Attractive incentives and tax deductions can substantially reduce investment and annual operating cost. Economic incentives will however never make a bad location a great one, but on the other hand can bring other locations into the game.
Nearly every investor wants to take advantage of financial support if applicable. But the types of incentives vary a lot. BCI Global distinguishes six categories:
Whether you are eligible for financial support, depends on a wide variety of relevant factors (see below). They determine for what kind of financial support – to what level – under what conditions your investment project is eligible. Note that the way how pertinent authorities work with economic incentives varies considerably between Europe, US and Asia, but also within these regions: in Europe every 7 years a maximum on support is determined for all 1,348 regions in the 28 member states; in the US nearly every state, county and metro has its own combination of financial measures; in China it varies even per industrial park …. and there are a lot of them!
While economic support sounds great, there are also hurdles ‘on your way to the bank’. Red tape is an often-mentioned barrier, i.e. complex, long and unclear application procedures, with often detailed monitoring and reporting during the eligible period. Negotiating with pertinent authorities can be difficult if your project changes during the location decision process: different project parameters, different planning/timing, ownership requirements, to name a few.
Hurdles can emerge even after a Commitment Letter if the project changes (for example: more automation than anticipated, so fewer new jobs), or your project planning, or the key performance metrics, or a combination of the above. Though renegotiations may be the result. Last but not least uncertain, political and public support can be unpleasant, and media coverage can be negative. The Amazon headquarters case in New York is well-known, causing Amazon not considering the Big Apple anymore.
BCI Global works with a detailed 4 step process in which we combine our 35 years of experience in dealing with public and private authorities all over the world. We follow an ambitious-realistic path, analyse carefully whether the eligibility criteria match your project, understand what the counterparts are looking for (jobs, investments, selling land, etc.) and know that at the end of the day you have to cope with the specifics of each financial arrangement.
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