The INC Program: Martin Jensen
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If you are looking to offset the cost of doing business in emerging markets, this podcast is for you. The Investment Cooperation Program (INC) supports responsible private-sector investments in over 140 emerging markets.
Stay tuned to hear how you can leverage funds for your market expansion.
I'm Michael Mancini, Editor-In-Chief of CanadExport, the official e-magazine of the Canadian Trade Commissioner Service—Canada's most extensive network of international business professionals.
I recently spoke with Martin Jensen, Director of the Investment Cooperation Program, also known as INC. Here is what he had to say about INC and how companies can apply for funding.
Michael: Martin, first, tell us what the INC program is?
Martin: INC is a $ 20 million program to support Canadian businesses that want to invest responsibly in emerging markets. The Program does this by sharing some of the costs of the studies a business will make to inform its decision to invest, and also by enhancing the investment’s developmental benefits after it is made. For example, we can contribute to the costs of the commercial viability studies that the client undertakes. And after the investment is made, we can contribute to the costs of planning and implementing enhancements that will make it more sustainable.
Michael: Can you give me an example?
Martin: Say a Canadian manufacturer is thinking of establishing a plant in Honduras. He has visited the country, talked to potential partners, and made a rough assessment of the commercial possibilities there. A company in this position can apply to the Program for support in undertaking the commercial viability studies it needs before committing to invest. If it qualifies, it may be eligible to receive contributions for up to 50% of the expenses it incurs for travel and accommodation, consultants’ fees, and that sort of thing, to a maximum of $60.000.
Here’s another example, from the post-investment phase of the Program. Let’s say our manufacturer has gone ahead with his Honduran investment. The business is prospering, but it becomes evident that the plant’s waste products are being released without treatment into the ground. In addition, the workforce lacks the capacity to meet buyer demand or make the company’s product attractive to a broader market. The company can come back to the Program for help with these things: for instance by planning and commissioning an environmental plan, or establishing a human resources and training program to create new jobs and enhance the skills of its workforce.
Michael: What markets are the focus of INC?
Martin: We’re open for business in all the countries that are eligible to receive Official Development Assistance under the OECD agreement on this. That’s close to 150 countries. The list is included as an annex to our Applicant’s Guide. Basically we’re a responsive program and will consider investments in all of these countries. I should say though, from a commercial point of view, we see the Program as advancing the government’s Global Commerce Strategy, which prioritizes the large emerging markets. So that does include China, India, Mexico and Brazil. But if you are contemplating an investment in Guyana or Botswana, we’re here to help you too.
Michael: What are some examples of the kinds of activities?
Martin: It’s hard to be exhaustive, but I’ll mention some common items: Market studies. Technical feasibility studies. Legal review and financial analysis. Technology adaptation and demonstration. HR and training plans. Environmental management plans. The analysis of local supply chains, to help the business integrate into the wider industrial context, and improve its own procurement.
Michael: You mentioned the “qualifications” and “eligibility” of clients. What’s involved here?
Martin: Thanks, this is an important question. To qualify for INC support, our clients have to be for-profit Canadian businesses, in operation for at least 3 years, with revenues of $2 million a year for the past two years. We also require that the proposed investment be at least $500,000. These are minimum requirements to qualify.
If you’re already a client of the Trade Commissioner Service, you can go to our website, complete the prequalification questionnaire, and consult the Program Advisor responsible for your country of interest. Once prequalified, your Program Advisor will provide you with personalized assistance with the online application.
If you are not already a TCS client, then you will first have to register with the Virtual Trade Commissioner before completing the prequalification form. Again, this is easily done. There is a link to the VTC right on our website.
Michael: There is $20 million available per year? Can a company apply more than once?
Martin: Yes, we work with an annual allocation of $20 million. And yes, companies can apply more than once, though we require that they only undertake one phase of an investment at a time. Program support is segmented into two pre-investment phases, and two post-investment phases. This is evident in the example I just gave. Depending on the nature of the project, a manufacturer that applied for all phases of support could receive up to $575,000 per investment. We also support professional services contracts and the extractive sector, though the nature and amounts of the coverage vary. We don’t have time to go into it here, but the details can be found in our Applicant’s Guide. Go to the DFAIT website, type the words “investment cooperation” in the search window, hit “ENTER” and you’re there.
Michael: So the program, if I understand it, does not finance an actual investment but provides financial contributions for specific activities surrounding a proposed or existing investment.
Martin: That’s right—we support pre-investment studies, as well as post-investment sustainability enhancements. In that sense we support the investment, but don’t contribute funds to it directly. I should point out here that we do this on a reimbursement basis, that is, we reimburse the investor for a portion of his actual costs on the production of receipts or other evidence that they have been incurred. It’s usually a 50% contribution though it can be as much as 75%. Again, I’d refer curious listeners to the Applicant’s Guide for more detail.
Michael: Why is a pre-qualification necessary? Why not just apply for funding?
Martin: Pre-qualification is necessary to ensure that a proposal falls within the Terms & Conditions of the Program, and the client has the means and ability to perform. For instance, we don’t support investments related to the supply of military goods and services. We don’t support speculative investments in real estate or natural resources. And as I’ve already explained, we require our applicants to have been in business in Canada for at least 3 years, to have revenues of at least $2 million a year for the past 2 years, and to be ready to make a $500,000 investment in the country concerned.
Michael: Are small and medium-sized firms (SMEs) eligible?
Martin: Yes, and we encourage them to apply. In addition to our financial support, the TCS is particularly useful to SMEs who often lack the resources to undertake the kind of careful market exploration international commerce demands. As long as you meet the prequalification criteria, you are eligible.
Michael: Why is the threshold set at $2 million?
Martin: The threshold is an indicator of firm size obviously, but also a measure of managerial capacity, and the ability to make and maintain the minimum required investment of $500,000. It isn’t the only thing we consider, but the Program’s designers felt we needed a simple measure of capacity to implement and sustain the investment. After consultations with the business community, they settled on this figure.
Michael: What sectors is the INC program targeting?
Martin: Same answer as for countries of focus. We are responsive to our clients’ initiatives, so we don’t target sectors. We do exclude some areas (military and nuclear) because, again, our funding comes from the International Assistance Envelope, and the OECD rules on development aid exclude nuclear and military business. Otherwise, we are active in both manufacturing and services as well as the extractive sector.
Michael: How long will it take for the INC program to process and respond to a company’s application?
Martin: From the submission of a completed proposal, to the communication of the final decision to the client, we apply a service standard of 40 working days. We use this period to consult with our geographic and sectoral specialists, including our Trade colleagues in-country, financial advisors, and other experts who may have important comments on the client’s proposal. This will sometimes lead to the proposal being amended in certain details, with the client’s approval of course. The point is to have the best possible proposal in hand, for the company’s benefit and the ultimate success of the investment.
Michael: Are there any other important considerations for potential clients?
Martin: Yes—Corporate Social Responsibility, or CSR. In keeping with the developmental purposes of the Program, we ask our clients to adhere to internationally-recognized CSR standards like the OECD Guidelines for Multinational Enterprises. The core concern here is that the investor should take account of the social and cultural impacts of the investment. As I hope I’ve made clear in this discussion, some of the latter phases of the Program are intended to help the investor plan and implement measures that will increase both its commercial value, and its place in the host community and country. This topic is often met with in the extractive sector, but it has applications right across the commercial spectrum.
Michael: Thanks for your time today Martin.
Martin: Thanks Michael.
Well, that’s all for this podcast edition of CanadExport. For more information on how you can apply to the INC Program, contact the Canadian Trade Commissioner Service at tradecommissioner.gc.ca.
For more features articles and podcasts on international trade, visit www.canadExport.gc.ca, the official e-magazine of the Canadian Trade Commissioner Service. While you’re there, feel free to ask the Trade Commissioner Service a business question. A Trade Commissioner will get back to you. Just look for the Ask the TCS logo on the right navigation bar of the CanadExport website.
I’m Michael Mancini signing off for now.
To download our other episodes, just go to www.canadexport.gc.ca or go to iTunes and use the searchword “CanadExport.”
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