BIZMOLOGY — Building cars, designing computers, making medicine, and brewing beer. These are all things Americans are pretty good at, and they also are among the industries that attract millions of dollars of foreign investment into the country every year.
While the US remains the world’s #1 destination for foreign direct investment (FDI), a new report from The Brookings Institution says US federal, state, and local governments can do more to attract foreign-owned companies.
[img=269,179]http://bizmology.hoovers.com/wp-content/uploads/2014/06/179223350-269x179.jpg[/img]In 2013 companies invested a total of $1.46 trillion in locations outside their home country — $193.4 billion came to the US, according to Brookings.
But the US shouldn’t take its status as an investment hub for granted. With emerging markets competing alongside more established ones, high-value foreign capital is increasingly finding a home elsewhere.
In the first study of its kind, Brookings analyzed D&B data to determine what types of jobs foreign investment supports and where in the country these jobs are located and why. The purpose is to help policy makers take advantage of the opportunities created by increasing flows of cross-border investment.
Foreign-owned companies employ some 5.6 million US workers (5 percent of total private employment). More than 2 million of these workers are in the manufacturing industry. Another 1.4 million work in the advanced technology sector. Most of these jobs are concentrated in the major metros. However, jobs are increasingly becoming more diverse geographically and shifting to more service-related industries.
The average large metro includes foreign domestic investment from 33 different countries and 77 different city-regions from around the world.The Brookings Institution
Mergers and acquisitions have become a very popular way for companies to grow outside their domestic market. A growing number of foreign firms are acquiring existing US brands. A few examples include Italy-based Fiat’s acquisition of Chrysler and Anheuser-Busch’sacquisition by Belgium brewer Inbev. The targeted firm is often folded into the parent company’s global distribution and production network. It allows the target company to automatically gain international trade infrastructure and management expertise. Another example is the recent acquisition of Kansas City-based Boulevard Brewing Company by Belgium’s Duvel. The $100 million deal brought in fresh capital that allowed Boulevard to expand production and increase its exports to Europe.
US policy makers are keenly interested in boosting FDI as it offers a fresh injection of capital into a region or industry. That’s very important as the US continues to recover from the recession and corporate investment remains below prerecession levels. The SelectUSAinitiative was created in 2011 by the Obama administration to promote and facilitate FDI. The agency offers ombudsman, advocacy, and counseling services in order to promote and facilitate foreign investment deals, but remains underfunded.
Attracting foreign investment is important and useful as a tool for strengthening industries, facilitating knowledge exchange, and increasing global engagement, the Brookings study said. For the US, foreign direct investment often brings with it higher-paying jobs, new R&D and innovation capacity, and a broader base from which to export goods and services.
Foreign-owned companies also are helping grow and enrich the US workforce. Companies such as Seimens and Volkswagen have launched training programs aimed at young American students. Robert Bosch and BMW also have set up successful apprenticeship programs through US community colleges.
Instead of just offering tax incentives to these foreign companies, the Brookings study said it is more important for policy makers to focus on updating infrastructure and augmenting workforce skills in order to attract FDI. Another misconception about foreign investment is that mergers and acquisitions, not the opening of new stores, plants, or offices, drive growth of foreign-owned establishment jobs.
In order to attract more foreign direct investment, the Brookings Institution suggests that the US government and policy makers should:
1. Craft a long-term plan for fiscal stability in order to create a stable economic and investment environment.
2. Increase public investment in basic research and development.
3. Ensure an adequate supply of skilled workers by providing workforce training and moving forward on high-skilled worker immigration reform.
4. Modernize infrastructure that would help support freight, port, and air transportation, as well as energy, water, and telecommunications networks.
- See more at: bizmology.hoovers.com/foreign-direct-investment-in-us#sthash.0VyUAb8d.dpuf5. Adequately staff and fund the SelectUSA initiative.
