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FDI Toolbox – Attracting Foreign Direct Investment:. The Maine Perspective. September 26 th , 2013. Introduction:

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fdi toolbox attracting foreign direct investment
FDI Toolbox – Attracting Foreign Direct Investment:

The Maine Perspective

September 26th, 2013

slide3

Introduction:

  • The Maine International Trade Center (MITC) is a public-private partnership to promote international trade: assisting Maine companies to export and foreign companies to import as well as find partners in Maine
  • The Invest in Maine Initiative (IiM) is managed by MITC and has as objective to attract foreign direct investment to Maine. IiM is also partly privately funded and works closely with Maine industry as well as key assets such as Brunswick Landing.
  • IiM focuses on attracting FDI in key sectors where Maine has strong assets and therefore a strong proposal/pitch.
  • Brunswick Landing as one of Maine‘s assets is part of every single Maine FDI presentation.
slide4

Loring Commerce Center

  • Former Loring AFB (closed in 2004)
  • Loring’s 12,100- foot (3,688 meter) runway is one of the longest on the US East Coast.
  • Located right at the border with New Brunswick, Canada and also close to Quebec
  • Redevelopment has successfully targeted Canadian companies
why fdi
Why FDI?
  • Attracting companies from outside the US is incremental – and not transferring jobs from one state to another.
  • FDI supports more than 5.6 million American jobs, including over 2 million in manufacturing.
  • The average salary of these jobs is 33 percent higher than the national average.
  • Affiliates of global companies in the United States account for more than 18 percent of all U.S. exports.
  • These affiliates invest in innovation in the United States, spending over $40 billion each year on research and development.

Source: SelectUSA

fdi the big picture
FDI – The Big Picture

Developed economiesincludingthe US arecompetingwithdevelopingeconomiesfor FDI.

China will mostlikelybypassthe US for FDI in 2013.

Source: UNCTAD World Investment Report 2013

fdi the big picture1
FDI – The Big Picture

Developedeconomiesare still thekeyinvestors – but developingeconomiesarejoiningtheranks.

Source: UNCTAD World Investment Report 2013

fdi in the united states1
FDI in the United States

IT is the fastest growing US FDI industry

Investors from the UK, Switzerland, and the Netherlands have the largest FDI stake in US manufacturing

Germany is the largest investor in the US information sector

Britain has the largest investment in the US finance and insurance sectors followed by Japan and Canada

Netherlands and the UK investors have the largest stake in the US Oil & Gas sector

Japan and the UK are the largest investors in US wholesale trade

Source: Schneider Consulting

fdi in the united states2
FDI in the United States

Source: Netherlands FDI Agency

  • The smaller European economies such as the Netherlands and Switzerland are important investors in the US!
  • Job map by US state reflects the Dutch sector strengths and interests:
  • oil and gas, logistics, energy, pharmaceuticals, engineering
fdi in the united states3
FDI in the United States

Source: SelectUSA

fdi in the united states4
FDI in the United States

Relative to the average US firm in the same industry, foreign companies

with plants in the US tend to:

Opt for larger scale and higher capital-intensity plants

Have an average plant size that is 6X larger

Have newer plant and equipment

Produce 6X more value-added

Produce 7X higher value of shipments

Pay 60% higher wages

Realize 40% higher productivity

Realize 58% greater output per worker

Source: US Department of Commerce, BEA 8-2012

fdi tool box advice 1
FDI Tool Box: Advice # 1
  • Integrate your FDI attraction efforts with your state and region:
  • FDI outreach is more expensive than US domestic outreach due to travel and support requirements: teaming up with local, state and regional partners helps to share the costs.
  • Accept that foreign companies will visit multiple states/regions and therefore competitor assets.

Source: UNCTAD World Investment Report 2013

fdi tool box advice 2
FDI Tool Box: Advice # 2
  • Don‘t expect foreign companies to know your state and location:
  • Show your state on the map.
  • Explain how to get there. (‚Can‘t get there from here‘ does not apply!)
  • Show your key transportation and other infrastructure assets.
  • Show (!) and not just verbally describe your location – in most cases the foreign representatives are not native speakers of English.
fdi tool box advice 3
FDI Tool Box: Advice # 3
  • US Context: Identify how your defense community assets link to specific sectors and natural resources:
  • Utilize regional and national information that highlights the specific assets and resources – this information explains why your assets and location are of value, especially to a foreign company who may not be aware of this.
  • Expect detailed questions re. your assets, labor force, workforce productivity (for Europeans productivity is key!) and other detailed questions that US companies may not ask during the initial contact.
fdi tool box advice 4
FDI Tool Box: Advice # 4
  • Research the specific foreign companies you are approaching or are being approached by:
  • Ownership structure; key investors
  • Making headlines back in home country?
  • Existing presence in the US?
  • If existing US presence, any tax, labor or immigration related violations?
  • Direct competitors present in your state/region?
  • Local supply chain
  • Is the foreign company active in a sector that is sensitive re. national security?
  • Is this sector subject to restrictive export rules?
fdi tool box advice 5
FDI Tool Box: Advice # 5
  • What is a foreign company‘s motivation for establishing a US base of operations?
  • Canada example (Loring):
    • Better acceptance if products can be marketed as ‘Made in USA‘
    • Proximity to market but also close to home base in Canada; allows for support from across the border located home base
    • Logistic advantages
fdi tool box advice 6
FDI Tool Box: Advice # 6
  • Perception drives due diligence process:
  • US has the image of being extremely litigious; perceptions of litigation and regulatory risk can be exaggerated. Have facts on hand.
  • Be prepared for an in-depth environmental review and pre-emptive action even when facilities are only leased.
  • Main concerns are workforce exposure to environmental hazards; joint and several liability for environmental remediation.
  • Europeans, especially Germans often have experience with closed military bases (US and Russian base closures after German unification)
fdi tool box advice 7
FDI Tool Box: Advice # 7
  • Learn about the foreign country:
  • Familiarize yourself with their culture; especially the cultural missteps that you want to avoid.
  • Tea, coffee and water are standard at meetings in Europe and Asia.
  • Asians and Europeans tend to dress formal for business meetings.
  • Information in the local language has a strong impact. It shows that you really want to attract the foreign investor.
  • Create a standard protocol for site visits based on the culture and standard in the foreign country (e.g. pick up at airport required, type of meals etc.)
fdi tool box advice 8
FDI Tool Box: Advice # 8
  • Assist with understanding economic development tools:
  • Double check what is available to foreign companies and what type of legal US entity they need to form to qualify
  • Assist with making sense out of the myriad of federal, state and local incentive programs
  • Be prepared to provide a list of programs that applys such as:
    • Grant programs that can help with generic facility improvements
    • Workforce training programs
    • Federal, state and local tax incentives
  • Be prepared to explain these programs to non-native speakers of English
  • Offer to arrange and attend meetings and to provide assistance with forms and applications
fdi tool box advice 9
FDI Tool Box: Advice # 9
  • Manage expectations and help to avoid ‘sticker shock‘, especially re. benefits:
  • The foreign company will most likely know that the US benefits system is different but may not know the details.
  • An early review and example of employee benefits (also often required in order to qualify for incentives) can prevent a sticker shock further down the road.
fdi tool box advice 10
FDI Tool Box: Advice # 10
  • Understand specific concerns that foreign companies have re. investing in the US:
    • The NSA program disclosures have a severe impact how foreign companies view security of confidential information.
    • US Benefits are confusing for many foreign companies.
    • State and Federal taxation is confusing for foreign companies.
  • You may not be able to address
  • all concerns. Be honest; don‘t
  • oversell.
fdi tool box advice 11
FDI Tool Box: Advice # 11
  • Incentives are important but they are not necessarily the decisive factor:
  • Position your defense community assets how they relate to market access; consider niche markets
  • Workforce availability is key
  • Workforce productivity is as important as labor cost
  • Combining local industry expertise with your defense community assets is important
  • Availability of suitable housing and accommodation – this is a strong point of many defense communities
  • US work permits are always a challenge; including for foreign investors. You don‘t need to be an expert but have local expert lined up that can help with basic questions
fdi tool box advice 12
FDI Tool Box: Advice # 12
  • Be patient!
  • FDI decisions take time.
  • Companies, whether large and small, have a lot to consider.
  • Several management layers, sometimes in multiple countries are involved in such decisions.
  • Financing, if provided from outside the US can also take more time
  • Design a strategy to stay in touch with the foreign company while their management goes through the process but don‘t be pushy.
  • Remember that spam filters are your biggest enemy when sending information; follow up.
thank you very much and g ood luck
Thankyouverymuchand goodluck!

Janine B. Cary

President

Maine International Trade Center

511 Congress St, Portland ME 04101

Email jbcary@mitc.com

Annette Bossler

Managing Director

Main(e) International Consulting LLC

32 Blueberry Lane, Bremen ME 04551

Email abossler@maine-intl-consulting.com

Carl W. Flora

President & CEO

Loring Development Authority of Maine

154 Development Drive, Suite F, Limestone, ME 04750

Email cflora@loring.org