The credit crunch is either currently impacting on government finances or will impact on government finances in virtually every country in the world. Governments are currently taking snap decisions to provide financial support for their banks.
Next year government agencies will be first in line for cuts in funding and IPAs are likely to be at the head of the queue. With multinationals contracting to weather the downturn it is likely that attracting FDI will be low on the political agenda. IPAs will have to adapt quickly to coping with fewer resources in the new global economic landscape.
A couple of news items I spotted this week are suggesting that this process is already under way. According to advance government budget proposals, a long established and successful Western European IPA (no name, no pack drill) will have its budget cut by more than 50% next year. The government plans indicate that the IPA will cope with this through “greater efficiencies” and fewer staff. The same IPA has recently outsourced much of its marketing function to two separate marketing agencies; one will deal with its above the line advertising whilst the other will carry out its direct marketing function.
The IPA’s balance sheets will be improved by the staff cuts and outsourcing but the short term financial benefits will induce long term impacts on the agency’s pool of experience and understanding of FDI. Outsourcing of non-core functions is common to many industries but it is hard to argue that marketing is anything other than core to an IPA. Investment promotion also leans heavily on networking and relationship building. People jettisoned from the IPA sector are unlikely to be available on the other side of the downturn.
IPAs need to act before the likely cutbacks. They should gather (document and disseminate internally) as much of their current knowledge base as possible to avoid re-creating the wheel in a year or two.
