Introduction
Investment promotion in free zones requires the use of specific marketing methods. According to Van Den Berghe (2020), since free zones are part of a country, they depend on the competitiveness of their country. It means that investors may be aware of the country but may not know that the country has a free zone with valuable investment opportunities. For this reason, one best marketing strategy to attract investors is to make sure that stakeholders involved in the country promotion are aware of the free zone and include it in their marketing plans (Van Den Berghe, 2020). Collaborating with investment promotion agencies (IPAs) to raise awareness about free zones and encouraging organizations to share information about the prospects whose projects are suitable for free zones are examples of implementing this strategy (Van Den Berghe, 2020). In addition, free zones are often positioned as distinct from the country in which they are located (Papadopoulos et al., 2016). In their promotional activities, free zones try to emphasize the benefits of their location, including their potential to provide connections to neighboring economies (Papadopoulos et al., 2016).
Investors should clearly understand the offer of a free zone seeking their investments. To communicate their offer to investors, free zones use a variety of marketing approaches and channels. Van Den Berghe (2020) emphasizes the need for free zones to establish a distinctive brand, which should include a logo and other attributes. Loewendahl (2018) stresses the importance of choosing the right marketing channels for sharing information about investment opportunities. The leading sources of information for investors appear to be a dialogue with industry peers, business travel, newspaper and magazine articles, and meetings with IPAs (Loewendahl, 2018). Although the first two sources can hardly be influenced by marketers, the other two sources should be effectively used in investment promotion activities.
Table 1 also shows marketing techniques that turned out to be the most effective in attracting investors. The Internet is the most effective marketing technique because it allows for information sharing with investors without any time and space constraints (Khairil, 2017). However, for the Internet to be truly effective in marketing, it should align with the entire marketing strategy, and the information on free zones’ websites should be continuously updated to show there is progress in the industry (Khairil, 2017).
The way free zones formulate their marketing messages also has significance. According to Khairil (2017), marketing messages should be focused not only on regional excellence but also on the infrastructure capacity, human resources capacity, and technological advances to provide more value to investors. In print advertising, such features as the sentence and word structure, colors, font, layout design, and paper type can have an additional influence on investors’ decisions (Khairil, 2017). Furthermore, when a free zone uses marketing techniques involving a speaker, the personality of a speaker plays a critical role. Khairil (2017) argues that a speaker with excellent appearance and rhetoric but without an influential government position will not be perceived by investors as credible. Therefore, in public relations, free zones should use speakers who have an influential position in the government.
Raising brand awareness and building a strong brand image is important for investment promotion in free zones. However, it is also critical how rapidly the information about investment opportunities in free zones is communicated. IPAs, which are usually responsible for dealing with investors, should handle investors’ queries within 1-2 days (Loewendahl, 2018). This is the period of processing queries accepted in the private sector, so investors interested in investing in free zones expect the necessary information to be provided to them within this period.
Marketing approaches to attracting investors to free zones have to respond to changes caused by rapidly developing technologies. In this regard, Van Den Berghe (2020) suggests seven winning strategies that are supposed to help free zones cope with emerging challenges. The first strategy is focused on leadership and training, which are essential components of any successful business. Van Den Berghe (2020) argues that it is critical for free zones to conduct self-assessment to identify the most necessary skills, then prioritize five of them, and invite experts possessing these skills. In addition, free zones should provide their staff with access to training programs by partnering with various educational institutions (Van Den Berghe, 2020). These measures will ensure that the free zone is adapting to the new industrial environment. Zona Franca Santander in Colombia has adopted this approach, and now it has a large pool of talented and professional workers to offer to its investors (Van Den Berghe, 2020).
The second strategy – research and advocacy – is aimed at finding out more about potential investors and their motives for investing in free zones. Van Den Berghe (2020) argues that financial incentives are not the main determinant of investors’ decisions, so free zones should research investors’ needs and tailor targeted offerings. For example, Dubai Multi Commodities Center has used this strategy by transitioning to paperless online services, thus facilitating the process of running a business in the free zone, which has become its additional competitive advantage (Van Den Berghe, 2020). The third strategy is the future FZ strategy, meaning that free zones should be future-oriented in their activities. Van Den Berghe (2020) suggests that free zones should analyze trends in innovation and sustainability and follow them in their strategy. Identifying top technologies with the potential of influencing the free zone’s industry is an important step while implementing this strategy. The fourth strategy is related to awareness, marketing, and promotion. According to Van Den Berghe (2020), free zones should raise awareness about available investment opportunities among various stakeholders and make sure that all of them use a unified marketing and promotion strategy.
The fifth strategy refers to stakeholder engagement, which is important because an increasing number of free zones has made attracting investors a difficult task requiring coordinated teamwork. Van Den Berghe (2020) suggests that the marketing strategy of the free zone should be integrated into the economic strategy of the whole country. Therefore, the involvement of multiple stakeholders is necessary to achieve the strategy’s effectiveness. The sixth strategy outlined by Van Den Berghe (2020) is knowledge management and aftercare. Investors do not want to simply occupy a part of the free zone; instead, they intend to participate in its growth and development. Consequently, free zones should provide investors with an opportunity to take part in the development of the business strategy. Finally, the seventh strategy is business intelligence and performance. According to Van Den Berghe (2020), one of the primary investors’ motivations to invest in free zones is the ease of starting a business. Therefore, establishing one-stop-shop services to facilitate the process of investment is an essential measure for attracting investors. Additionally, free zones should measure their performance each month or quarter and define metrics that have the most influence on their success.
Government Factors Critical to Attracting Investors to Free Zones
Since the government is responsible for creating free zones, it has the authority to provide various incentives to investors to influence their investment decisions. According to Condron (n.d.), the government factors critical to attracting investors to free zones include political stability, government support, and legal protection. Government support may include facilitating the process of licensing, adopting incentive policies, and imposing penalties on infringers (Khairil, 2017). Furthermore, the availability of a skilled labor force, suitable infrastructure, and linkages with different industries and educational institutions are also essential (Condron, n.d.). Finally, investors expect to get assistance from IPAs or equivalent organizations in their day-to-day activities (Condron, n.d.). It is a good practice for IPAs to provide “one-stop-shop” services, accompanying investors at every step of their investor journey, from the decision-making to the after-care stage (Loewendahl, 2018; Van Den Berghe, 2020). Thus, the extent to which the government is willing to support investors is a crucial factor influencing investors’ decisions.
Particular attention should be given to various financial incentives provided to investors in free zones. According to the Organisation for Economic Co-operation and Development (OECD; 2017), such incentives are commonly used in developing countries. The reason for this is that it is easier to decrease costs for investors rather than makes structural changes, such as improving infrastructure or increasing the number of the skilled labor force (OECD, 2017). One way the government promotes investment in free zones is by offering tax incentives to investors. Jasiniak and Koziński (2017) found out that tax incentives are important for attracting investors; however, their importance depended on the area, company size, and tax incentive types. Researchers discovered that in less economically developed locations, considerable tax incentives were very significant for investors because they compensated for the challenging business environment (Jasiniak and Koziński, 2017). In addition, small companies considering investment opportunities pay more attention to tax incentives than large companies because they are less resistant to challenges (Jasiniak and Koziński, 2017). Overall, investors are attracted to locations that offer lower costs of conducting business.
While financial incentives are a common way of attracting investors, OECD (2017) argues that they may benefit the investing country more than the host country. According to OECD (2017), evidence shows that such government measures as improving infrastructure, removing regulatory barriers, developing human capital, and releasing public information about investment opportunities are more effective in attracting investors to free zones. Governments should make information easily available to investors because if the information is hard to find, investors rely on private sources when making investment decisions.
The Influence of the Company’s Management and Leadership on Investors’ Decisions
The management and leadership of organizations of free zones also play a vital role in investment promotion. To increase the chance of attracting investors, organizational management should incorporate efficiency, inclusivity, and sustainability (Condron, n.d.). Efficiency means that organizations in free zones should use the best practices, adapting them to their environment (Condron, n.d.). Inclusivity implies partnering with primary and secondary stakeholders, such as industry partners, investors, sponsoring government agencies, IPAs, free zones board, etc. (Condron, n.d.). While partnerships with stakeholders are important, organizational management should avoid including all stakeholders in the board. Instead, it should maintain the board’s efficiency by appointing a limited number of directors having skills and expertise in the appropriate field (Condron, n.d.). Finally, sustainability in organizational management refers to using information and communication technology in commercial activities, possessing strong functional skills, such as financial and asset management, and having robust funding sources (Condron, n.d.). Thus, to attract investors, the management of organizations in free zones should be qualified to conduct the business in the selected field, apply best practices, and have a strong financial basis.
While management factors are concerned with organizational and financial factors of companies in free zones, leadership factors are more related to the development of human resources. According to Van Den Berghe (2020), effective leadership includes continuous assessment of the organization with the purpose of identifying skills that are most needed for organizational development at a particular moment. Further, these skills should be incorporated into the organization’s staff through training, education programs, and sharing experience with experts possessing these skills (Van Den Berghe, 2020). One best practice for effective leadership is partnering with educational institutions to make sure that employees have an opportunity for professional development (Van Den Berghe, 2020). Leadership directed toward the development of the skilled labor force attracts investors to free zones because it ensures that organizations will be capable of providing investors with the potential for growth.
To sum up, the success in attracting investors to free zones is determined by marketing approaches, government support, and management and leadership factors. In terms of marketing, free zones should integrate their marketing strategy into the country’s economic strategy and collaborate with various stakeholders to raise awareness about the available investment opportunities. The use of the Internet and influential public figures in promotion is also welcome. The government plays an important role in attracting investors because it can offer different financial incentives and make efforts toward improving the infrastructure and labor force and facilitating the business set up process. Finally, management and leadership factors crucial to attracting investors include the use of best management practices, strong financial position, appropriate qualifications, and the willingness to develop human resources.
References
Condron, B. (n.d.). Designing economic zones for effective investment promotion in Iraq: A practitioner’s viewpoint. Web.
Jasiniak, M., & Koziński, J. (2017). Tax incentives as an instrument attracting investors to special economic zones. Financial Internet Quarterly, 13(2), 36-44.
Khairil, M. (2017). Communications strategies of marketing to encourage investment on special economic zones in Palu City. Prosiding Konferensi Nasional Komunikasi, 1(1), 26-35.
Loewendahl, H. (2018). Innovations in foreign direct investment attraction. Inter-American Development Bank.
The Organisation for Economic Co-operation and Development. (2017). Regional seminar on “Investment promotion: Focus on incentives and territorial development.”Web.
Papadopoulos, N., Hamzaoui-Essoussi, L., & El Banna, A. (2016). Nation branding for foreign direct investment: An integrative review and directions for research and strategy. Journal of Product & Brand Management, 25(7), 615–628. Web.
Van Den Berghe, D. (2020). 7 winning strategies of a world class FZ program: Preparing for what’s next. Web.