Once upon a time, across most of the world, governments made the major investment decisions over where the capital came from, and where it went. Now, globalization, privatization and deregulation between them leave most such decision-making to the whims of the equity markets. Does that mean that governments have no part in the process? Far from it. While ministers would once have schmoozed with central bankers to raise the readies, now they have to work much harder at ‘diplo-IR’, persuading equity investors that their countries offer investment opportunities.
At one time the British Royal yacht Britannia would float from port to port with a member of the Windsor family. Or Air Force One would land at the airport with a full team of businessmen promoting exports. Now they are more likely to be touting for inward investment. Many companies, especially from developing countries, jump on the bandwagon and make their first contact with US and European investors through such diplomatic channels.
Russian fall
In August it was announced that Burson-Marsteller was being retained by the Russian Council for Financial Services to persuade the global markets that money put into Moscow would not evaporate like Napoleon’s army. In fact, the announcement was a little premature. The company’s proposals had won the competition, but the contract terms were far from settled. Since the beginning of the year, Russian stocks had fallen by 60 percent, and the week of the announcement, Russian blue-chip stocks fell a further 25 percent, presumably making Burson-Marsteller’s already challenging job even more taxing.
More promising was Jamaica, which at least has nicer winters than Moscow. According to Peter Martin, the mastermind of Jamaica’s recent investment roadshows, the climate is a major plus in securing investor interest. Martin insists: ‘A healthy tourism product is key to bringing investors. Investment is a very serious business, but it also has to do with the quality of life and the welcome they get.’
Kickstart
A country like Jamaica would once have looked for foreign aid from governments. But last year’s $240 bn private equity investment in developing countries dwarfed anything governments were prepared to offer. When the Jamaican soccer team made its way to the World Cup in Paris, it was obvious that the Caribbean island, with only 2.5 mn people, had an unprecedented opportunity to draw attention to itself and to tap some of those billions.
The progress of the ‘Reggae Boyz’, Jamaica’s soccer team, became a global roadshow, with the prime minister, P J Patterson, and other members of his cabinet joining private business people in New York, London, Paris and all the soccer venues around France to garner investors and tourists. The aim was to put Jamaica ‘on the cutting edge of globalization,’ announced Patterson, describing his efforts at global corporate branding for a whole country. In fact, the physical symbol of the campaign was a globe, of sorts: the world’s biggest ever soccer ball, five stories high, which kicked off in New York.
Martin recalls: ‘We had a very small window of opportunity. After all, the US is blase over soccer, but all the major US global companies would be in France. With our small budget, we couldn’t compete with Paris, or Nike, or MasterCard. We had to capture the imagination of the world – hence the ball, to interrupt the flow of life.’ It worked, in an all round way. ‘Every New York TV station covered it, all the TV commentators signed it, and then we shipped it to Jamaica, where the prime minister signed it, and then we took it to London on the way to France.’
‘We promoted Jamaica as a brand name – tourism, reggae, sports, to tie the ball to the event itself and the meetings the ministers were having with investors.’ Once they had caught investor attention with the fun stuff, they got the message across about the opportunities posed by the privatization of the Jamaican public sector and the opportunities offered by the divestment of bank holdings in property and industry.
It will be a year or two before the results can be quantified, but the Jamaican government seems entirely happy with the exposure. Martin points out that he was not using new tactics. He had previously used the same principles for the Greater London Council. ‘We inveigled 58 US companies to invest in the greater London area, and our selling point was they would find the finest theater in the world, a culture that not only complements but is the source of American culture. If you are investing in an area, then top management wants a place that’s safe, convenient, interesting, fun and very receptive to their business.’
Earlier, Martin was in at the beginning of Stamford’s successful campaign in the 1960s to attract corporate headquarters to the city. Once again the ‘lifestyle’ aspects were the big selling points. ‘Safe, clean and just 45 minutes from Manhattan if you want Broadway. If you can tie tourism, culture, and business in this way, it’s a winning combination,’ he says.
Princely roadshow
Even smaller than Jamaica, Luxembourg, the grand duchy nestling between France and Germany, offers no sun-kissed beaches, proximity to Manhattan or theatrical accomplishments. Nor did its soccer team make it to the World Cup in France.
Luxembourg turned up in New York this June not with a ball, but with a crown – or at least a prince. Whatever problems they had with King George III, Americans will get up early to breakfast with a royal, so there were full houses for working breakfasts in New York and Boston. As one financier member of the US-Luxembourg Chamber of Commerce confesses, ‘Prince Guillaume was a good door-opener; people are always impressed by royalty.’
A more tangible advantage is that Luxembourg is the world’s third largest fund business center with $500 bn in assets under management at institutions headquartered there. Jacques-Philippe Marson, Luxembourg’s honorary consul in Boston, who has just left State Street to work with Paribas, points out that with its ‘offshore and European distribution component, from Luxembourg you can distribute investment products across Europe, particularly the pension funds.’
In anticipation of further integration of the single European market, Luxembourg is pioneering legislation to allow continent-wide pension funds and, of course, it wants people to know about it. It is also keen to ensure that it is not squeezed out by centers like London and Frankfurt. Originally a heavy iron and steel-based economy, it has plished the old rust-belt sector into a shiny new financial services center in the last quarter century and does not want to see its new prosperity threatened.
To backstop the Prince on the technical details, the government sent its minister for financial services, Luc Frieden, who fortuitously was in town for the United Nations summit on drugs and money laundering. Anxious to keep their cutting edge in financial services, the prime minister of Luxembourg had decided they should use the opportunity of his arrival in New York to meet institutional investors and fund managers, and ensure that a clean money supply kept flowing into the duchy’s fundomat.
As always, the driving force is the government, since it is tacitly accepted that such joint chambers of commerce are often quasi-governmental bodies. So the events lacked the pizzazz of Jamaica, and if Luxembourg had a musical answer to Reggae, not a note was played at the breakfast. But all those investors listened very carefully to the lyrical exposition of its central position in Europe, its highly developed human resources – all hummed along to a continuing refrain about the tax advantages.
From a roadshow consumer’s point of view, while the Jamaicans had all the fun, it seems highly probable that in the end the Luxembourger will get more of the finance. But anything the Caribbean island could get is a big step forward. And if I were a zealous, hands-on investor, I have no doubt where I’d rather go for a one-on-one.
