| Institutions | Government departments and ministries |
| Investment and/or trade promotion agencies (central and local, domestic and abroad) | |
| Export credit agencies (e.g., export-import banks) | |
| Development finance institutions | |
| Special purpose institutions | |
| Coordinating institution or mechanism |
The management of various HCMs and responsibilities for OFDI should be assigned to relevant institutions within the home country. Government departments and ministries, investment and/or trade promotion agencies, finance institutions etc. can assume specific roles pertaining to OFDI, such as providing information, financing and insurance, dealing with taxation matters or engaging in associated treaty negotiations (UNESCAP 2020). Every country’s institutional arrangements are unique, and institutional capacities evolve in parallel with economic development. Thus, the placement of OFDI-related responsibilities among institutions may vary between countries, and optimal arrangements may change as countries develop. What matters is that the key functions of OFDI support are effectively provided when desired by the home state.
The following is a non-exhaustive list of the institutions relevant to OFDI:
- Government departments and ministries (e.g., Ministry of Economic Affairs, the Ministry of Commerce, the Ministry of Economy, Trade and Industry, the Ministry of Foreign Affairs, etc.) are involved depending on the policy area relevant to OFDI, such as by drafting relevant laws and regulations, enacting policies, dealing with financial matters, engaging in international treaty negotiations or supporting investors overseas.
- Investment and trade promotion agencies (central and local, domestic and abroad) can provide OFDI-related services, information and support to potential investors. They may provide operational support to existing investments and may monitor overseas investment activities of national companies.
- Export credit agencies (e.g., export-import banks) can provide tailored financial services to investors, such as loans, grants and insurance.
- Development finance institutions can mobilise capital and provide tailored financial services to investors, such as loans, grants and insurance.
- Special purpose institutions are institutions established for a different purpose than OFDI but are active in areas that benefit companies investing abroad. One example is institutions promoting innovation that can enhance the absorptive capacity and competitiveness of domestic enterprises. Special purpose institutions can be private organisations to which governments outsource responsibility.
Sometimes the distinction between these institutions is not clear cut.
A main coordinating institution can be assigned by the government and given primary responsibility for OFDI. This is often the Board of Investment or main investment or export promotion agency in a country. The coordinating institution could function as a “one-stop shop” for OFDI-related services. It can be situated:
- In the same agency as the one responsible for inward investment, with no separation between the two: This will allow the pooling of resources and expertise, but there might be confusion between inward and outward investment functions, and challenges of prioritisation between the two. Agencies trying both might be pulled in different directions.
- In the same agency as the one responsible for inward investment, but in a separate department or organisational entity: This will allow the pooling of resources and expertise to an extent, while the separation will reduce confusion between inward and outward investment functions.
- In a different agency from the one responsible for inward investment: While this will reduce the possibility to pool resources and expertise on investment, it will eliminate any confusion between inward and outward investment functions, avoid challenges of prioritisation and prevent agencies from being pulled in different directions. It may be beneficial if the aim is to follow distinct developmental strategies for inward and outward investment, respectively. Situating OFDI coordination within an export promotion agency can be beneficial as exports and internationalisation through OFDI are often interlinked (Heilbron and Whyte 2019, 10).
Sometimes, relevant institutions also sit at the sub-national level, such as in regions or cities. (These are not covered in this Toolkit.)
Key insights
- Many different institutions assume functions related to OFDI. Often, the Board of Investment or main investment promotion agency play an important role, for example as a main coordinating institution for OFDI.
- Countries’ institutional structures for OFDI tend to be more fragmented compared to the centralised institutional set-ups many have established for inward investment (including “one-stop shops”). There is not always a main coordinating institution for OFDI. This can result in negligence of OFDI support or duplication and overlap of responsibilities. A viable institutional structure for OFDI should aim at reducing fragmentation, for example through an arrangement centralised around one coordinating institution. At the very least, the government could create a directory of HCMs available in the country (Sauvant et al. 2014).
- An important strategic choice is whether to have inward and outward investment administered by the same institution. Some separation will reduce confusion, whereas too much separation will prevent the pooling of resources and expertise.
Interactions
D1) Company characteristics: Institutions dealing with OFDI might focus on specific types of companies, such as SOEs, private firms or SMEs.
D6) Investment destination: Institutions dealing with OFDI might focus on specific investment destinations, such as the focus of development finance institutions on investments in developing countries.
D7) Absorptive capacity: Some institutions have as part of their mission the enhancement of home-country absorptive capacity to promote the realisation of home-country effects.
D10) Targeting home-country effects: The mandate bestowed on institutions relating to OFDI could be tailored towards, or focused on, the realisation of specific home-country effects. For example, export promotion agencies could focus OFDI promotion on investments that generate exports.
Existing Country Practices
Relevant institutions in Belgium: BMI-SBI (Belgian Corporation for International Investment): Development finance institution that co-finances business ventures by Belgian private companies abroad. Credendo, previously ONDD (Office national du Ducroire | Nationale Delcrederedienst): European credit insurance group providing insurance products that cover global risks.
Relevant institutions in Canada: Canadian Trade Commissioner Service:Service supporting Canadian companies internationally through advice, finance, connections etc.Export Development Canada: Crown corporation supporting Canadian companies internationally through advice, financing, insurance and connections.
Relevant institutions in China:China Development Bank: A development finance institution and policy bank reporting to the State Council of China. It offers financing to support the development of China’s economy. China Export & Credit Insurance Corporation (Sinosure): A state-funded and policy-oriented insurance company supporting China’s foreign trade and economic cooperation.Investment Association of China (IAC): Organization under the National Development Reform Commission specialising on investment and construction (in Chinese).The Export-Import Bank of China: Export credit agency reporting to the State Council that supports China’s trade, investment and international economic cooperation. Investment Promotion Agency of the Ministry of Commerce: China’s IPA and key agency responsible for OFDI.
Relevant institutions in France:Bpifrance: Financial institution supporting entrepreneurs, including French firms investing abroad.
Relevant institutions in Germany: DEG (Deutsche Investitions- und Entwicklungsgesellschaft mbH): Development finance institution that finances long-term private-sector investments that promote sustainable development.
Relevant institutions in India: ECGC Ltd. (Formerly Export Credit Guarantee Corporation of India Ltd.): A government-owned export credit agency reporting to the Ministry of Commerce & Industry, its aim is to promote exports and provide insurance and other related services. Export-Import Bank of India: Export credit agency aimed at integrating international trade and investment with India’s economic rise.
Relevant institutions in Italy: SIMEST (Società Italiana per le Imprese all'Estero): Development finance institution that supports Italian companies in the global market through financing.
Relevant institutions in Japan: INCJ (previously Innovation Network Corporation of Japan): Special purpose institution aimed at creating and nurturing key innovative industries. Japan Bank for International Cooperation (JBIC): Financial institution of Japan conducting lending, investment and guarantee operations to complement private sector institutions.Japan Finance Corporation (JFC): A financial institution owned by the Japanese government offering a variety of services.Japan External Trade Organization (JETRO): A government-related organisation promoting trade and investment between Japan and the rest of the world.Nippon Export and Investment Insurance (NEXI): State-owned entity offering insurance to cover risks arising from foreign transactions that are not covered by commercial insurance.
Relevant institutions in the Republic of Korea: Korea Eximbank (the Export-Import Bank of Korea): Export credit agency facilitating the development of the Korean economy by enhancing international economic cooperation, including investment.KORES – Korea Resources Corporation:The corporation is a special purpose institution providing financing and technological support to private companies for resources development. KOSME – Korean SMEs and Startups Agency:A government-funded organization promoting the growth and development of Korean SMEs. K-SURE – Korea Trade Insurance Corporation: Export credit agency under the Ministry of Trade, Industry and Energy providing insurance and financing to support international transactions. KOTRA – Korea Trade-Investment Promotion Agency: Trade and investment promotion organisation providing global business support, with a focus on SMEs.
Relevant institutions in Malaysia: EXIM Bank Malaysia: Government-owned export credit agency delivering financing for cross-border projects. Malaysia External Trade Development Corporation(MATRADE): Export promotion agency under the Ministry of International Trade and Industry, with key responsibilities for OFDI. Ministry of International Trade and Industry: Government ministry responsible for OFDI and for negotiating investment treaties. SME Bank: Development Financial Institution under the Ministry of Finance providing financing assistance and development expertise to SMEs.
Relevant institutions in the Philippines:Department of Trade and Industry (DTI):Government ministry responsible for trade and industry. It is supported overseas by the Foreign Trade Service Corps (FTSC). Philippine Board of Investments (BOI): Lead investment promotion agency, including for OFDI, attached to the Department of Trade and Industry (DTI).
Relevant institutions in Russia: Russian Export Center Group (EXIAR): Export credit agency established by the state to support exports, including through the provision of investment insurance products.
Relevant institutions in Singapore:Enterprise Singapore: Government agency supporting enterprise development, including internationalisation.
Relevant institutions in Spain: Centre for the Development of Industrial Technology (CDTI): Special purpose institution under the Ministry of Economy, Industry and Competitiveness that fosters technological development and innovation of Spanish companies. CESCE: Export credit agency managing export credit and related insurances on behalf of the Spanish state. CONFIDES (Compañía Española de Financiación del Desarrollo): This institution finances private investment projects around the world.Instituto de Crédito Oficial (ICO): A corporate state-owned development finance institution attached to the Ministry of Economy and Business. Spanish Institute for Foreign Trade / España Exportación e Inversiones (ICEX): ICEX Spain Export and Investments is a national business public entity. It promotes the internationalization of Spanish companies.
Relevant institutions in Switzerland: State Secretariat for Economic Affairs SECO: Its Start-up Fund (SSF), which is managed by FINANCEcontact, offers loans to Swiss companies for start-up business projects in emerging economies.
Relevant institutions in Thailand: EXIM Thailand: Export credit agency that offers financial facilities to support and promote Thai trade and investment. Ministry of Foreign Affairs, Kingdom of Thailand: Government agency responsible for foreign affairs. It is the coordinating agency for international investment protection. Thailand Board of Investment (BOI), Thai Overseas Investment (TOI) Promotion Division: Lead agency responsible for OFDI, located within the main agency for inward investment (in Thai).
Relevant institutions in the United Kingdom: Department for International Trade: Government department helping businesses export and grow into global markets.
Relevant institutions in the United States: U.S. International Development Finance Corporation (DFC, former OPIC): Development finance institution that partners with the private sector to finance projects in developing countries.
Resources
Sauvant et al. (2014, 27-33) for an analysis of institutions.
Heilbron and Whyte (2019) examine institutions governing foreign direct investment and
consider how to specifically integrate OFDI into such institutional frameworks.
He and Cui (2012): A study of 511 firms from 38 countries finds that MNEs with high (low)
governance quality (i.e., the quality of regulatory institutions) in their home country are more (less) involved in internationalisation.
International Organisations:
World Association of Investment Promotion Agencies:
A network of investment promotion agencies focused on inward investment.
Association of European Development Finance Institutions:
Organisation supporting development finance institutions implement their vision.