FOREIGN DIRECT INVESTMENT POLICY IN THE 5 LVIV REGION 200 OF UKRAINE ecember D 3000 Km 3000 Mi. Scale at the Equator. FOREIGN DIRECT INVESTMENT POLICY IN THE LVIV REGION OF UKRAINE A REVIEW BY THE ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT (OECD) TABLE OF CONTENTS CHAPTER 1. INTRODUCTION............................................................................................. 4 Purpose of the review ................................................................................................................ 4 Review process.......................................................................................................................... 4 FDI attraction, aftercare and embedding: definitions and principles......................................... 5 FDI and FDI policy in the Lviv Oblast: main issues and trends................................................ 7 Potential for cross-border co-operation in FDI........................................................................ 10 CHAPTER 2. FDI ATTRACTION POLICIES ..................................................................... 12 Introduction ............................................................................................................................. 12 Overall approach of authorities and agencies in the Lviv Oblast to attracting of FDI ............ 12 Aspects of the local business support environment to be developed in order to attract high quality FDI....................................................................................................................... 17 Organisation of specific policies to attract FDI....................................................................... 22 Conclusions and recommended policy actions........................................................................ 26 CHAPTER 3. FDI AFTERCARE POLICIES........................................................................ 33 Purpose and Approach............................................................................................................. 33 The Rationale, Challenge and Focus of Strategic Aftercare.................................................... 33 The Relevance of Aftercare Policies to Ukraine and Lviv ...................................................... 37 CASE STUDY 1 Holger Christiansen A/S................................................................................. 43 CASE STUDY 2 Leoni AG........................................................................................................ 50 Main findings and recommendations....................................................................................... 54 Next Steps for Lviv Oblast ......................................................................................................61 Next Steps for Lviv Oblast ......................................................................................................62 Scope for Developing Cross-border Aftercare Initiatives ....................................................... 64 CHAPTER 4. FDI EMBEDDING POLICIES....................................................................... 67 Introduction ............................................................................................................................. 67 Promoting Embedding of FDI – A Review of National and Regional Policies ...................... 68 Embedding of FDI in the Lviv Oblast – An Empirical Analysis............................................. 73 Assessment .............................................................................................................................. 78 Policy Recommendations ........................................................................................................ 80 Potential for Cross-border Co-operation in FDI...................................................................... 86 CHAPTER 5. POLICY RECOMMENDATIONS................................................................. 91 FDI Attraction.......................................................................................................................... 91 FDI Aftercare........................................................................................................................... 94 Preparing for strategic aftercare in Lviv Oblast....................................................................... 94 Next steps for Lviv Oblast....................................................................................................... 95 FDI Embedding ....................................................................................................................... 97 Developing the potential for cross-border co-operation in FDI............................................... 99 2 ANNEX I THE PLACE MARKETING BENEFITS OF AFTERCARE......................... 100 ANNEX II FDI AFTERCARE LEARNING MODELS ................................................... 101 THE CZECH REPUBLIC............................................................................... 101 IRELAND ....................................................................................................... 107 SCOTLAND.................................................................................................... 114 ANNEX III THE IRISH ECONOMIC DEVELOPMENT MODEL.................................. 120 ANNEX IV THE IRISH APPROACH TO AFTERCARE: SERVICES, DELIVERY AND RESOURCES.................................................................................................. 122 ANNEX V THE IRISH GOVERNMENT’S VISION AND STRATEGY TO 2015. ....... 124 Tables Table 1. Objectives and targets for FDI attraction ............................................................ 14 Table 2. Marketing strategy of SEZs in the Lviv region................................................... 19 Table 3. Three levels of market intelligence ..................................................................... 23 Table 4. Marketing action plan.......................................................................................... 32 Table 5. FDI Employment in Ireland: 1992-2001 ........................................................... 108 Table 6. Job Approvals re. Greenfield/Expansion Activity: 1992-2001 ......................... 108 Boxes Box 1. Case study: Reform Programme for the Improvement of the Investment Climate in Turkey ..................................................................................................................... 13 Box 2. Case study: Targeted investment promotion in Victoria State, Australia .................... 15 Box 3. Case study: World Association of Investment Promotion Agencies (WAIPA)........... 17 Box 4. Case study: Aegean Free Zone in Izmir (Turkey)........................................................ 18 Box 5. Case study: The Upper Rhine Region and EUCOR university confederation............. 21 Box 6. Case study: Office of the Investment Ombudsman in the Republic of Korea ............. 22 Box 7. Case study: LOCOmonitor™, an FDI database and company targeting tool .............. 23 Box 8. Case study: Web site of Copenhagen Capacity............................................................ 25 Box 9. Kredyt Bank’s Centre for Promotion of Foreign Investments Attraction, Small and Medium Business Development................................................................. 75 Box 10. FDI Promotion and Embedding in the Czech Republic............................................. 80 Box 12. Estonia's FDI Strategy................................................................................................ 81 Box 13. Shannon Development Ireland - 'Supply Network Shannon'..................................... 82 Box 14. Local Industry Upgrading Programme of Singapore ................................................. 84 Box 15. Cluster Policies at the Regional Level in Europe....................................................... 85 Box 16. Embedding of Suzuki's FDI in Hungary .................................................................... 85 Box 17. OECD Guidelines for Multinational Enterprises ....................................................... 86 Box 18. Öresund University – promoting cross-border co-operation...................................... 87 Box 19. Öresund Science Region ............................................................................................ 88 3 CHAPTER 1. INTRODUCTION This document is the report of the OECD review of Foreign Direct Investment (FDI) and Local Development in the Lviv Oblast (region) of Ukraine. This review is carried out in the framework of the joint initiative by the OECD and the European Commission on Improving the Conditions for Enterprise Development and the Investment Climate for Domestic and International Investors in Ukraine. Purpose of the review The objective of this review is to examine policies in the Lviv region for: − Investment attraction, analysing which aspects of the local environment regional authorities/ agencies should build and market in order to attract more and better quality inward investment (FDI attraction – Chapter 2 of this report). − Assisting foreign investors with initial installation, monitoring their development in the region and helping them overcome problems as they arise in order to maximise retention and expansion opportunities (FDI retention and aftercare- Chapter 3 of this report). − Achieving the maximum long-term spin-off from inward investment attracted, for example through local supplier development, cluster building and