In my previous article, I outlined the key benefits of appropriate inward investment, such as direct employment, an increase in the tax base and indirect employment, and opportunities for local SMEs that supply and buy from these investors. Given these benefits, the natural question is then how do we attract foreign investors to pursue projects that are synergistic with local economic development priorities?
To start with, the Cayman Islands must compare favorably to other jurisdictions in terms of key ‘investment climate’ factors. In particular, factors such as a stable macro-economic climate, market access and open competition, reliable utilities and transportation, available skilled workforce, available local suppliers and resources, appropriate education, training and research facilities, manageable regulation and taxation systems, and a good quality of life, are all taken into consideration.
Reviewing this list, it is obvious that the factors that attract foreign investors are also factors that support local businesses. In fact, a conducive investment climate will both encourage inward investment and domestic investment, as well as enable beneficial linkages between all businesses.
The importance of these factors is the reason that foreign investors pay close attention to research such as the ‘Doing Business’ reports published by The World Bank. Independent, third-party research provides a reliable benchmark to compare jurisdictions. Clearly documented procedures and easily accessible information from a jurisdiction also contributes to the positive impression that an investor receives while doing their due diligence.
In addition to the above factors, two other considerations are useful in attracting inward investment. The first is an agency to facilitate investment interest and the second is a clear economic development strategy which provides the framework in which all relevant government agencies can coordinate the facilitation of investment.
In terms of an investment promotion and facilitation agency, lead generation and direct marketing are essential elements of their toolkit. Lead generation is the identification of specific companies that fit within the country’s economic development plan; direct marketing is contacting these companies directly in order to entice them to the jurisdiction.
In this regard, direct email targeting key decision makers and visits to specific companies are the most effective ways to interact with the investment leads that have the greatest potential for investing in the jurisdiction. This ‘personal’ approach has better success than general marketing techniques, particularly as the companies that are of most interest are rarely all in one place and all paying attention to the same advertising media.
Finally, the overall success of an inward investment strategy recognizes the importance of aftercare programmes. These programmes involve developing a close relationship with investors that are attracted to the jurisdiction in order to encourage them to source supplies and resources locally.
In so doing, linkages within the local economy are formed that maximizes the positive impact of foreign businesses and allows for wider dispersion of economic benefits from inward investment. With a positive, welcoming experience, foreign investors can provide additional recommendations within their networks of associates that may lead to additional investment interest.
While the above discussion provides some basic guidance on the issue of attracting inward investment, there are still two underlying factors that must be considered.
As a country, we must be clear on what we want in terms of sustainable economic development, and what investment would best complement our local businesses. We must also have the commitment to put in place long-term plans that ensure the type of investment climate that is conducive to sustainable businesses and for which the maximum benefit will accrue to the majority.
Dax Basdeo, PhD is Executive Director of the Cayman Islands Investment Bureau and the Cayman Islands Film Commission.