Global best practice in productivity improvement – lessons for Northern Ireland

1
Global best practice in productivity improvement
lessons for Northern Ireland
May 2009
2
Contents
1

• What we have done

2

• Discussion of case studies
• Singapore (in depth)
• Republic of Ireland
• Costa Rica
• Finland
• Sweden
• Portland, Oregon
• Others

3

• Implications for Northern Ireland

3
Contents
1

• What we have done

2

• Discussion of case studies
• Singapore
• Republic of Ireland
• Costa Rica
• Finland
• Sweden
• Portland, Oregon
• Others

3

• Implications for Northern Ireland

4
To develop a long-list of examples to examine we
used a simple funnel
NUTS 2 regions in Germany, France, Italy, US,
Korea and Canada
Countries of the world
Regions with GDP per capita lt85 of Northern
Ireland
Countries with GDP per capita lt85 of Northern
Ireland or total GDP greater than Spain
Poland Barbados Hungary Russia Croatia Saudi
Arabia Bulgaria Thailand 67 others
United States China India Japan Germany UK France
Russia
Germany Sachsen Germany Sachsen-Anhalt Germany
Thueringen Germany Brandenburg Germany
M-burg-Vorp. Italy Molise Italy
Basilicata Italy Puglia
Italy Calabria Italy Sicilia Italy
Capania Korea Gyeonbuk Korea Capital
region Korea Jeolla Korea Gangwon Korea Jeju

• Brazil
• Italy
• Indonesia
• South Korea
• Mexico
• Canada
• Venezuela
• Malaysia

Relevance
Performance
Regions that have not recently achieved gt2 CAGR
GDP per worker improvement in a 5 year period1
Countries that have not recently achieved gt2
CAGR GDP per worker improvement in a 5 year
period1
All French regions All other German
regions Italy Lombardia Italy Toscana Italy
Abruzzo Italy Veneto Italy Emilia-Romagna Italy
Sardegna Italy Valle DAosta Italy Marche
Italy Liguria Italy Piemonte Italy
Friuli-Venezia G. Italy Umbria Italy PA di
Trento Italy PA do B-Bozen Korea Gyeongnam All
other US states All other Canadian provinces
Kuwait New Zealand Norway Argentina Netherlands Au
stria Malta Australia
Luxembourg Denmark Cyprus Chile Switzerland Belgiu
m Portugal Spain Uruguay
Sweden Finland Taiwan South Korea Israel Greece Un
ited Arab Emirates Qatar
US New York US California US District of
Columbia US North Carolina US Vermont US
Louisiana US Virginia
Italy Lazio Korea Chungcheong US South
Dakota US Oregon US Colorado US Arizona US
Massachusetts
US New Hampshire US Washington US
Idaho Canada Newfoundland Canada
Alberta Canada Nova Scotia Canada Saskatchewan
Iceland Estonia Slovenia Latvia Slovak
Republic Czech Republic Belarus
Azerbaijan Armenia Lithuania Kazakhstan Hong
Kong Singapore Ireland
1 Based on the areas best results from either
2003-2008 or 1998-2003 for countries and either
1996-2001 or 2001-2006 for regions
SOURCE ConferenceBoard, OECD, US Department of
Commerce
5
These are the six cases that have been examined
in detail
Singapore
Success founded in establishing pro-business
environment and aggressively pursuing FDI through
a high performance agency
Republic of Ireland
Built on low tax rate with flexible approach to
attract FDI, bring in anchor investors and move
up the value chain
Costa Rica
Targeted approach to capturing FDI through
independent marketing agency
Finland
Built RD capability around Nokia as an anchor
and successfully developed
Sweden
Deregulation and creation of pro-business
environment to drive competition and productivity
Oregon
Built on anchor firms and proximity to West Coast
to create hot spot for entrepreneurial spinoffs
Originally filtered out on income
SOURCE Literature review press search expert
interviews
6
Which have different sources of advantage and
disadvantage (1/2)
Disadvantage/ worst performer
Best in class/ Advantage
Corporation tax rate,
18
12.5
10-30
26
28
US 35
28
Use of Zonal tax exemptions
YES
YES
YES
NO
NO
NO
NO
Ease of doing business rank
1
7
117
14
17
3
6
RD expenditure, GDP
2.3
1.3
lt1.0
3.5
3.7
2.6
1.8
Students graduating p.a.,
N/A
1.40
N/A
0.77
0.67
0.9
1.06
Engineers graduating p.a.,
0.13
0.17
N/A
0.16
0.13
0.06
0.09
Note Data for Oregon (US) data is for United
States as a whole. Oregon offers tax exemptions
and other fiscal incentives lowering the
effective tax rate of total population 2006
SOURCE WMM IMF Global Insight OECD World
Economic Outlook database
7
Which have different sources of advantage and
disadvantage (2/2)
Disadvantage/ worst performer
Best in class/ Advantage
Size of public sector ( GDP)
13.70
35.44
n/a
47.24
52.57
35.36
43.13
Average wage (manufacturing, GBP per hour)
2.27
4.64
14.07
16.21
17.25
12.93
14.68
Average wage (engineer, GBP annual)
25,000
36,447
62,308
60,385
59,717
54,048
61,054
71
98
n/a
63
89
96
98
English-speaking ( population)
Electricity costs (GBP per KWH)
0.06
0.05
0.07
0.04
n/a
0.03
0.06
Broadband penetration,
42
19
3
31
32
26
28
No consistent datasource for languages
2006 Annual Wage 2009 for Chief Computer
Analyst
SOURCE IMD WDI, CINDE, Costarica.com, Language
data Eurobarometer 2005, US Census Data, EU
Commission, Singapore 2000 census data
8
For each example we have built a case study
around four questions

• What was the context for this regions
  productivity improvement?
• What institutions, programmes and policies were
  used to drive it?
• What were the key success factors for these
  institutions, policies and programmes?
• Strategically?
• Organisationally?
• Operationally?
• What are the lessons for Northern Ireland from
  this region?

SOURCE Literature review press search expert
interviews
9
To address these questions we carried out primary
and secondary research
Over 30 interviews conducted
Literature and Research reviews

• Conducted 8 interviews with experts for
  Singapore, Finland, Sweden, Ireland, US, Israel

• Government and agency reports for 6 case study
  countries from 2000-2009)
• National press searches
• Business school case studies on country
  competitiveness (Ireland, Costa Rica, Estonia)
• Academic literature

• 7 interviews with current or former employees of
  government agencies (FDI/Export promotion) in
  Costa Rica, Singapore, Finland, Ireland

• OECD, World Bank, IMF reports and academic
  research on
• FDI policies
• Country competitiveness
• RD and Cluster strategy
• Industrial policy
• Government efficiency

• 2 Offshoring specialists
• 3 Productivity experts
• Industrial policy expert

• 6 Investor perspectives on Ireland, Singapore,
  Eastern Europe and Northern Ireland

• McKinsey Global Institute knowledge incl. 15
  country productivity reviews

• Conducted interviews with Invest NI, Bombardier,
  Citigroup, Almac, All State

SOURCE Literature review press search expert
interviews
10
Contents
1

• What we have done

2

• Discussion of case studies
• Singapore
• Republic of Ireland
• Costa Rica
• Finland
• Sweden
• Portland, Oregon
• Others

3

• Implications for Northern Ireland

11
Introduction to Singapore

• Small city-state situated on 63 islands and
  connected to the Malaysian peninsula
• Population 4.8m (70 of Chinese origin)
• Land area 710.2 km2 (5 of NI)
• Official languages English, Malay, Mandarin,
  Tamil
• 5th wealthiest country in the world in terms of
  purchasing power adjusted GDP per capita
• Self-governed since 1959, independent from
  Malaysia since 1965
• Parliamentary Republic
• Single Party (Peoples Action Party PAP)
  dominates political process
• Limited natural resources (no freshwater)

• Real GDP growth has averaged 8.1 percent since
  independence in 1965
• Productivity grew by a 4.0 between 1980 and
  2008, over three times faster than the OECD
• Attracted major gt 7,000 international investors
  from broad range of industries, including for
  example Infineon, Exxon, GSK, Merck
• Succeeded in building sectors from scratch such
  as Health Care
• Rated 1 in Ease of Doing Business by World Bank
  in 2008

SOURCE Literature review press search expert
interviews
12
Why are we interested in Singapore?
Applicability
Relevance

• Small island economy
• 2007 GDP 250 of NI

ü

• Aspects NI could learn from
• Integrated economic strategy of Singapore where
  packages to attract FDI aims at creating
  lasting benefits
• Customer-focus of the EDB through tailoring to
  individual investor needs and efficient end-to
  end process
• Focus of government agencies in serving all
  customer needs conveniently (online) and through
  one-stop-shops

• Openness to investment and trade
• 2007 Exports 246 of GDP

ü

• Developed
• 2007 GDP per capita 90 of NI

ü

• Aspects NI is unlikely to learn from
• Semi-authoritarian government in Singapore
  facilitated alignment and top down
  implementation
• Creation of state-owned enterprises
• Strong use of trade policy and financial
  incentives
• Early import substitution phase to industrialise
• Customised financial incentive package to attract
  FDI

• Successful
• Achieved 3.0 productivity growth from 1995-2008
  compared to UK average of 1.7

ü
SOURCE Economist Intelligence Unit UNESCO
Statistics World Bank Ease of doing business
reports IMF International financial statistics
WMM/Global Insight World Economic Outlook
database IMD World Competitiveness online
13
Singapore developed through ambitious planning
and outward-orientation
1980s - Singapores high-wage policy to force
move to knowledge economy fails in context of
world economic crisis. Economic review by MTI
recommends PCs and disk drives as sunrise
sectors
1959 - Self-government of Singapore, led by the
Peoples Action Party (PAP) Became independent
from Malaysia is in 1965. Lee Kuan Yew is first
Prime Minister. Government declares itself
pragmatic (capitalist and semi-authoritarian)
1997 - Asian Crisis hits Singapore, but country
recovers already starting in 1999. Re-orientation
of economic policy with more focus on knowledge
economy
2000s Continuing emphasis RD and knowledge
economy. Focus on attraction of foreign talent to
Singapore and positioning of Singapore as
destination for RD research facilities and
regional headquarters of multinationals
1990s
1960s
1970s
1980s
2000
2009
1961 - Creation of the Economic Development Board
(EDB). Created the Jurong Industrial Estate,
Singapores first industrial estate. EDB open
offices in NY and Hong Kong. Attract Shell,
National Iron and Steel Mills
2001- Creation of ASTAR- The agency of Science
Technology and Research focusing on Biomedical
Sciences and Engineering/Science, promoting
research and public-private collaboration
1991 - Creation of EDBI - the independent equity
investment arms of the EDB which invests in
companies in new strategic industries Has
invested in 240 companies since its creation
1970s - Start of the electronics industry in
Singapore Texas Instruments investment of 6m
USD is secured within 6 months and operations
start 90 days after investment decision
1983 - Creation of the Trade Development Board
(TDB) to promote Singapores exports. Rebranded
IE Singapore in the early new millennium
SOURCE Literature review press search expert
interviews
14
Singapores productivity growth was associated
with FDI, export and RD growth
FDI
Exports
Total stock inward FDI, GDP
GDP, excluding tariffs
Singapore
Singapore
UK
UK
RD
Productivity growth
GDP, all RD
Change in real GDP per employed worker, p.a.
Singapore
UK
Singapore
UK
10-year rolling average
SOURCE WMM / Global Insight (GDP, exports,
productivity) OECD (RD expenditure) IMF
15
Singapores success is built on strategic
planning and the creation of a business-friendly
environment that enabled FDI-driven growth

• Long-term analysis and planning for direction of
  economic policy carried out by MTI, economic
  reviews led to re-orientation (e.g. focus on PC
  and disk drives in 80s post oil crisis)
• Dedicated planning unit in the EDB with 10
  employees in Strategic Planning and Knowledge and
  60 in Planning and Policies
• EDB Annual reviews help to bring together market
  intelligence and trends, identify focus sectors
  and areas and re-allocate resources accordingly

Rigorous policy planning
Prioritisation of FDI

• Strategic clarity that FDI matters for growth as
  Singapores lack of natural resources and small
  insular position constrained endogenous wealth
  creation
• EDB makes things happen to attract FDI, e.g.
  set-up of university courses, infrastructure
  investment
• Strong support by leadership to attract investors
  - Lee Kuan Yew used to gather CEOs of potential
  investors to reassure about doubts and assert
  commitment

• Singapore comes top in the World Banks Ease of
  doing business rankings 2007 and 2008
• Eliminating unnecessary red tape is constant
  government concern. For example, businesses can
  submit suggestions online to Pro Enterprise Panel
  to cut red tape (e.g. outdated regulations)
• Effort to create a pro-businesses environment
  EnterpriseOne Portal which centralises all
  relevant information, e-services, walk-in centers
  of government agencies

Creation of a business-friendly environment inc.
low taxation
Government agencies as efficient one stop shops

• Public services mainly provided through
  government agencies (e.g. EDB 500 employees, IE
  370 employees vs. 200 employees in the MTI)
  which are operated similarly to private entities
• Government agencies (EDB, Spring, IE) set up as
  one-stop-shops where all customer needs can be
  addressed (capital, capability-building, advisory
  services, market intelligence)
• Customer services centre for initial point of
  contact

Culture of excellence

• Talent recruitment high performing students and
  graduated are attracted to public sector
• Talent retention incentives through
  performance-based pay (15-50 performance-dependen
  t bonus) and fast promotions
• Talent development emphasis on functional and
  managerial training. Early on-job
  responsibilities including client relationships

SOURCE Literature review press search expert
interviews
16
Four major agencies drive Singapores
development, lead roles are taken by the EDB and
IE Singapore
ROLE
STATUS
FUNDING

• Government agency
• One-stop-shop for foreign investors
• 500 employees of which 100 in one of 19
  international offices

• Government
• 2008 Expenditure USD 400m

• Key government agency in charge of attracting FDI
  and creation of favourable business environment
• EDBI is Investment arm investing in new industries

• Promotion of exports of Singapore-based
  enterprises
• Financing options and capability building focus
  (skill-building)

• Government agency
• One-stop-shop for firms seeking to export
• 500 employees of which 50 in 30 offices abroad

• Government
• 2008 Expenditure USD 117m
• Payment by companies for selected customised
  services

• Agency supporting SMEs and start-ups with overall
  mission to Enable Enterprises and create a
  competitive SME sector through financing
• Skill building

• Government agency
• 370 employees

• Government
• 2008 Expenditure USD 96m
• Payment by companies for selected customised
  services

• Agency for Science, Technology and Research in
  charge of promotion of research and innovation
• Focus on life science and engineering/IT

• Government agency
• 150 employees

• Government
• 2008 Expenditure USD 710m
• Payment by companies for selected customised
  services

• Online information portal serving the business
  community by centralising all relevant
  information to start, sustain and grow a business

• SPRING (Government agency) in collaboration with
  44 partner agencies involved in the Enterprise
  One project

• Government

SOURCE EDB, MTI, Spring, AStar
17
The EDB is a high-performing, customer-focussed
government agency delivering significant benefits
to Singapores economy
SCOPE AND APPROACH

• 500 employees, budget of 410m USD (0.3 of GDP)
  of which 330m is spent on grants
• Provides input to other government agencies on
  how to make Singapore an attractive business
  location - has led Singapores to be first in
  ease of doing business worldwide (World Bank)
• 15 of staff located in 19 international offices
  which develop mainly contacts with new potential
  investors
• Headquarter staff manages relationships with
  foreign and domestic companies within a cluster
• Annual strategic reviews of targeted sectors and
  companies serve to re-focus efforts and identify
  opportunities based on existing strengths.

PROGRAMMES AND POLICIES

• Customised assistance and incentives schemes are
  provided throughout the investment process
• Working in Singapore and registering business
  easy access to visas, step-by-step guides
• Business location List of science parks
  provided, EDB staff will look for suitable land
• Setting up the business - Financial incentives
  and assistance schemes range from assistance in
  manpower development, technological/equipment
  upgrading, to RD, intellectual property and
  industry development.
• Recruitment and Staff EDB funds on the job
  training and overseas training of Singaporeans in
  MNCs
• Attractive taxation policy 17 corporate income
  tax, capital gains not taxed, GST 7
• Conditional grants payments against milestones,
  if conditions not met re-negotiation or claw-back

ORGANISATION AND CULTURE

• EDB recruitment targeted at high potentials
  scholarships are offered to high performing high
  school students to study abroad and then return
  to work for the EDB
• Incentives for EDB employees are significant
  financial incentives (15-50 of salary) and fast
  promotions
• The organisation is focused around seven vales
  Care, Integrity, Team, Imagination, Courage,
  Excellence and Nation - losing a deal to another
  country is seen as shameful
• Junior staff get responsibilities for managing
  day-to-day client relationships early on and
  account directors own client relationships and
  are empowered to create flexible deals to meet
  investor needs and to start deals moving while
  formal processes and approvals get completed
• Focus on training programmes. EDB employees learn
  financial and other functional skills as well as
  managerial skills in workshops on creativity,
  teamwork and risk-taking

Detail on different schemes available in Back-Up
SOURCE EDB, expert interviews
18
The organisation of the Economic Development
Board is aligned with its key tasks and
emphasizes importance of planning

• Independent investment arm created in 1991
• Invests in companies in new strategic industries
  (over 250 to date)

• Senior executives from MNCs advising EDB (e.g.
  COO of PG, CEO of 3M)

• Enterprise Ecosystem
• Incubation Unit
• Intellectual Property
• International Policies
• Planning
• Resource Development

• Business Knowledge Group
• Client Services
• Finance Administration
• Human Resources
• Information Systems
• Legal
• Marketing Communications
• Organisation Excellence

• 4 Executive Directors lead division with area
  responsibility
• 19 international offices with 100 EDB employees

• Development of sector clusters of local firms and
  foreign investors in Singapore

Clear dedicated support functions (Admin, HR,
CIO) account for 40 employees but additional
support staff is probably within divisions
SOURCE EDB, expert interviews
19
Structure of the EDB Board brings together
international private sector expertise and public
sector leadership
Name
Job/Background
Board members and roles
Lim Siong Guan
EDB Chairman (full time), former Permanent
Secretary to the Primer Minister
Chairmen
Leo Yip Seng Cheong
EDB Deputy Chair (full time)

• Mixed group of private and public sector
  professionals
• Executives from foreign companies
• Singaporians and non-Singaporians
• Role is to give strategic guidance, external
  perspective, industry expertise

Ashwin Muthiah
Chairman Proteus Petrochemicals Pte Ltd.
Beh Swan Gin
Managing Director, EDB
Deborah Henretta
Group President Asia, ProcterGamble
Erik Peyrer
VP, Business Development APME
Francois Guibert
Corporate CP, CEO Asia/Pac ST Microelectronics
Members
Gautam Banerjee
Exec. Chairman, PWC
George Goh
Executive Chairman, MeibanGroup
Goh Chye Boon
Deputy Secretary Ministry of Trade
Iain John Lo
VP New BD Ventures, Shell
Jonathan Asherson
Regional Director SE Asia, Rolls Royce
Jon Niermann
President Asia, Electronic Arts
Lui Pao Chuen
Advisor National Research Foundation
Shunsuke Ohtsu
Chief Executive Asia and Chair, Hitachi Asia
SOURCE EDB, Expert interviews
20
Singapores financial assistance and other
incentive schemes
Examples
Purpose of the schemes
Benefits
Equipment and Technology

• Approved Foreign Loan Incentive (AFL)
• Investment Allowance (IA)

• AFL provides full/partial exemption on interest
  payments to non-residents
• IA provides capital allowance for new equipment
  on the condition that it introduces new
  technology or contributes to industry efficiency

• Investors pay lower taxes in Singapore reduces
  tax liability

Business Development

• Development Expansion Incentive (DEI)
• Script to Screen (S2S)

• DEI provides preferential corporate tax rates
• S2S provides grants to support the development of
  creative and technical talents in content
  production

• Reduces tax liability/Assist companies to move
  towards higher value-added business activities

Innovation, RD and Intellectual Property

• Approved Royalties Incentive
• Further Deduction for RD Expenses (S14E)
• Innovation Development Scheme
• Research Incentive Scheme for Companies
• Technology for Enterprise Capability Upgrading
• Writing Down Allowance for Cost Sharing Agreement

• Tax incentives and grants are given to promote
  RD capability (technical manpower)
• Technology transfer must take place
• RD should be conducted in Singapore (S14E)
• In many cases, schemes are open to companies with
  at least 30 local equity or ones registered in
  Singapore

• Non-resident recipients of payments pay lower
  taxes
• Meets the cost of RD assists companies in
  technology and knowhow transfers
• Helps local enterprises build in-house RD
  capabilities

Headquarters Management

• Regional/International Headquarters Award
  (RHQ/IHQ)

• Encourage companies to use Singapore as a base
• Customised package of tax incentives or grants
  are provided

• Customised support for qualifying projects

Industry Development

• Development Expansion Incentive
• Initiatives in New Technology
• Local Industry Upgrading Programme
• Locally-based Enterprise Advancement Programme
• Pioneer Incentive
• Venture Capital Fund Incentive

• Activities must lead to the development or
  introduction of new capabilities for companies or
  industry
• Projects must generate significant economic
  benefits for Singapore

• Reduces tax liability
• Helps meet costs of technology transfer,
  introduction of new capabilities, manpower and
  operating costs etc
• Foster closer ties with industry contacts

Local Govern-ment Incentives

• Programmes cater to the needs of startup, local
  enterprises, global companies with large-scale
  needs such as the set up of regional headquarters
  in Singapore

• Help businesses improve efficiency, strengthen
  capabilities and explore new opportunities in
  their business

• Loans, grants, tax incentives, equity financing
  and non-financial assistance etc

SOURCE EDB Website
21
International Enterprise offers a one-stop-shop
serviceto promote exports

• 370 employees of which 50 in the 30 offices
  worldwide (IE employee sometimes in embassy)
• Objective to provide a one-stop-shop services
  to all Singapore-based companies seeking to
  export
• IE Advisory Centre as a point of contact for
  businesses serves and as shop where firms get
  generic information (general enquiries, access to
  databases) and customised services
• Important information and range of services can
  be accessed online via Enterprise One Portal
• Customised services are available to all
  companies (no minimum size or export potential)

SCOPE AND APPROACH

• 35,000 companies benefited from IE Singapore
  services in 2007 across all activities (60 vs.
  the previous year)
• Activities of IE are within three areas
  CONNECTIONS, CAPABILITIES and CAPITAL
• CONNECTIONS
• Organisation of Singapores participation in
  major trade fairs in key sectors including 50-70
  subsidy to Trade Associations costs (all
  companies eligible, subject to approval by
  involved trade association)
• Facilitation of search for export partners base
  through online platform BuySingapore which
  automatically matches exporters and buyers across
  over 100,000 business members, basic membership
  is free but enhanced membership has annual
  subscription fee (250 SD)
• COMPETENCY
• Development of managerial capabilities of
  business to operate abroad (e.g. Scholarships for
  international management courses abroad for
  Singaporean executives)
• Identification of selected areas where companies
  need help (Manpower, appropriate branding and
  design for international expansion, intellectual
  property)
• CAPITAL
• Provides top up trade insurance and subsidies for
  firms purchasing commercial trade insurancee
• Subsidised credit for purchases of overseas
  facilities
• Subsidised loan insurance
• Most services are provided for free to companies
  (IE Concierge service, use of databases and
  portals (BuySingapore), seminars but payment for
  customised services

PROGRAMMES AND POLICIES
ORGANISATION AND CULTURE

• Competitive pay levels for employees
• 5-year career plan and attractive incentive
  schemes
• Design of training roadmaps
• Participation in Singapore-wide competitions for
  service-level quality of agencies/public
  institutions

SOURCE IE Singapore
22
Enterprise One is the online portal for
Singapores business community
CONCEPT

• Online-Portal launched in 2006 which centralises
  information required by businesses
• Aims to help local enterprises find the answers
  they need to start, sustain and grow their
  businesses
• Points towards available e-services and relevant
  government agencies
• 44 participating partners (government agencies
  and Ministries)

CONTENT

• Key features of the online portal
• Industry Guides Topics are grouped by industries
  and organised in sections so that information
  relevant to business sector is easy to find.
• Quick Find (Online Interactive Tools) for
• Funding options customised for ones business
• Government assistance based on needs
• Market statistics released by Government agencies
  
• Business-related Government e-Services
• Licences and permits based on relevant business
  needs
• Frequently Asked Questions (FAQs)
• How-To Guides More than 150 How-To
  Guides, Checklists and Flowcharts to make it
  easier to apply for government assistance
  schemes, licences, permits, approvals and other
  registrations.
• Case Stories
• RSS Feed

OPERATION AND MANAGEMENT

• Managed by the government agency SPRING in close
  conjunction with 44 partners (including EDB,
  ASTAR, SPRING, MTI)
• Available 24/7
• Phone hotline offers additional support
• Constantly updated FAQ database

SOURCE SPRING SINGAPORE, Enterprise One Portal
23
Enterprise One is the online portal for
Singapores business community
Single web presence across all agencies and
government departments
Sophisticated online help system and single
helpdesk contact point
Complete listing of policies and incentives (over
70 schemes)
Questionnaire to identify government schemes
applicable to your business
SOURCE Enterprise One
24
Potential lessons from Singapore for Northern
Ireland

• Foresight in economic policy making and long term
  approach of EDB in measuring FDI benefits
• Relentless focus on creation of a
  business-friendly environment through
  One-stop-shop government agencies (EDB,
  International Enterprise, Spring), e-services and
  online portal for businesses
• Performance-oriented agency attracting FDI with
  incentive schemes for talent recruitment,
  development and retention based on financial and
  non-financial incentives

SOURCE Literature review press search expert
interviews
25
These are the six cases that have been examined
in detail
Singapore

Success founded in establishing pro-business
environment and aggressively pursuing FDI through
a high performance agency
Republic of Ireland
Built on low tax rate with flexible approach to
attract FDI, bring in anchor investors and move
up the value chain
Costa Rica
Targeted approach to capturing FDI through
independent marketing agency
Finland
Built RD capability around Nokia as an anchor
and successfully developed
Sweden
Deregulation and creation of pro-business
environment to drive competition and productivity
Oregon
Built on anchor firms and proximity to West Coast
to create hot spot for entrepreneurial spinoffs
Originally filtered out on income
SOURCE Literature review press search expert
interviews
26
Contents
1

• What we have done

2

• Discussion of case studies
• Singapore
• Republic of Ireland
• Costa Rica
• Finland
• Sweden
• Portland, Oregon
• Others

3

• Implications for Northern Ireland

27
Introduction to the Republic of Ireland
Background
Key achievements

• Small country on edge of Europe
• Population 4 million
• Total land area 82,000km2
• Member of the EEC/EU since 1973
• Member of single currency zone (using the Euro)
  since 1999
• Youngest population in Europe

• GDP per capita trebled between 1985 and 2008
• Strong productivity growth of 3.2 between 1990
  and 2007, as opposed to 1.3 in OECD
• Rapid FDI growth, of 10x EU 15 average, resulting
  in 4x UK FDI level as of GDP by 2003
• Attracted major global multi-nationals in
  pharmaceuticals and IT, including Intel,
  Microsoft, Google, Pfizer and Wyeth

SOURCE Literature review press search expert
interviews
28
Why are we interested in Ireland?
Applicability?
Relevance?

• Small?
• 2007 GDP 380 of NI

ü

• Aspects NI could learn from
• Long term focus on targeting anchor investors
• FDI-driven growth performance
• Entrepreneurial as opposed to compliance oriented
  agency

• Open?
• 2007 Exports 80 of GDP

ü

• Developed?
• 2007 GDP per capita 140 of NI

ü

• Aspects NI is unlikely to learn from
• Ability to use corporate tax rate to encourage
  inward investment and establishment of profit
  centres

• Successful?
• Achieved 3.2 productivity growth from 1990-2007
  compared to UK average of 2.0

ü
SOURCE Economist Intelligence Unit UNESCO
Statistics World Bank Ease of doing business
reports IMF International financial statistics
WMM/Global Insight World Economic Outlook
database IMD World Competitiveness online
29
Early on, the Republic of Ireland succeeded in
attracting anchor companies
1985 Microsoft founds first European base in
Ireland 1989 Intel establishes first operations
in Ireland both after many years cultivation
as IDAs policies became more focussed on key
targets
1992 Culliton report published encouraging
increased focus on areas increasing productivity,
reduced reliance on grants and a bringing
together of multiple factors/institutions across
the economy (e.g. role of education,
infrastructure)
2003 12.5 corporate tax rate established on
universal basis
1999 Euro established including RoI
2003 Google invest in RoI
1970 Pfizer sets up its first manufacturing
plant in Cork harbour
1985
1995
2005
2000
1970
1998-1991 Creation of Programmes for Advanced
Technology to support key areas of RD through
partnership between government, business and
universities
1987 Ratification of the Single European Act to
join the Single Market
2000 Technology Foresight fund and Science
Foundation Ireland created giving 646m over five
years to RD
1973 Ireland joings the European Economic
Community
1994 Enterprise Ireland spun off from IDA to
increase focus on developing indigenous firms
SOURCE Literature review press search expert
interviews
30
The Republic of Irelands productivity growth has
been driven by FDI
,
FDI
Exports
Total stock inward FDI, GDP
GDP, excluding tariffs
Productivity
RoI
RoI
UK
UK
RD
Productivity growth
GDP, all RD
Change in real GDP per employed worker, p.a.
UK
RoI
RoI
UK
10-year rolling average
SOURCE WMM / Global Insight (GDP, exports,
productivity) OECD (RD expenditure) IMF
31
The Republic of Ireland was successful in
attracting FDI combining a customer-oriented
agency with attractive financial incentives
Moved early on FDI and focussed on attracting key
anchors

• Ireland focussed early on FDI and maintained this
  focus despite growing calls to provide more
  support to indigenous firms, which meant it was
  able to attract key anchor investors early on
  (Intel, Microsoft) and establish itself in the
  FDI market
• Key anchor investors were pursued over very long
  periods (10 years plus) and the IDA dedicated
  high levels of resource to attracting them (e.g.
  interviewing 300 Irish semiconductor engineers
  working abroad within 5 weeks for Intel)

Overall economic system aligned to attract the
right investment

• Long term success of the Republic as a
  destination for FDI has required an increasing
  focus on RD support and building collaborative
  research projects (for example with government
  support of up to 80 for RD expenditure carried
  out in partnership)
• Skills have also been aligned to investor needs,
  with colleges creating new courses specifically
  to meet local investors skills gaps

Low corporation tax combined with EU membership

• The Republic of Ireland was able to build on its
  strength as an EU member with low corporation tax
  rate to encourage MNCs to establish their
  European base in the Republic and to book profits
  there

Dedicated, dynamic investment agency

• The IDA, despite being a government agency, has
  developed its own, customer-focussed culture
  based on pride in attracting companies to Ireland
  and respect from across the political system
• Culture is focussed on seizing opportunities
  and creating jobs which has helped gain
  political alignment
• The IDAs customer-focussed culture and
  risk-taking of employees has been enforced by
  staff being measured based on outcomes of work
  rather than targets
• Technologists have been recruited to enhance
  capability to attract RD intensive firms

SOURCE Literature review press search expert
interviews
32
Institutions in the Republic of Ireland
GOAL
STATUS
FUNDING
SOURCE Literature review press search expert
interviews
33
The IDA helps attract investors to the Republic
of Ireland
SCOPE AND APPROACH

• Created in 1949, state-sponsored agency that is
  funded through a government grant under the
  National Development Plan
• Focused entirely on attracting and embedding FDI
  to the Republic of Ireland (incl. marketing the
  Shannon Free Zone abroad)
• 2007 turnover of 180m, of which around 80m was
  given to firms in grant funding
• 16 international offices situated across the US,
  Europe, Asia and Australia, 10 offices across the
  Republic 48 of projects in 2007 came from US
  companies
• Initially the IDA initially was responsible for
  both the attraction of foreign inward investment
  and the development of indigenous firms the
  spin-off of Enterprise Ireland from the IDA in
  1994 was aimed at separating the development of
  indigenous firms (through Enterprise Ireland)
  from FDI activities. The separation was driven
  by a need for greater transparency of the
  different performance of the two sides and a
  perceived need for greater focus on indigenous
  firms
• In 2007 26 of projects were with new clients

• Identifies and builds long-term relationships
  with firms it wishes to attract to the Republic,
  and maintains an ongoing dialogue with companies.
  Opportunity-driven in its targeting
• Builds on incentives including
• 12.5 corporation tax rate
• 25 RD tax credit applicable to RD and
  buildings where at least 35 of activity is RD
• Grants to RD (52), capital (15), employment
  (28) and training (1) that are capped overall
  on an amount per job and amount per unit capital
  basis
• Is responsive to the needs of target firms. To
  seal the deal with Intel for example, the IDA
  interviewed 300 Irish engineers within 5 weeks
  who were living abroad and presented Intel a list
  of 85 qualified candidates
• Follows a rigorous evaluation process for
  investment, taking into account cash flows to the
  state as well as broader economic benefits of the
  project. Algorithm updated constantly (e.g. in
  times of full employment, job creation of project
  is less important).
• Purchases and develops Business Technology
  Parks with (e.g.) broadband telecommunications
  network, on site childcare facility, new office
  production buildings
• Lobbies other government organisations on
  policies to support its mission, such as the
  maintenance of a low rate of corporation tax

PROGRAMMES AND POLICIES
ORGANISATION AND CULTURE

• Highly entrepreneurial culture, with a pragmatic
  focus on getting things done within the overall
  grants cap rather than adhering to strict
  processes and rule
• Staff are incentivised through strong mission and
  sense of purpose and through recognition of past
  success of IDA
• Staff performance is measured on results rather
  than fix targets giving them more autonomy (no
  bonuses paid, public sector pay)

SOURCE Literature review press search expert
interviews
34
Structure of the IDA
CEO

• Total 300 staff

Business Development
Marketing 50 heads
Influencing agenda, planning and regions 90 heads
Corp Services
Marketing, Personnel and Org Dev

• Structured by division, hub of operations,
  responsible for new and existing investors
• Each division also paired with a region to ensure
  close connection
• Staff lead identification of priority
  sectors/firms, negotiations with investors

• Structured by region of the world
• Staff make presentations, attend conferences,
  liaise with other Irish agencies overseas,
  monitor competitors

• Works in partnership with skills development and
  RD organisations to meet investor needs

• Structured by region of Ireland
• Staff refine regional messages, work with
  infrastructure providers, represent IDA on
  regional bodies
• Includes property department that buys and sells
  property
• Also contains Planning Ecosystem division that
  develops IDA strategy

• Handles communications, legal, IT, accounts etc

As of 2006
SOURCE IDA
35
Enterprise Ireland is responsible for
supportingindigenous firms

• Enterprise Ireland is the government agency
  responsible for the development and promotion of
  the indigenous business sector
• 31 international offices in 24 countries, with
  support services provided in a further 39
  countries
• 10 offices across Ireland
• 2007 turnover of around 270m, of which 150m was
  spent on financial support to industry

SCOPE AND APPROACH
PROGRAMMES AND POLICIES

• Increasing sales from exports (key priority)
• Provides firms with customised support,
• Helping new exporters validate market
  opportunities and secure first sale reference
  customers (EI initiated 7,724 client-buyer
  meetings in 2007, 405 large sales contracts
  signed with EI support)
• Supporting clients in establishing an in-market
  presence and providing advice on acquisition and
  partnering strategies (83 international mentors
  appointed to provide expertise and advice to
  clients)
• Support is primarily practical (export credit
  guarantees are provided privately by Irish
  Exporters Association) with the exception of the
  Going Global Fund launched in 2008 grants up to
  50,000 to fund 50 of expansion costs given out
  competitively
• Investing in research and innovation through
  multiple grants programmes including
• RD fund supplies grants of up to 450,000 to
  fund up to 45 (depending on firm size) of RD
  expenditure, with an additional 5 funding
  available for collaborative projects
• Innovation Partnership initiative, funding 80 of
  costs for collaborative research projects led by
  HE institutions
• Pilot funding for small RD projects from firms
  who have not previously undertaken RD
• Competing through productivity
• Training grants to support (e.g.) supply chain
  management training
• Encouraging foreign firms to use indigenous firms
  as suppliers (use of local suppliers is never
  condition for FDI investment deals, e.g. through
  grant conditionalities)

SOURCE Literature review press search expert
interviews
36
Potential implications for Northern Ireland

• Illustrates the potential benefits of a long term
  focus on FDI and attracting major anchor
  investors
• Provides a possible institutional model in the
  IDA closely linked to central government but
  with a sales-oriented culture and flexible
  mindset
• Demonstrates some success in government RD
  expenditure driving RD excellence in the economy

SOURCE Literature review press search expert
interviews
37
Contents
1

• What we have done

2

• Discussion of case studies
• Singapore
• Republic of Ireland
• Costa Rica
• Finland
• Sweden
• Portland, Oregon
• Others

3

• Implications for Northern Ireland

38
Introduction to Costa Rica
Background
Key achievements

• Central American country with borders to Panama
  and Nicaragua, coastlines with Pacific and
  Carribean sea
• Capital San Jose
• Population 4.1m
• Land area 51,100 km2
• Official language Spanish
• Constitutional democracy since 1953
• 4th country in Latin America based on the Human
  Development Index but 16 of population living
  below poverty line
• Natural resources coffee, bananas and other
  tropical plants
• First country in the world to abolish its army
• President Oscar Arias 1986-1990 and 2006-present
  (Nobel Peace Prize winner)

• Productivity grew by 2.5 between 1990 and 2000,
  as opposed to 1.8 OECD average
• Growing higher value-add sector (high-tech,
  electronics) through attraction of FDI. 51
  foreign companies operate in electronics sector
  in 2006
• Increasing enrolment of students in engineering
  and science degrees
• Attracted major investors including Intel,
  GlaxoSmithKline, Procter Gamble and Amazon to
  Costa Rica
• Development of local supplier base and clusters
  around foreign companies through government
  programs

SOURCE Literature review press search expert
interviews
39
Why are we interested in Costa Rica?
Applicability?
Relevance?

• Small?
• 2007 GDP 110 of NI

ü

• Aspects NI could learn from
• Focus of a small agency on selected sectors and
  priority companies where Costa Rica is
  competitive to attract FDI
• Positive externalities on domestic economy by
  limited number of FDI investments

• Open?
• 2007 Exports 48 of GDP

ü

• Developed?
• 2007 GDP per capita 46 of NI

• Aspects NI is unlikely to learn from
• Use of special export processing zones as
  financial incentives to attract FDI
• Workforce at very low cost
• Relatively unproductive labour force in sectors
  with no/low FDI

• Successful?
• Achieved 2.0 productivity growth from 2000-2008
  compared to UK average of 1.7

ü
SOURCE Economist Intelligence Unit UNESCO
Statistics World Bank Ease of doing business
reports IMF International financial statistics
WMM/Global Insight World Economic Outlook
database IMD World Competitiveness online
40
Costa Ricas strategy to attract higher value FDI
was supported by strong leadership
Early 1980s Costa Rica creates several Export
Processing Zones (Zonas Francas) where importers
can import inputs free of duties and are exempted
of tax for 8-12 years
1994 Election of President Figueres gives new
momentum to Costa Ricas economic policy.
Priority is shifted towards higher value add
economic sector while deprioritising investments
seeking low-cost manufacturing.
1996 FIAS report on competitiveness of Costa
Rican electronics sector recommends pursuing FDI
in sub-sectors requiring relatively high inputs
of skilled labour power technologies, PC cards
and surface mount technologies, system
integration technologies and call centres (to the
electronics industry).
Today - Assessment of HC capabilities and
existing private and public research in Costa
Rica on which RD intensive FDI can be built. Led
by CINDE with other institutions.
.
1990s
1980s
2000s
Early 1990s CINDE loses part of US-Aid funding
and has to focus efforts (higher value add) 1995
Active pursuit of Intel investment and
involvement or President. Creation of Intel task
force.
1997 300m Intel Investment is secured
1982 Creation of CINDE as a non-profit,
non-governmental agency by businessmen in
collaboration with US-Aid to attract foreign
investment to Costa Rica. 1984 government
acknowledges CINDE to be of public interest.
Initial focus on a broad range of sectors
2000 Creation of PROVEE program aimed at
developing local supplier base for foreign
companies and creating linkages in the economy.
2000 - Creation of RD matching grants system
Fondo de Recursos Concursables to develop Costa
Ricas focus on knowledge economy
1996 Creation of Procomer as government agency
aimed at promoting exports
SOURCE Literature review press search expert
interviews
41
Costa Ricas performance was driven by rapid
growth in FDI and exports
FDI
Exports
Total stock inward FDI, GDP
GDP, excluding tariffs
UK
Costa Rica
Costa Rica
UK
Productivity growth
RD
GDP, all RD
Change in real GDP per employed worker, p.a.
UK
Costa Rica
UK
Costa Rica
10-year rolling average Recent fall in
productivity may be due to falling agricultural
productivity and dependence on performance of US
economy Gaps in Costa Rican RD Data sourced
from WDI
SOURCE WMM / Global Insight (GDP, exports,
productivity) OECD (RD expenditure) IMF, WDI
42
What were the key success factors for Costa Rica?
Identifying opportunities based on existing
strengths

• When losing competitiveness as a low cost
  manufacturer in the early 1990s Costa Rica made
  the conscious effort to understand its existing
  strengths and identify development opportunities
• The FIAS study was commissioned to assess
  competitiveness and opportunities in the
  electronics sector, CINDE carried out significant
  market intelligence and identified market trends
• Focus on building on existing strengths
• Anchor companies Use of Motorola, Intel for high
  tech sector, Baxter for medical devices for
  reference selling CINDE refers to large
  companies on its website and provides details on
  investment story, gives possibility to talk to
  large investors in country
• Existing human capital Use of relatively skilled
  labour to build electronics/high tech sector
  CINDE assesses available current and future
  capital and skill levels
• Leverage quality of life Marketing of political
  stability, democracy quality of life and
  proximity to the US

Agency focus on a small set of sectors

• CINDE adapted its 1997 strategy on
  recommendations of the FIAS study and its
  internal market intelligence and focussed on
  selected sub-sectors
• Services (Shared services, Advertising
  Marketing, Software, Design)
• Advanced Manufacturing (Telecommunications,
  Electric Assemblies, Electronic Components,
  Semiconductors, Engineering and Software,
  Consumer Electronics, Engineering and PCB Repair)
• Medical devices
• Strong focus 29 out of 30 companies that
  invested in Costa Rica with CINDE support were in
  these sectors, 99 of employment created with
  CINDE in these sectors

Strong leadership

• President Figueres shifts focus to higher value
  add sector priority of economic policy
• Intel investment When CINDEs focus allows Costa
  Rica to be on Intels long list, attracting Intel
  to Costa Rica becomes a government priority
• Creation of an Intel task force includes Minister
  of Foreign Trade
• President meets Intel team in person for 3 hours
  to discuss the project
• Today CINDE has Minister of Trade or President
  attend important meetings 3-5 times per year.
  Requests for VIP are informal and Mini