Monitoring IPA performance

 

Rationale | Key considerations | Policy practices | Resources | Next

 

2.3 Is the IPA adequately funded and is its performance in terms of attracting investment regularly reviewed? What indicators have been established for monitoring the performance of the agency?


Rationale for the question

Below a certain level of funding, IPAs are not likely to be effective. While there is no absolute rule to determine the right funding level and different nations have different budget constraints, operating an effective IPA clearly requires substantial resources. It also requires effective monitoring to determine whether the IPA has helped to increase overall FDI inflows and how it is performing each of its four functions.

Related PFI questions:

Periodic reviews are a core principle of the PFI and arise in all chapters, including in Questions 1.5, 1.7, 2.6, 3.4, 5.7, 10.8.

 

Key considerations

The PFI user should consider the following components of an effective IPA:

Funding – Operating an effective IPA is expensive. Hiring well-qualified staff, ideally with private sector experience, and actively engaging in image building such as through communications programmes, advertising, trade fairs all cost money. Various reports on IPA best practices also note that information technology can be an important ingredient of success to track investment patterns properly, to make effective presentations and to access international databases.

Performance reviews – Attracting investment is the main priority of an IPA and should be regularly monitored. Levels of FDI inflows depend on many factors: geography, access to nearby markets, natural and human resources, global and national economic growth, actions by leading investment nations, and the quality of the national investment climate. Subject to these overall constraints, IPA support for improvements in the business climate, combined with promotion and facilitation, can all help to increase the overall level of foreign investment.

In addition to an overall assessment, each of the four functions of the IPA should be evaluated separately using one or several relevant indicators. These assessments will require effective systems for gathering data on all IPA activities.

 

Policy practices to scrutinise

Concerning the issue of IPA funding:

  • How is the IPA funded? From the government budget?
  • How is the budget allocation for the IPA decided?
  • Is the IPA staffed with qualified personnel?
  • What is the salary range of these personnel? How does it compare with similar positions and qualifications in the private sector? Is it enough to provide motivation for the staff of the IPA?

Consideration of which sectors are attracting investment, how many jobs are created or how much technology transferred can assist in judging whether investment incentives and tax holidays are providing appropriate value for money. The factors to consider tracking include:

  • Overall investment flows.
  • The form of investment: portfolio investments in the stock exchange; mergers and acquisitions; expansions of existing projects; investments to establish sales and marketing facilities for foreign manufactured goods or services; and greenfield investments.
  • Investment by sector: e.g. manufacturing, mining, agriculture, agricultural processing, textiles, garment assembly, retail, financial services, retail.
  • Jobs created by the investment.
  • Industrial linkages and additional purchases of inputs and services by each investor.
  • Technology transfers.
  • Net tax benefits from corporate taxes, customs duties and employment taxes paid.

 

Resources

See the investment promotion and facilitation resource library.

 

 

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