranked from the most to the least competitive and the results from the previous year’s scoreboard (2009) are shown in brackets. • "I have to say that IMD World Competitiveness Online is an excellent tool for first hand evaluation of alternatives for determining a global footprint (manufacturing, outsourcing, sales force, etc). The data and the way you presented are superb, easy to read, to compare and even to use in presentations."Jesus Guevara, Strategy & Business Development Greenlee Textron

Competitiveness: Inform. Sources * The rankings here refer to economies ranked by internet penetration – internet users by 100 inhabitants

Competitiveness: Inform. Sources In the important area of e-readiness ranks lower than all selected countries ‘Ease of Doing Business’ can be greatly improved by e-government. This index points to where action could be focused Croatia ranked in lower half of world index and considerably behind some countries Croatia ranks 4th of compared countries and in lower half of index (42 indicators)

Focus on Competitiveness “Croatia's competitiveness falling – other countries moving more quickly” “Zagreb, 9 September 2010 – The National Competitiveness Council, as a Partner Institute of the World Economic Forum (WEF) in the Centre for Global Competitiveness and Performance, today published the latest results of the "Global Competitiveness Report 2010-2011". After Croatia registered a decline last year of 11 places compared to 2008, the unsatisfactory trend continued in 2010. With a real decline of four places compared to 2009, Croatia is this year ranked in 77th place out of 139 countries. Since 2002, when Croatia was included in the rankings for the first time, it has registered uneven movement in the competitiveness rankings, characterized by a period of real improvement between 2005 and 2007 and then a continual decline from 2008 until today”. Source: NCC

PR0POSED ACTION + DEADLINE • As Counties gather information under previous Modules they will begin to develop better comparative information with other countries and regions/counties. This information will enable them to benchmark their status versus selected regions. • For example, how do the Counties in Croatia compare with the criteria used in the World Bank ‘Doing Business 2010’? Are there positive messages here that individual Counties can use in their promotion of investment? • Counties should begin to build this information by (a) establishing comparator regions (b) monitoring progress versus these regions (in Croatia and outside Croatia) (c) using authoritative reports from international institutions (World Bank, OECD, EC, etc.) • Ensure conclusions and documents are available in English, available in paper and electronic form and accessible on website. • Deadline for completion: 30 March 2011.

RESULTS + IMPACT INFORMATION • What are the facts on FDI in your region/county? Previous modules have gathered this infromation. What is the impact of this FDI? These are crucial questions and information that need to be addressed • Under the Advanced Information Standard it is expected that regions/ counties will at least have (a) an accurate list of FDI companies and systems in place to update it quarterly (b) short profiles of main companies (activity, jobs, export %, business functions, and investment), and press releases on significant FDI projects. This information should be easily accessible (e.g. on websites). • But additional indicators and facts on FDI investment are needed, summary of employment, investment, exports – see next pages • Economic contribution/impact (e.g. wages/purchases/tax paid) by FDI companies – see examples on next pages • Addressing this issue: putting in place professional survey methods and collating reports is a long term task and can be done in stages. • The role of local universities, economic research institutes and the cooperation of companies is important to support the process.

Monitoring Indicators on FDI • Monitoring the impact of FDI is critical for FDI policy and promotion • The indicators here are samples of how one agency monitors its FDI • This INFORMATION is valuable in talking to new + potential investors • It is equally valuable in showing government, political levels, media and the general population the results and impact of FDI • Regions and counties should begin a process of establishing these types of indicators • Universities, economic institutions can play a key role in organising surveys and research on this. Sources: IDA Annual Report 2009, Bn=billions

Economic Impact of FDI in Ireland Sources: IDA Annual Report 2009, Bn=billions

PR0POSEDACTION + DEADLINE • Under the Advanced Information Standard it is expected that regions/ counties will at least have (a) an accurate list of FDI companies and systems in place to update it quarterly (b) short profiles of main companies (activity, jobs, export %, business functions, and investment), and press releases on significant FDI projects. This information should be easily accessible (e.g. on websites). • But additional monitoring indicators and facts on FDI investment are needed, greenfield projects, employment, investment, exports, etc. • Economic contribution/impact (e.g. wages/purchases/tax paid) by FDI companies is desirable • Addressing this issue: putting in place professional survey methods and collating reports is a long term task and can be done in stages. • The role of local universities, economic research institutes and the cooperation of companies is important to support the process Ensure documents are available in English (other languages optional), available in paper and electronic form and accessible on website. • Deadline: Process established to undertake this task: 30 March 2011.

Criteria for the Advanced Standard

Deadlines on Timing of Phases By End March 2011 Completion of Tasks and Framework By End January2011 Initial Progress with Information By End December 2010 Companies with the potential to scale and become global players in their markets EstablishAdvancedInformation Standard Progress with at least 2-3 modules well advanced or complete Information Modules and work programme established ICPR Team will advise + monitor progress and seek progress reports

Advanced Information Standard Investor Needs Investor Needs and Key County Promotion Messages to Investors Advanced Information Standard modules Investor Information Regional/ County information FDI Results + Impact Information Competitive-ness Information Company information Sectoral Information Basic Information Standard Building on the Basic Information Standard and Work Undertaken to date

Thank you … Any questions? www.icpr3.org

The Advanced Investment Certification Programme for Regions in Croatia