Monday, February 06, 2006

Culture ‘Helps to Draw’ Investors (By Roger Blitz, the Financial Times)

By Roger Blitz in London
Published: February 5 2006 22:01 | Last updated: February 5 2006 22:01

The location of foreign investment decisions are being increasingly influenced by “soft” factors such as a city’s architecture, cultural attractions and climate, a new report claims.

Although business people look primarily at “hard” factors such as tax incentives, labour costs and access to markets, they are finding it harder to differentiate between cities solely on the basis of these factors.

The report by the London-based Communication Group warns that dominant foreign direct investment recipients such as New York, London, Paris and Hong Kong face challenges from up-and-coming cities such as São Paulo, Toronto, Cape Town and Doha.

Interviews with executives from companies including Schroders, Easyjet and Ernst & Young pointed to what the report described as a cloning effect in the FDI market.

Companies believed markets were becoming easier to access, staff costs more uniform and many countries were offering looser regulation and tax incentives.

Research carried out by the polling agency YouGov for the report found that, after a strong economy, business leaders mentioned an agreeable climate, strong cultural tradition, exceptional architecture and entertainment facilities as among a city’s main assets.

The report also criticises the idea that the “knowledge economy” is the best framework for cities to attract investment.

“The much-heralded concept of nations as ‘knowledge economies’ was a reaction to the ‘low-cost’ challenge, but in general, its mass adoption has not grabbed attention or provided the hoped-for points of difference,” said Michael Hayman, chief executive of the Communication Group.

The contribution of cultural attractions to inward investment potential was underlined by Judith Isherwood, former acting chief executive of the Sydney Opera House and now chief executive of the Wales Millennium Centre in Cardiff.

”Cultural centres fulfil a dual role – they offer a cultural programme and are an economic emblem for a city,” said Ms Isherwood.

“You won’t see anything written about the economic impact of arts centres like the Sydney Opera House. They were built for the arts, for audiences to come and see performances.

”If you look at the [WMC] business plan, part of it was based on the added economic dimension for Cardiff and the whole of the South Wales region.”

* “The Power of Destinations – Why It Matters To Be Different” from The Communication Group.

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