Countries worldwide all vie to attract inward investment based on their competitive and comparative advantages in various sectors. Few countries stand out however in how they use skills as a key incentive to get foreign direct investment – Singapore and Ireland for example. Developing countries, however, tend to focus their efforts mainly on “creating” an ecosystem that appeals to investors. This usually translates into incentives, tax breaks, incubators to set up initial operations with little attention if any, paid to the skills requirements. Skills are often the last of a long list of considerations when a country is thinking of attracting investors and usually reflected by a reactive type of approach where the national training agencies or other training institutions “scramble” to train persons to meet the needs of an investor so as not to lose the investment. The risks of this type of approach are low probability for employment, and a strained pipeline of talent which could result in a dissonance with the investor’s needs, as the talent flow is insufficient to absorb/mitigate against attrition and other factors which can hinder our workforce.
Talent as a brand
How can countries round out their offerings to investors and increase the likelihood of securing an investment? Establish your skills pipeline as a brand. First and foremost, demonstrate that the country has a talent pool that can be upskilled or reskilled based on global demands and show that pipeline in terms of data -investors thrive on data, not anecdotes.
- Show that training institutions are playing a key role in proactively preparing the workforce for key sectors of growth. This includes your entire skills ecosystem, ranging from entry level with TVET, all the way to advanced skills with tertiary education system – showcase the country’s capability to create pathways as those investments “evolve”.
- “Sweeten” the incentive package by including access to a competitive fund which will allow the investor, through a co-funding arrangement, the ability to train and certify their employees in areas where they may have gaps or in response to new or emerging job roles and trends – Highlight the country’s commitment to continuous skills evolution.
Skills and foreign direct investment have a symbiotic relationship. Access to talent rates highly in inward investors’ criteria for choosing investment locations so, in the competition for internationally mobile capital, a location’s skills offer is crucial to success in attracting investment. Skills drive FDI.OCO Global Report, February 2022
|Singapore and Ireland are the standout examples of how skills can be an effective tool for attracting Foreign Direct Investment. Singapore’s Investment Promotion Agency, EDB Singapore, is a critical stakeholder in the Institute of Technical Education, helping to determine which skills should be developed to attract prospective investors. EDB Singapore also seeks out companies that will have significant spillover effects, so that Singapore can continue to develop high-quality, cutting-edge skills. WorldSkills standards are also used by the Institute of Technical Education as to ensure the skills they are developing are world-class. The Irish IPA, IDA Ireland, is also a significant stakeholder in the skills system and uses sophisticated skills mapping across Ireland to show prospective investors the pipeline of talent they could draw on if they invested.|
Keys to offering skills as part of your investment package
The fact is technology is expanding at an exponential rate. Sectors that rely heavily on technology to manage their operations -and most sectors do, as technology is used in all sectors-, must be proactive in their planning and develop an agile and adaptive talent pool to respond effectively. Technology also requires new emerging roles for which there are no institutionalized standards, resulting in a heavier reliance on practical on-the-job training and the ability to learn and apply new skills quickly. The main reason for this is that most educational and training institutions cannot produce standards and certificates at the same rate that technology is evolving and being deployed.
In short, these are key elements that a country should consider in including skills as part of its investment package to investors, to position talent as a brand:
- Analyze comparative advantages by sector.
- Support sectors to create mechanisms to efficiently identify skills needs, i.e. Sector Skills Councils and draft industry skills development strategies
- Demand-driven approach: Determine what skills can be scaled by consulting directly with industry, i.e. via sector skills councils.
- Training ecosystem as a partner: Engage with training institutions to develop curricula.
- Provide data on talent pipeline: pipeline of people who have been trained and certified in specialized areas to engage with investors.
- Establish mechanisms to implement industry skills development strategy – create mechanisms such as competitive funds which can support co-funding arrangement for upskilling and reskilling to develop a more industry-targeted workforce.
- Set forth demand-driven initiatives to bolster training through short-term and longer-term modes such as apprenticeship programs.
Countries that focus on skills transformation and human capital will increase their ability to compete on a global scale as well as generate the capability to adjust to transformation trends. Governments that are responsive to change and are constantly evolving to meet the demands of those changes, will likely attract more Foreign Direct Investments and promote more economic growth & job creation.