Building a new investment strategy

  • Building a new investment strategy
Issue 16, September 2009.

In October 2008 the Foundation for Effective Governance together with the Lviv city authorities and consultants from Monitor Group began work developing an appropriate long-term competitiveness strategy for the city. The first phase of the project was completed by end of May 2009 with the public presentation of the new Lviv strategy with the support of both key stakeholders and the broader community.
The task now remains to transform strategy into reality and implement an ambitious long-term vision for Lviv. If successful, in 10–15 years, Lviv will have built a modern open economy that houses a well-balanced mix of companies and is open to external expertise and capital.

Focusing on Lviv’s natural strengths
To turn this vision into reality, strategy consultants believe that Lviv needs to accelerate economic development by driving the development of key clusters such as Tourism and Business Services, while supporting overall economic growth through focusing on four key economic pillars: namely, aligning education with business needs, investment promotion, boosting governance transparency and investing in supporting infrastructure. Attracting foreign capital and expertise to Lviv to support development in priority areas and ensure sustainable economic growth is one of the key priorities of the development strategy. The engine for further foreign investment into the city is set to be a Foreign Direct Investment Agency which is expected to replace the existing Foreign Direct Investment   Office in the near future. The Agency will have a clear investment promotion strategy with one of the key priorities being attracting foreign capital and expertise to the rapidly developing Business Services cluster. The city needs international firms (multinational service providers and specialized industry players) to ensure expertise and competitiveness. In addition, the strategy suggests that the city
also seek to actively court Ukrainian firms in sectors such as finance, telecoms, and IT to generate strong domestic demand.


Well-placed for global outsourcing boom

Lviv already has an established Business Services cluster with over 100 companies serving Ukrainian and international clients, and is well positioned to take advantage of the Business Services Outsourcing market, which is a fast-expanding USD 90 billion per year global industry. Although this market has been dominated by India in recent years, Eastern Europe is now playing a more dominant role in the sector. Global firms are recognizing the significant benefits associated with outsource.

Focusing on Lviv’s natural strengths
To turn this vision into reality, strategy consultants believe that Lviv needs to accelerate economic development by driving the development of key clusters such as Tourism and Business Services, while supporting overall economic growth through focusing on four key economic pillars: namely, aligning education with business needs, investment promotion, boosting governance transparency and investing in supporting infrastructure.
Attracting foreign capital and expertise to Lviv to support development in priority areas and ensure sustainable economic growth is one of the key priorities of the development strategy. The engine for further foreign investment into the city is set to be a Foreign Direct Investment Agency which is expected to replace the existing Foreign Direct Investment Office in the near future. The Agency will have a clear investment promotion strategy with one of the key priorities being attracting foreign capital and expertise to the rapidly developing Business Services cluster. The city needs international firms (multinational service providers and specialized industry players) to ensure expertise and competitiveness.
In addition, the strategy suggests that the city also seek to actively court Ukrainian firms in sectors such as finance, telecoms, and IT to generate strong domestic demand.

Well-placed for global outsourcing boom
Lviv already has an established Business Services cluster with over 100 companies serving Ukrainian and international clients, and is well positioned to take advantage of the Business Services Outsourcing market, which is a fast-expanding USD 90 billion per year global industry. Although this market has been dominated by India in recent years, Eastern Europe is now playing a more dominant role in the sector. Global firms are recognizing the significant benefits associated with outsourcing to Eastern Europe, and see the low cost of labour, small time zone differences, closer distances for client visits, little visa restrictions, language proficiency, strong human capital and similar cultural mentality as key assets – Lviv is well-positioned to take advantage of this trend and leverage its existing core assets to become a premier outsourcing destination in the CEE through implementing the developed strategy.

Capitalising on Lviv’s huge potential
However, project managers of the Foundation for Effective Governance and consultants of the Monitor Group as well as the city leaders appreciate that it is not enough to simply develop a strategy. The real challenge lies in implementing the strategy and turning their vision for Lviv into reality. This challenge officially began on June 1, when the first steps were taken to implement aspects of the new investment strategy. Meanwhile, a team of consultants will continue working for a few more months in the city to ensure that a proper organizational structure capable of implementing recommendations is established in Lviv. In order to promote a culture of transparency which is often all too lacking in major public works projects, the overall strategy implementation process will be driven by a Competitiveness Board which will consist of key public, business, and academia leaders in the city. Moreover, two taskforces responsible for driving the development of Business Services and Tourism clusters have already begun their work.
The city authorities together with the Foundation for Effective Governance promise to closely track progress in order to ensure that real change happens and the city capitalizes on the huge opportunities that lie before it.
The public, meanwhile, will no doubt also be monitoring progress and looking for signs that the business climate is improving.