INSTITUTE OF URBAN DEVELOPMENT
HOW TO ATTRACT
INVESTORS TO AIRPORT
REGIONS
Action/output
3.2.6
Kraków, 2013
LOCAL ECONOMIC DEVELOPMENT IN AIRPORT CATCHMENT AREAS
Spatial development, environment and architecture
INSTITUTE OF URBAN DEVELOPMENT
HOW TO ATTRACT INVESTORS
TO AIRPORT REGIONS
Kraków, 2013
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LOCAL ECONOMIC DEVELOPMENT IN AIRPORT CATCHMENT AREAS
Spatial development, environment and architecture
Partnership Agreement between Lead Partner and Partners of “airLED: Local economic
development in airport catchment areas” - project No. 4CE485P4
CENTRAL EUROPE PROJECT
Project team:
Wojciech Jarczewski, Ph.D. – Project Leader, Department of Urban Policy and Regeneration
Maciej Huculak, M.Sc. – Department of Urban Policy and Regeneration
Maciej Wierzchowski, Ph.D. – Department of Spatial Economics
Andrzej Słowik, M. Sc. – Department of Spatial Economics
Janusz Jeżak, Ph.D. – Head of the Department of Spatial Economics
Authors:
Wojciech Jarczewski, Ph.D.
Maciej Huculak, M.Sc.
INSTITUTE OF URBAN DEVELOPMENT IN KRAKOW
ul. Cieszyńska 2,
30-690 Kraków
www.irm.krakow.pl
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LOCAL ECONOMIC DEVELOPMENT IN AIRPORT CATCHMENT AREAS
Spatial development, environment and architecture
Project:
LOCAL ECONOMIC DEVELOPMENT IN
AIRPORT CATCHMENT AREAS
Type:
Action/output 3.2.6
Subject:
Handbook “How to attract investors to airport regions” – Summary
Author:
Wojciech Jarczewski, Maciej Huculak
File:
How_to_attract_investors_handbook_contents.doc
Version No.
1.0
Status:
completed
Company:
Publication
Date:
IUD
3.12.2013
Provisions
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LOCAL ECONOMIC DEVELOPMENT IN AIRPORT CATCHMENT AREAS
Spatial development, environment and architecture
TABLE OF CONTENTS
How to attract investors to airport regions
I.
II.
III.
CITIES AND REGIONS IN PRO-INVESTMENT ACTIVITIES
STRATEGIC PLANNING OF PRO-INVESTMENT ACTIVITIES
PRO-INVESTMENT OFFERINGS AS PART OF A DEVELOPMENT
STRATEGY
6
8
9
IV.
SPECIAL ECONOMIC ZONES
10
V.
PRO-INVESTMENT PROMOTION
11
VI.
NEGOTIATIONS AND SERVICES FOR INVESTORS
13
VII.
EMBEDDEDNESS AND AFTERCARE POLICY
14
VIII.
PILOT IMPLEMENTATION
15
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Spatial development, environment and architecture
I.
CITIES AND REGIONS IN PRO-INVESTMENT ACTIVITIES
A key characteristic of cities and communes (Polish: gminas), which have succeeded in attracting external
investors, is the presence of a strong leader or team with a vision for growth and the ability to implement
that vision. Some local governments attract few investors or none at all over long periods of time, and start
to attract multiple investors once a local leadership change occurs. In other cases, areas that theoretically
possess the right conditions for investment do not attract any investors due to a lack of interest in investor
acquisition on the part of the local government or its inefficient approach.
In practice, every small rural and urban commune and midsize city that is effective at attracting investors
possesses a pro-investment strategy articulated by local government officials. The desire to attract investors
and the general idea of how to do it on a local scale are the foundation and key driver of further action. Any
gaps in know-how may be filled in with information obtained from more experienced communes and by
hiring appropriate specialists. The funds needed to finance the preparation of an attractive business offering,
its promotion, and the servicing of investors may be gradually secured from the commune’s annual tax
budget or other public or commercial sources.
The only elements that must be produced locally, and cannot be “imported,” are the vision to attract
investors and the will to implement that vision. The local government, and especially the head of the local
government, must possess this type of vision. In many small and midsize communes, there exists a close
relationship between the emergence of a pro-investment vision, its implementation, and plant establishment
or relocation decisions made by new external investors. Research has shown that new external investors
rarely choose to establish new business locations in communes that offer excellent investment conditions,
but make little or no effort to attract external investors (Domański, Jarczewski 2006).
This trend does not hold in large cities where the plant establishment decisions of external investors are
less correlated with decisions made by municipal governments. In a sense, large cities are rare goods, which
attract investors regardless of the posture and actions of municipal governments.
Voter support, which allows a government to function for more than one term, is a key factor in effective
pro-investment efforts. Communes where the leadership changes often tend to generate few, if any, proinvestment efforts. However, each change of leadership is also an opportunity to start new pro-investment
activity. Two terms in office (8 – 10 years) are needed in order to formulate a vision, prepare an attractive
offering, promote the offering, and acquire new external investors in a given commune. If a good working
plan is in place, subsequent terms in office can be used to focus on improving investment-related results.
However, too many terms in office per any one political leader can also lead to a loss of fresh ideas and the
energy to pursue pro-investment activity. In some cases, the election of a new mayor or other leader results
in fewer pro-investment efforts or a general cessation of pro-investment activity. However, continuity of
power is not synonymous with continuity of pro-investment activity.
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II.
STRATEGIC PLANNING OF PRO-INVESTMENT ACTIVITY
Strategic urban planning has emerged as an offshoot of strategic business planning. The first stage of proinvestment strategic planning must involve the identification of trends in plant establishment and plant
relocation in the country of interest as well as in Europe and the world in general. The lack of proper
identification of the guidelines used by companies in search of new business locations in a competitive
environment makes it difficult to take appropriate action designed to encourage the influx of mobile capital.
It is also important to compare one’s city or commune with other cities and communes directly competing
for new external investors. A comparison will reveal market niches that may become the given city or
commune’s greatest assets. A best practices approach is also an excellent way to improve solutions used by
one’s city or commune.
Having a general understanding of the requirements posed by potential external investors as well as of what
is being offered by competing cities or communes and one’s own resources, it is possible to identify specific
goals and means of operationalising them. The effective realisation of plans can only be assured by properly
selecting the means to achieve properly set specific goals.
The pursuit of pro-investment activity in large cities with thousands of municipal employees requires a very
complex analysis of the entire system. Even the best mayor will not be able to constantly manage every
aspect of pro-investment programs. On the other hand, in small and midsize cities, there does not seem to
be a strong relationship between the quality of pro-investment documents and the quality of pro-investment
activities. Existing documents often appear to have been produced to satisfy some legal requirement, as
opposed to having a specific strategic purpose. Small and midsize communes need a good strategic planner
in order to produce an effective pro-investment plan, while large cities need a strategy to accomplish the
same goal.
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III.
PRO-INVESTMENT OFFERINGS AS PART OF A DEVELOPMENT STRATEGY
The preparation of an investment offering is a basic sign of a pro-investment posture of a commune. Cities
and communes that do not prepare a formal offering are not likely to acquire new external investors,
especially large and midsize investors. For companies in search of new business locations, the purchasing of
land, soliciting changes in zoning laws, and creating technical infrastructure are usually too time-consuming
to be worthwhile in light of already prepared offerings available in competing cities or communes.
There exists a clear relationship between the effort put into the preparation of offerings and the influx of
new investors. Research has shown that the implementation of pro-investment plans is strongly related to
the experience and determination of local government officials. Many communes provide only one area
zoned for business activity. Such an area is often owned by the given commune and features a property tax
break, while offering no other benefits. Many properties simply do not meet investor needs. This problem is
sometimes solved by communes purchasing land and adding technical infrastructure. This type of action is
complicated and politically risky. In Western Europe and North America, the preparation of investment
offerings has been considered an essential part of investor acquisition for decades. Ultimately, it is politically
risky for a commune to invest funds in infrastructure and roads leading to business zoned properties in light
of the uncertainty associated with the sale or lease of such properties.
Communes use a variety of incentives to enhance the attractiveness of their offering. Property tax breaks for
a defined period of time are the most popular of incentives. The research literature suggests that tax breaks
are a key investment motivator used by local governments. However, the effectiveness of this incentive has
not been clearly established, while lost tax revenue may strongly affect commune budgets.
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IV.
SPECIAL ECONOMIC ZONES
Special economic zones are designated areas that offer favourable business conditions and serve as a basic
means of improving the competitiveness of the local, regional, and national economy. Local governments
can use special economic zones to enhance the investment attractiveness of a given city or commune.
Special economic zones feature a significant percentage of new plants, especially foreign-owned plants. In
the automotive industry, virtually every new plant in Central Europe has been built in a special economic
zone. A few automotive plants were built in other types of business areas characterized by special financial
conditions.
In addition, subzones can be created anywhere in the country, which is criticized at the national level, but
promoted at the local level as part of pro-investment activity. A total of 303 communes in Poland offered
special economic zones in 2009, which was more than 12% of all communes in Poland. The number of
communes in Poland featuring special economic zones is increasing, although the rate of growth is less than
what would be expected given the benefits of attracting investors to such zones. It is expected that a
maximum of 20% of Poland’s communes will create special economic zones.
In light of the high requirements posed by Poland’s special economic zones operator, local governments in
Poland must put forth a well-prepared offering in order to qualify for the special economic zone
designation. In some cases, local governments come to the table with potential investors already in tow. The
special economic zone designation is the culmination of numerous long-term and costly pro-investment
efforts. The designation is often a measure of a commune’s ability to attract and service new external
investors. Local governments increase the level of professionalism and improve pro-investment policies in
order to meet rigorous requirements put forth by special economic zone management boards. Today, Polish
communes in the early stages of pro-investment policy have little chance of acquiring special economic zone
status for their industrial parks. This is in contrast to the mid-1990s when special economic zones were
created in Poland in areas with little technical infrastructure and few associated investor benefits. The
promotional stage usually occurred once an area was already designated a special economic zone.
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V.
PRO-INVESTMENT PROMOTION
Promotion is the most frequently planned and utilised tool in pro-investment programs operated by local
governments in Poland. The promotional strategies and associated tools used by communes in Central
Europe are often based on experiences and publications from the United States and Western Europe. What
is still often lacking is a professional approach to promotional publications, which ought to focus solely on
pro-investment issues and not resemble tourism-related or culture-oriented promotional materials.
Two principal types of promotional activities have been identified:
-
direct promotion by commune officials
-
indirect promotion by institutions and companies
Each pro-investment promotional tool may be implemented on its own or in combination with others. In
direct promotion, commune officials attempt to convince potential investors to take advantage of their
commune’s offering. In most cases, communes hand out paper brochures and create internet pages. Large
cities often take part in investment fairs, and advertise in some cases. Direct marketing is a rarely employed
tool. Some communes employ indirect methods that include mailing descriptions of offerings to various
national investment agencies, local and regional agencies for development, consulting companies, and real
estate companies. Management boards of special economic zones are also a valuable albeit difficult partner
for local governments.
The problem that seriously complicates the measurement of the effectiveness of commune-level proinvestment promotional efforts is the difficulty in defining an appropriate metric. This is also a key factor in
the low number of papers being published in this area. Existing research suggests that the actual effect of
promotional efforts on plant establishment and relocation decisions is limited. This does not reduce the
value of pro-investment promotional efforts, but does suggest that such efforts do not exert measurable
influence on the actual decision-making process at the target company. The opinions of business owners or
plant managers on key plant establishment and relocation factors are not a good measure of the
effectiveness of pro-investment promotional efforts.
The main goal of pro-investment promotion is to create awareness of a commune’s offering so that
potential investors will consider it when searching for a new plant location. The goal is not to immediately
induce the investor to purchase whatever the commune is selling, as would be the case with most consumer
products. In essence, the more investors consider a commune’s offering, the more effective the commune’s
pro-investment promotion is said to be. The most effective pro-investment promotional tool is
collaboration with a variety of supporting institutions. Many small and midsize communes have recognized
the high value of indirect promotion and have limited direct promotional efforts to a website and some
paper folders.
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Spatial development, environment and architecture
According to the basic principles of strategic planning, pro-investment promotion should be part of an
integrated plan to attract investors. This basic principle is often not followed by small communes and even
large cities. The type of promotional tools used by a commune often depends on the pro-investment
experience of a given commune. Simple tools are used by communes with little or no experience in investor
acquisition. These include direct tools such as handing out folders, creating websites, and producing
advertisements. More advanced pro-investment activities associated with the preparation of offerings and
collaboration with supporting institutions such as regional and national pro-investment agencies as well as
experience in negotiations with the first acquired investors lead to a gradual transition in the types of
promotional tools used.
Expert advice and specialised literature as well as personal experience lead communes to utilise inexpensive,
but believed to be effective, methods of pursuing investors. Methods of this type tend to require greater and
more systematic effort. On the other hand, a particularly difficult type of promotional approach is direct
marketing. This approach is used primarily by experienced local governments that encourage personal
contact between commune officials and investors searching for new business locations. Communes with a
significant degree of success in the area of investor acquisition are characterised by the use of
“promotional networks,” which is a form of pro-investment promotion based on multiple channels and
partners.
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Spatial development, environment and architecture
VI.
NEGOTIATIONS AND SERVICES FOR INVESTORS
The organising capacity of local governments and their ability to use this capacity in the course of
negotiations with potential investors may strongly affect plant establishment or relocation decisions. A
professional approach to the investment process generates a pro-investment image of a commune that may
help acquire subsequent investors.
Professional treatment of potential investors helps them make the final decision in favour of the investorfriendly commune. Pro-investment communes assemble negotiation teams consisting of appropriately
selected officials who follow preset procedures. Commune leaders and their associates supervise the
investor acquisition process and join the negotiations early on. Negotiation experts note that lack of
credibility on the part of the commune may discredit an offering initially perceived as valuable by the
potential investor. Another key aspect of the investor acquisition process is the timely preparation of data
requested by the potential investor. Finally, the decision to disclose any information on the negotiation
process and the final plant establishment decision should be left to the investor.
Potential investors expect communes to fulfil all stated obligations prior to the final plant establishment
decision. Local governments are usually familiar with local problems and need to support potential investors
in their negotiations with agencies and institutions independent of the local government. The period
between the final plant establishment decision and the start of business operations is usually a time of
frequent contact between investors and local government officials. The interactions and experiences of new
investors and local government officials during the plant establishment process determine their perception
of the commune and its government for years to come.
Many researchers point out the benefits of the so-called one stop shop in the negotiation process and the
investor servicing process. The concept is very simple – one member of the commune negotiation team is
responsible for addressing the various needs of the potential investor.
The ability to negotiate and provide services to potential investors is based on two basic elements:
* initiative by the local government
* level of experience of the commune’s negotiation team, which is linked to the number of potential
investors served
A well-honed negotiation system requires the use of preset procedures. This is true even in small communes.
Experience resulting from interactions with many different types of investors helps hone procedures, which
leads to more emphasis of local benefits and the lowering of barriers.
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Spatial development, environment and architecture
VII.
EMBEDDEDNESS AND AFTERCARE POLICY
The start of regular business operations does not mean the end of investor – government interactions. The
success of pro-investment policy depends not only on the ability to attract new investors, but also on the
ability to help existing investors grow. The latter is often the more important part.
Professional aftercare policy
* increases the likelihood of expansion at existing facilities
* reduces the risk of plant relocation to another commune
* increases investor satisfaction with current location, which helps attract new investors
The posture of local government officials toward existing businesses affects their degree of embeddedness.
However, the magnitude of this effect is usually small and impossible to gauge amidst other factors. Proinvestment policy is a key part of a commune’s image in the process of attracting new investors.
Competent aftercare is often the product of experience associated with investor acquisition. The
knowledge and experience acquired by a local government in the negotiation and investment monitoring
process may become valuable elements of an aftercare policy. Communes featuring companies established a
long time ago tend to offer less aftercare, even though older companies (privatised state-owned enterprises)
may also need different types of assistance. If local leaders recognize the need for an active pro-investment
policy, then they also recognize the need for an aftercare policy, as the two are strongly linked.
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VIII.
PILOT IMPLEMENTATION.
Niepołomice – Kraków-Balice airport region (POLAND)
Niepołomice is a commune located immediately southeast of Kraków. It has become a model of
professionalism and effectiveness in the area of attracting external investors1 since Poland’s transition to a
market economy two decades ago. This small commune of 22,000 residents also experienced the social and
economic hardships of the early 1990s when Poland began to make the transition from communism to
capitalism. All large and midsize plants in Niepołomice significantly reduced employment levels at the time.
The problem of unemployment was exacerbated by job losses at the neighbouring Tadeusz Sendzimir Steel
Mill in Kraków. Many residents of Niepołomice had held two jobs and the loss of both jobs often proved
financially unbearable. Stanisław Kracik was elected mayor of Niepołomice in 1990. Kracik and his closest
associates helped initiate a process of social and economic modernisation in the commune. Its pioneering by
Polish standards Niepołomice Investment Area became a foundation of the commune’s future economic
development.
The product of twenty years and many different levels of pro-investment activity consists of 60
companies operating plants in the Niepołomice Investment Area. The total investment value is about 470
million U.S. dollars. The number of employees is close to 4,600. The high employment rate in Niepołomice
has reduced unemployment in neighbouring Wieliczka Commune. The labour market in Kraków has also
been substantially affected. Niepołomice is now home to a variety of companies ranging from international
giants such as Coca Cola, MAN, and Royal Canin to smaller domestic companies and local businesses. The
commune’s rapid rate of economic growth has also produced significant tax revenue for the local
government. Tax revenue has helped fund an array of key public investments throughout Niepołomice
Commune. After 19 years at the helm of the Niepołomice local government, Stanisław Kracik was designated
governor of Małopolska Province in 2009.
The innovation level of the many solutions employed by the Niepołomice local government in the
course of investor acquisition and the scale of the commune’s success suggest that its approach may be
considered a model approach that may be valuable to a wider audience of local leaders and other
stakeholders.
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