Massive growth in services, boosted by advances in technology, is causing global upheaval. Trends such as offshoring reflect this growth – but IPAs need the right strategy if they are to benefit.

Slovakia and Colombia – the world’s “most successful investment climate reformers over the past year” – are the exceptions rather than the rule, according to a report released by the World Bank Group.

Despite the fact that a small group of countries led by Slovakia and Colombia are moving quickly ahead with reform, creating one-stop shops for new businesses, cutting regulatory delays by weeks and increasing the flexibility of labour laws, most developing countries are hugely inefficient when it comes to regulations.

Venture capitalists, business developers and entrepreneurs are due to descend on Taipei’s International Convention Center from November 7-10 to exchange ideas with about 400 local professionals and business people from the country’s growing technology sector.

Each year at about this time the United Nations Conference on Trade and Development (Unctad) publishes its analysis of FDI. The overall tally was a decline in 2003, for the third year in a row. The report points to a 53% slump in flows to the US and, at $30bn, the lowest level in more than a decade. But might this be an example of measuring a statistic that tells only a part of the story?

The year 2003 again saw a decline in world FDI flows, by 18%, to $560bn. This decline was concentrated in developed countries and central and eastern Europe. Developing countries, led by Asia, saw a rise in inflows, which reached $172bn. China became the world’s largest host country (with $54bn). The latest data from the World Investment Report 2004 (see www.unctad.org/wir) also confirm the shift towards services: from one-quarter in the 1970s, the share of this sector in the world’s total FDI stock rose to 60% (and two-thirds of FDI flows).

US film-maker George Lucas has gone unusually silent on plans to relocate part of his growing animation company to Singapore. “We haven’t settled on our facility location in Singapore, so there is not much news since the original announcement,” Lucasfilm Animation spokeswoman Marlene Saritzky told fDi magazine. “I’m afraid there isn’t much more to tell.”

Figures from both leading FDI investment tracking monitors, Ernst and Young’s European Investment Monitor (EIM) and IBM’s GILD index, indicate a downturn in life science projects for the first half of 2004 compared with 2003. The EIM data shows a 9% fall for the first half of the year but this is placed in stark context when overall investment for the six months for all industry sectors has increased 20%.

ICT is a good example of the kind of knowledge-based industry that most countries try to develop. Different success models exist. Several developing countries are well on the way to equalling the FDI-induced Irish model, especially countries like India, whereas the indigenous ICT cluster development model of the Scandinavian type is far more difficult to copy due to the speed of technological change.

Production overcapacity is one of the hottest issues in the automotive industry today. Some industry observers claim that overcapacity is a myth, used by automakers as an excuse for closing plants in areas that are no longer important to them or that have become too expensive. But industry figures point to global overcapacity of about 20%.

Globalisation of real estate will continue to gain momentum as more real estate companies, opportunity funds, pension funds, real estate investment trusts and other investors acquire or develop properties around the world. Globalisation offers more choices than investors might find in their home markets, the prospect of higher returns, portfolio diversifications, arbitrage opportunities, and more flexibility in structuring investments based on returns, risks, and other criteria.

Scotland’s commitment to long-term development and encouragement of innovation are helping to give it a global profile as a business location.

National and provincial governments in South Africa are helping to stimulate significant growth of the contact centre and business process outsourcing industries in the country, writes Wendy Atkins.

As global business in the information communications technology sector shows signs of recovery, it is developing countries that are now powering the industry. Michel Lemagnen reports.

Over the past few decades, Hong Kong has gained a global reputation as a regional and international centre for finance and trade.

Many overseas companies have set up their regional and, in some cases, their international bases in Hong Kong. The city is host to more than 3500 regional headquarters and regional offices. But we definitely have room for more.

The information communications technology sector is fast growing into one of the world’s mega-markets and is attracting government attention – not least in China. Charles Piggott reports.

The ICT industry is flourishing in Lazio and is being boosted by a significant involvement in the Galileo satellite communications project.

The Pakistan government is working hard to attract large scale FDI into the country, including allowing foreign investors to hold unlimited equity and making concerted efforts to project a positive country image. Jules Stewart reports.

Pakistan’s export processing zones have much to offer investors and are making a positive contribution to the country’s economy.

Waseem Haqqi, chairman of the Board of Investment of Pakistan, tells fDi about the board’s expanded remit in stimulating investment, both foreign and domestic, in the country.

The purchase of French bathroom and kitchen scales manufacturer Terraillon by Hong Kong’s wealthy Chai brothers shows how Chinese entrepreneurs can reinvigorate struggling Western companies. Blanca Riemer reports.

Torbjörn Fredriksson,senior economist at Unctad explains how services have become a tradable commodity that can be fragmented and provided offshore, giving companies a competitive advantage.

Libya has been slow to open up but, despite the small market and problems with corruption and bureaucracy, experts predict that FDI will grow. Prospective investors should move quickly, as Kate Luxford reports.

Utilities can provide something just as vital as energy. In the US, they workarm-in-arm with economic development agencies to advise and attract manufacturers. Karen E Thuermer tracks power companies’ achievements.

The Sacramento Municipal Utility District (SMUD) fared well when Californian utilities suffered an energy crisis brought on by the state’s fundamentally flawed approach to deregulation. SMUD came out tops thanks to its wide range of power plants, long-term contracts with power generators and the diversity of the industries that it serves.

Duke Power was instrumental in bringing BMW to South Carolina some 10 years ago. The region is now home to a thriving automotive cluster that includes suppliers and the soon to be developed International Center for Automotive Research in Greenville. The $15m Center will be owned by Clemson University and leased by BMW. A study by the University of South Carolina School of Business reports that BMW’s plant has had a $4bn direct and indirect economic impact on the state.

Although Atlanta-headquartered Mirant Corporation is following bankruptcy proceedings in the US, it still takes a competitive stance internationally in the management and marketing of power-generation and energy risk. In its endeavours to grow new business, Mirant is focusing its economic development efforts in the developing world markets of Jamaica, Curaçao, Trinidad and Tobago, Grand Bahama and the Philippines. Here, the utility is developing electricity suppliers and, therefore, new customers.

PPL Electric Utilities, which services large parts of eastern Pennsylvania, plays a more supplemental role in economic development than it did in the past. Before deregulation, PPL had a much larger economic development staff.

Mexico is extending its wide-ranging FTA network eastwards, to take in the markets of Japan and China. Fernando Canales Clariond, minister of economy, explains why to Paula Garrido.

The fortunes of transnational corporations may have slipped since 1999, but they still generate a large slice of the sales volume for Latin America and the Caribbean.

Mention Puerto Rico, and two visions are conjured up. One is of sun-baked beaches, deep blue Caribbean sea and palm trees and large numbers of tourists showering wealth on the local community. The other image is of a poor and economically struggling island with a culture from which its inhabitants are desperate to escape to enjoy the gold-paved streets of New York. Both images have a semblance of truth, but neither tells the whole tale.

Puerto Rico has long been a magnet for foreign direct investment, particularly with thepharmaceutical sector and with investors from the US. It is now more than ready to attract investment from around the world.

Banco Itaú’s chief economist, Tomás Málaga, explains the reasons behind Brazil’s success in raising its exports and diversifying its manufacturing output.

While World Bank experts have their doubts about free zones, Claude Baissac argues that economic processing zones have the capacity to transform economies. He looks at the experience in Mauritius and offers advice for other developing countries.

In the case of EPZs, heterodoxy primarily refers to views, theories and analyses refers to views, theories and analyses that are not based on trade theory. Heterodox perspectives incorporate contributions of new growth theory, neo institutionalism and the developmental state theory.

Africa’s EPZs have played a negligible role in both the static and dynamic contribution to growth and development. All observers agree that, with the exception of a handful of countries (Mauritius, Tunisia and Egypt), EPZs have achieved a marginal employment impact, low FDI, no linkages with the domestic economy and a limited foreign exchange contribution. Balanced against the direct, indirect and opportunity costs of developing an EPZ, maintaining its infrastructure, administering the incentive regime and so on, the total balance for the region as a whole may have been negative.

Over time, the EPZ has fostered the development of a competent core of domestic firms that have progressively increased their capability to serve foreign markets under a number of production arrangements. This has been made possible by extensive co-operation between foreign and domestic firms, the latter rapidly following the initial lead by the former.

The growing Aegean Free Zone is an important base for international companies looking to launch into the Turkish market and beyond.

An invitation has been sent to 53 countries on the African continent to attend the inaugural meeting of the Pan African Free Trade Zone Association (PAFTZA), which will be held during the World Free Zone Convention in Cape Town at the end of October 2004.

A long-term Technical Advisory agreement between Jafza International and the Tangier Mediterranean Special Agency (TMSA) in Morocco was signed recently that will increase to two Jafza International’s long-term operations in Africa.

Two zones on opposite sides of the globe have embarked on radical rebranding of their images. First was the former Zona Franca de Montevideo SA, now Zonamerica. Now Jebel Ali Free Zone (Jafza) in Dubai has repositioned itself. Both zones have a new look, which is reflected in their websites: www.zonamerica.com and www.jafza.ae.

Already a centre for finance and business in West Africa, Côte D’Ivoire has moved up a gear in race for foreign investment with the launch of an IT and biotech park.

When it comes to industry targeting, some IPAs are aiming in the wrong direction, wasting resources and missing better opportunities. Andrew Charlton, Nicholas Davis and Fraser Thompson describe how a new strategy developed by Oxford Investment Research has helped Spain to focus its investment promotion activities.

China was the number one destination for creative industry FDI projects in OCO Consulting’s sample of 517 projects worldwide in the 30 months to June 2004, bagging 10.4% of the projects.

There was markedly more FDI activity in the information communications technology (ICT) sector than in the other two sectors that OCO examined.

Europe was the favoured location for FDI projects in the field of medical equipment in the 30 months to June 2004. Seven of the top 10 country destinations and 68 of the total sample of 173 projects are located in the region.

Barcelona, one of Europe’s most attractive locations, has won the title of European City of the Future in fDi’s 2004/5 competition. Meanwhile, Scotland picks up the prize for European Region of the Future. Charles Piggott reports.

The competition for European Cities and Regions of the Future 2004/5 was in three rounds.

Barcelona is overwhelmingly fDi’s European City of the Future 2004/05. No other city came close, with the judges’ decision being almost unanimous. The city, which has reinvented itself during the past decade to become a world-class high-value services centre, was nominated the outright winner by five of fDi’s six judges.

Scotland has gone all out to attract FDI in the past decade and four of fDi’s six judges put it forward as the European Region of the Future 2004/05, pushing it ahead of Saxony and Hungary to win the final round.

Vilnius came out substantially ahead of its eastern European rivals, scoring highly across most categories. It scored top marks for GDP growth, which has been rising by more than 8% a year. The judges were also confident about the city’s economic prospects, buoyed by the presence of a well-educated workforce and the cost advantages offered by the region.

Athens is the clear winner of this year’s Southern European City of the Future. Greater Athens’ GDP has been growing at rates of more than 7% in the past few years. (The spectacular 33% growth from 2002 to 2003 displayed by Turkey’s Mersin, the highest of any first round winner, also deserves mention.)

Vienna is an established business centre for central Europe and it won this year’s title with consistently high scores across nearly all categories.

Krasnodar Krai stood out from the competition for its noticeably high GDP growth. At 24%, its 2003 GDP growth is higher than any other round two winner. The region also has the cheapest industrial rent in its category at €30 per square metre a year.

The Canary Islands beat the other two finalists in the region by virtue of a financially attractive investment package, cost effective labour pool, strong infrastructure and low telecommunication costs.

Saxony knocked its French, Italian and Spanish rivals out at the second round to go through to the finals.

In a tie-break, Hungary beat Greater Zurich to first place. Low fixed costs, especially low rents and wage levels helped to tip the balance.

The country has targeted an effective promotion strategy and substantial incentives to make inward investment cost effective for companies.

Barcelona’s popular and affordable housing districts, world-class international schools and colourful cultural heritage make it a convincing winner.

The Scottish city of Dundee has done exceptionally well, beating off much bigger cities such as Barcelona, Budapest and Moscow to rank top for its international promotion strategy.

Greater Zurich (Switzerland) tied with Iceland for regional security. According to Mercer HR, Zurich ranks number two for personal safety. The city has few large conurbations and no ghetto areas. Switzerland’s political neutrality reduces its threat from terrorism and the country has become host to many international organisations.

Scotland’s massive international promotion network is one of the slickest there is, according to fDi’s panel of judges, who ranked it ahead of the promotion agencies of the Czech Republic and Flanders in Belgium.

The Canary Islands beat the other two finalists in the region by virtue of a financially attractive investment package, cost effective labour pool, strong infrastructure and low telecommunication costs.