View from Europe: why do IPAs have a bad name?

Speaking to colleagues and fellow corporate development managers, IPAs appear to command surprisingly low levels of esteem in managerial circles. While I would normally have waved this off as an unfortunate coincidence in terms of people I’d spoken to, a recent World Bank study seems to support this impression. It found that only 11% of managers had used IPAs in their FDI projects, less than half thought that IPAs were important, and 14% even considered them to be entirely irrelevant.

Arguably, this lack of managerial appreciation does not suggest that IPAs are not important. But it does indicate that most of them are doing a pretty bad job at getting in touch with investors, and providing the right kind of services to them. 

Managers find IPAs most useful when they can offer a helping hand in dealing with the often byzantine bureaucratic requirements of setting up greenfield projects, or – long after the initial investment – support in sorting out grievances with government entities. Merely handing out information is nice, but hardly enough in the age of Google and company. This is due to the accessibility of general information and the lack of genuine depth of information that IPAs usually offer. Corporate managers who cannot find the GDP figures of their intended investment location probably shouldn’t be running the project in the first place. However, information that is not publicly available but important for business plans and decision making, such as gross/net salaries of specific professions broken down for the different parts of the country, only a handful of IPAs are able to provide.

Even more problematic is that while in the early phases promising the earth, many IPAs shy away from giving hands-on support (other than showing investors around potential sites) in the later stages. This might be due to not wanting to crowd out the private sector for fear of incurring legal liabilities, for not having the manpower to do so, or a whole host of other reasons. IPAs need to start thinking hard about who they want to target and what the needs of this target group are, be totally transparent regarding what they can offer and what they want to offer in terms of services, and then consistently do it. This might mean that we either slim down IPAs to a bare minimum (the glorified marketing bureau), or beef them up sufficiently to be able to provide a real service. 

Martin G Kaspar is head of business development at a German mittelstand company within the automotive industry. E-mail: martin.georg.kaspar@gmail.com