A Locational SWOT refers to an assessment of the strengths, weaknesses, opportunities, and threats that face a region when seeking to attract FDI. It is particularly useful in identifying an initial list of target sectors that offer the greatest potential for investment. The results of this SWOT analysis provide the foundation from which regional clusters are identified.
One of the best sources of input on the key constraints to investment is the private companies operating locally. They are best placed to say where the pain points are in terms of operating conditions for businesses. These insights can be invaluable in identifying what reforms at the local, regional and national level would improve the productive capacity of the business environment.
A PPD is a structured interaction between public- and private-sector stakeholders focused around promoting the right conditions for private sector development, improvements to the business climate, and economic development. It is about stakeholders coming together to define and analyze problems, to discuss and agree on specific reforms, and to work to ensure that the suggested solutions are implemented.
When drawing up a list of potential sectors to target for inward investment, it is important that an IPA not only target industries but also business activities. The location of FDI projects is often driven by its business activity rather than its industry. For example, call centers, logistics, IT support, and regional headquarters functions are all business activities; the same activity can be established by companies operating in many different industries.
The SWOT analysis should identify the major sectors in a region and the most promising sectors for investment based on the opinion of current investors and experts. In addition, data research should be conducted.
The SWOT analysis should also identify the main “supply-side” strengths of a region (e.g. size of labor force or good ICT infrastructure) that can be matched against sectors in which these supply-side factors are very important.
When identifying target sectors, it is essential to consider which sectors have the highest volume of FDI that your region could compete for. There’s little point in targeting a sector, even if it’s strong, with a low level of FDI growth potential.
When selecting sectors, it is important to consider which sectors have the highest positive impact on a region’s economy. The impact of FDI depends on the sector and type of project an investor has.
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