The WDA's Shadow : Trade & Investment Inquiry

We all know that, in terms of attracting foreign investment, the challenges facing Wales since EU enlargement are significant, and it's a very different world to the one the Welsh Development Agency (WDA) inhabited.

The National Assembly's Enterprise and Business Committee inquiry into trade and investment recently reported back (pdf).

The Committee's 10 recommendations state the Welsh Government should :

• Commission an independent evaluation to see if the in-house method of attracting trade and investment is providing value for money.
• Determine how it can involve the private sector more, and if it can boost its presence within UK Trade & Investment (UKTI).
• Publish an annual report on Wales' investment performance, including the levels of support provided by the Welsh Government for these projects (like trade missions and fairs), as well as the number and type of projects overall.
• Provide higher-quality economic, export and Gross Domestic Product (GDP) figures for Wales in partnership with the Office of National Statistics.
• "Clarify its brand strategy" for trade and investment, as well as clarify what activities and approaches are helping it meet the promises of Just Ask Wales.
• Set out what it wants to achieve in terms of trade and investment, including identifying key markets, how it would support Welsh businesses to take advantage of these opportunities, and how it would support existing and foreign investors to do business in Wales.

Compared to the Planning Bill, this is like going on holiday.

The WDA & Welsh Government Support

The WDA wasn't the only Welsh inward investment organisation that
met an untimely end, and the ramifications are still ongoing.
(Pic : Prof. Dylan Jones-Evans)

The WDA – which was responsible for supporting inward investment in Wales – was disbanded in 2006 and absorbed into the Welsh Government as part of Rhodri Morgan's "Bonfire of the Quangos". International Business Wales (IBW) took its place, but in 2010 was itself integrated further into the Welsh Government's Department for Economy & Transport and ceased being a separate departmental function.

The demise of the WDA is still a contentious issue amongst business organisations, and this was reflected in their responses.

The Federation for Small Businesses (FSB) said successor organisations have "failed to command the strength of brand that the WDA achieved". Cardiff Business School research in 2012 (pdf) revealed a "haphazard approach to inward investment" and "difficulty in developing an overarching brand for Wales", while the creation of key sectors has caused confusion amongst potential investors.

Others were critical of the decision to scrap IBW, with the former head of the Asia-Pacific division saying support became "disjointed and inconsistent".

Halen Môn say, however, they're pleased with the levels of support they've received, while the Welsh Govenment's own evidence said it was, "fruitless....making a comparison between the WDA ....and IBW."

With the economic power shifting to emerging markets, many believe a "novel approach" is needed, meaning a return to some sort of overarching organisation with responsibility for inward investment – in effect, WDA 2.0. This was backed by the South Wales Chamber of Commerce, and Cardiff University's Prof. Max Munday, who said that the civil-service dominated structure of support was too risk-averse and not entrepreneurial enough.

The First Minister rejected the idea, saying that recent performances (79 direct investment projects and 10,500 jobs created or safeguarded) show Wales is still attracting investment, while there would be costs in establishing a WDA 2.0 – a view backed by the FSB.

However, figures showed that Wales lags behind Northern Ireland in terms of foreign direct investment projects, and has done consistently since 2009. Also, the number of projects in Wales are between a quarter and a third of those in Scotland.

The FSB were critical of sector panels in particular, with Josh Miles saying that, "it's not clear what the performance indicators are" making it harder to figure out what the panels do, and how they would support his organisation's members on the ground.

What really got on business organisation's nerves was a lack of private sector involvement. It was said there was a Welsh culture of "keeping everything in-house", while other parts of the UK take a more "hands-off" approach.

There was a particular emphasis on the need to support local exporters, and turn their collective expertise in a go-to panel of experts. An example is cited of Bristol where the public and private sectors work together to promote inward investment.

Wales and UKTI

The frosty relationship between Welsh Government and UKTI
has thawed considerably in the last few years.
(Pic : UK Government)

Cardiff Business School again referred to a "haphazard" approach by the Welsh Government, and poor coordination between the Welsh Government and UKTI. It was even said that when IBW was established, they viewed UKTI as "a potential competitor rather than a partner".

In May 2013, the Welsh Government signed a memorandum of understanding with UKTI, which set out the sorts of services provided by UKTI, and underlined that although the Welsh Government would have different priorities for Wales, these priorities wouldn't detract from UKTI's UK-wide remit.

The memorandum meant the Welsh Government would have access to UKTI support mechanisms - like following up leads, and providing expert advice to ministers in relation to key projects.

The Welsh Government would be the sole responsible agent for providing inward investment support and aftercare in Wales, meaning there would be no threat of "competition" between UKTI and Cathays Park, as it was in UKTI's interest to improve direct investment across the whole of the UK.

The relationship between the two organisations is described as "good", especially since departmental reforms by the Welsh Government in 2010. Wales now has a presence alongside UKTI staff in the United States, India, China and Japan.

Business and Economy Minister, Edwina Hart (Lab, Gower), believed Wales wasn't a "second division player" within UKTI, as companies from the devolved nations often have a competitive advantage over English companies due to devolution itself. However, she said it was "absolutely unrealistic" to have a Welsh representative at every single UKTI-organised event due to the sheer number of them held each year.

Support for Exporters

Exports remain vitally important to the Welsh economy - and performances are, at present,
pretty good. But high-profile trade missions have received a mixed reception.
(Pic : Welsh Rugby Union)

The value of exports from Wales are currently up 5.4% in the four quarters to Q2 2014 compared to the previous four quarters (the second largest increase of the UK's nations and regions), while there was a fall of 2.7% across the whole UK.

Most exports are said to be accounted for by big manufacturers based in Wales (like Airbus, TATA and Ford). However, interestingly, Edwina Hart suggests that the true picture of Welsh exports isn't being accurately reflected because Welsh goods are used as parts to manufacture exported-goods in other nations and regions of the UK - so aren't counted as exports themselves (if Wales were independent these intermediate products would be counted as exports).

Most of the support for exporters is delivered as part of the Welsh Government-UKTI partnership explained above. In terms of what the Welsh Government do themselves, they have tailored support schemes like International Trade Development, which is aimed at first-time exporters and walks companies through what they need to do step-by-step.

The Welsh Government also run an International Trade Opportunities programme which, for a financial contribution, will do a large chunk of the market research for companies and start the sales process (like finding local venture partners and setting up meetings).

In addition, Welsh Ministers and officials have undertaken several high-profile trade visits to emerging and established markets. In 2012-13, 23 trade missions were supported with around 100 Welsh companies participating. However, the South Wales Chamber of Commerce criticised the short-term planning and small number of delegates. They would prefer a structured plan of trade visits over 5 years.

Some companies – Brecon Breweries, Bon Bon Buddies and Howies were named in the report – were less impressed, saying in no uncertain terms that their success was due to their own work and they hardly got any support from the Welsh Government.

Also, the returns of investment for trade missions in 2011-12 were said to be "low". Smaller businesses were dismissive of trade missions - as they tended to be about big businesses meeting big buyers – though some describe participating in these events as a "positive experience".

The major barriers to exports were said to be "timely access to funding and capital", "red tape" and a lack of in-depth knowledge of local markets.

Brand Wales

Although the "Just Ask Wales" campaign has achieved a moderate success,
the WDA brand remains recognisible even today.
(Pic : wales.com)

The 2012 Cardiff Business School report suggested a single brand needed to be developed for Wales, based on the success of the branding used in the 1990s, which was more "coherent and consistent". The report said the WDA was still widely recognised years after its demise, and this was reflected in the evidence provided by other witnesses too.

There was caution that resurrecting a WDA-style "brand" wouldn't necessarily be a success in itself, as part of the reason the WDA was such a strong brand was its success in terms of attracting investment. You don't need a big brand to be able to do that. It was widely agreed, however, that there needed to be a more coherent brand strategy from the Welsh Government.

Part of the Welsh Government's response to these calls has been the Just Ask Wales scheme – an online portal that intents to attract inward investment. Since its launch in January 2014, it's said to have led to 67 serious inquiries, a performance Edwina Hart described as "absolutely great in terms of the number of people who've come in and the number of enquiries that have been made".

It was unclear what the Welsh Government were doing differently compared to past initiatives, and the Committee believed Just Ask Wales needs time to bed in; but there were concerns raised that Just Ask Wales isn't part of a broader set of actions, but is instead a glorified advertising campaign.

Monitoring Performance

The WDA used to publish very detailed six-monthly and annual reports on its progress against set targets. The Welsh Government have been left wanting here, and similar reports ended the moment the WDA was disbanded.

This lack of detailed economic information was raised by many witnesses, with the South Wales Chamber of Commerce saying there's been "no hard data for 2 years", while there were other criticisms of a "lack of transparency" and a "paucity of analysis".

It's said there needed to be a clear outline of what Welsh Government's economic strategy is, citing the example of Scotland, which has a published trade and investment strategy (pdf) as part of a wider economic strategy.

In Wales, we have whatever's in Edwina Hart's head, or at the very least any stategy (if it exists) isn't publicly available, or is - effectively - the Economic Renewal Plan.

Conclusion : Time to let the WDA go?

The WDA was in the right place at the right time, but the truth about its performance
is becoming legend. The world's moved on, and perhaps it's time we did as well.
(Pic : Wales Online)

Although it's the sitting government reaping the benefits in terms of improved exports and increased direct investment projects - and they're right to be pleased - Ieuan Wyn Jones' contributions were important to this success, despite being dismissed at the time by "experts". I told you history would be kind to him.

That doesn't mean all's well, or that everything previous economy ministers have done has worked as planned. Judging by what's been said, and despite major changes to how Wales markets itself abroad (in business terms), it's been a very difficult process to try and emerge from the shadow of the WDA.

The major weaknesses here are a cynicism amongst the private sector, as well as the "silo mentality" that's developed within the Welsh public sector since the "Bonfire of the Quangos" that's not really conductive to enterprise.

I can understand the appeal of bringing back the WDA in some form, but as I've said many times before, people have a rose-tinted view of what it achieved - the reality is becoming something of a heroic legend/myth - and a similar organisation would be lucky to match half the success of the WDA during the 70s and 80s. It's a different world, and we need to be smarter about this.

More importantly, we can't ignore Welsh businesses and end up becoming too over-reliant on foreign companies making the big investments, when we have companies here who could easily become global leaders with the right support.

Lastly, there's the issue that's becoming something of stuck record in Welsh politics – a lack of transparency from the Welsh Government. The obvious reason why they don't want to be open on economic figures is that they know they'll be incredibly embarrassing, or – as they'll put it – "distract us from the task at hand" etc.

I signed a petition submitted by Stuart Evans (Welsh not British) calling for a Welsh equivalent of the Scottish "GERS" report, but after a ping-pong of replies between the Petitions Committee, Welsh Government and Stuart himself nothing came of it.

With taxation powers on the way, more detailed economic figures are a must, so this will have to be done whether the Welsh Government like it or not. The public and businesses deserve to know the truth, and shining light on Wales' relatively poor economic performance might embarrass our politicians into working harder to fix it.