Home The Washington Diplomat August 2007

Local Governments Get Personal To Attract International Dollars

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Foreign companies are flocking to Alabama, and the locals say it’s more than low taxes, cheap land and labor, and a good transportation system that’s drawing the world to the Deep South.

After Daimler-Benz opened a Mercedes plant in Tuscaloosa County in 1997, numerous other European companies followed, notably European Aeronautic Defence and Space Co. (EADS) and ThyssenKrupp, the German steel company that announced a major new plant in April.

It’s a history that economic development officials in Alabama are proud of—and it highlights the methods that local governments, businesses and politicians use to compete for precious investment dollars from around the world, especially for their rural and less prosperous areas.

Residents of Alabama attribute the decade-long rush of European companies in part to their own hard work organizing and reaching out internationally. Plus, they say, the weather’s nice (at least much of the year) and Alabamans are just plain friendly. “People can’t believe how well they are received,” said Trish Coghlan, executive director of AlabamaGermany Partnership.

Southern hospitality is no cliché when it comes to foreign investing in Alabama. It’s helped to build networks of companies and government bureaucrats that navigate prospective foreign investors through all the hassles of doing local business—the permits, banking, infrastructure, taxes—while spreading the reputation of Alabama as a place that’s not just good for commerce, but also a good place to live, work and set up shop in.

Coghlan noted Alabama’s built-in attractions for businesses such as the enormous Port of Alabama, as well as the state’s mountains, rivers, farms and even beaches on the Emerald Coast, sometimes also jokingly called the Redneck Riviera.

But in most cases, commercial enterprise seems to be preceded by cultural exchange and relationships. In Alabama, state officials have welcomed visiting German business leaders by taking them deep-sea fishing, holding barbecues with bluegrass bands, and even putting on Oktoberfest festivities—although one such event, held in a dry (i.e. nonalcoholic) county, drew national attention for the unintended irony. To make something last from those good feelings, Coghlan said the state’s comprehensive team then works to simplify state business matters for the newcomers. Her group’s board, for example, includes officials from the utility companies, port authority and other players who need to be on board before any deals are inked.

The investment has grown, and with it so has Alabama’s economy. The state attracted almost billion in foreign investment from 2002 to 2004, much of it in the automotive and aerospace industries. Nearly three-fifths of that money came from nations in the European Union, according to EU Ambassador John Bruton, who visited Alabama leaders in April. In fact, in 2004, EU companies invested .4 billion—more than the rest of the world combined—in Alabama. In addition, Alabama’s export growth is among the nation’s fastest, and the state currently exports more goods to Germany than to Canada and Mexico combined.

The Mercedes plant that opened 10 years ago now claims direct or indirect responsibility for some 10,000 jobs and exports of class="import-text">2007August.International Dollars.txt billion, making it the state’s largest exporter. AlabamaGermany Partnership lists nearly 50 German companies that have set up in Alabama, most of them in manufacturing.

In May, the state also celebrated as ThyssenKrupp announced a new .19 billion steel plant in north Mobile County on the heels of a package of incentives from the state. Alabama Gov. Bob Riley said a “project this size, with this amount of economic impact, comes along perhaps once in a generation.” The company said the mill might ultimately create up to 38,000 new jobs in the region.

Later in May, EADS announced it would use the Brookley Industrial Complex in Mobile to build a new refueling plane, the KC-330 tanker, for the U.S. Air Force if it wins the .5 billion contract. Alabama beat out Florida, Mississippi and South Carolina for the potential project. This follows EADS’s earlier incursion into Alabama, with a facility at Mobile Regional Airport to service U.S. Coast Guard planes.

The steel mill and the aerospace company may seem to have little in common, but in an interview with an Alabama television station, EADS North America Chairman and Chief Executive Officer Ralph Crosby pointed to their common interest. “What you don’t know is we helped with ThyssenKrupp,” Crosby told WKRG TV in Mobile. “Because we know that it’s another German company … our CEO called the president of ThyssenKrupp and said, ‘Hey, you know, we understand Mercedes, we understand EADS, we understand Alabama, and Alabama delivers.’”

Individual cities and counties within states also fight aggressively to gain and keep investment. St. Clair County, outside Birmingham, Ala., was largely rural a decade ago. Now it boasts three German companies including WKW Erbslöh, an automotive supplier, which is building a major facility in the county.

“Our strategy is we take a very aggressive approach to economic development,” said Ed Gardner Jr., executive director of the St. Clair County Economic Development Council. That approach includes traveling abroad to visit prospective companies and looking at long-term returns—for example, giving away a 20-acre parcel of land in anticipation of an economic boost down the road.

Furthermore, the state’s reputation for success helps attract new companies. “It’s a much easier sell than it was in 1993,” noted Gardner.

On the other side of the investment equation are the embassies. An economic officer at the German Embassy noted that there are many organizations, such as German-American Chambers of Commerce, that work to connect German businesses with locations in the United States. The embassy is generally careful not to favor one company over another, and devotes plenty of energy promoting investment in Germany, rather than the other way around. But the embassy does connect German companies with local partners here and helps iron out any problems.

In addition, many embassies work to smooth the paths for foreign companies trying to set up shop in the United States, with diplomats traveling the country to promote understanding and build relationships.

EU Ambassador Bruton makes such trips a couple of times a month, an aide said. On Bruton’s recent trip to Alabama, he met with the usual gamut of business and political leaders, but, like most ambassador visits, the subject was culture, tradition and values—in addition to business. Bruton, for example, met with an Alabama group that opposes the death penalty and discussed the EU’s unease with Alabama’s use of capital punishment. He also spoke with some 1,000 high school students and a group at Auburn University, sharing some basics about the EU’s history and significance.

A key point Bruton made to the Alabamans: Europe is essential to America’s economy. The EU accounts for about two-thirds of all international investment dollars flowing into the United States, and some 43,000 Alabama jobs come from EU investment.

Ambassadors make such trips all the time, but Alabama has proven itself exceptionally attractive, according to Kevin Gilda, senior outreach advisor for the European Delegation, who noted that much of Alabama’s success is attributable to its people and high value on personal relationships.

Formerly people might’ve thought of Alabama as a state in decline, Gilda said, but it has improved dramatically from its past, with all the elements a company seeks: strong transportation and broadband infrastructure, as well as a willing workforce. Others might also mention Alabama’s business-friendly regulatory environment and low taxes, particularly when the state fashions special incentives packages for investing companies.

“They’re selling themselves extremely well,” Gilda said. “When they explain what they’re doing, it’s clear they’re interested in a long-term relationship. They’re aggressively pursuing business, but they’re doing it in a friendly way.”

In Nevada, boosters are battling the mixed message from its own main city—the legendary reputation of Las Vegas and its wildly successful “what happens in Vegas, stays in Vegas” marketing campaign.

Alan DiStefano, director of global trade and investment for the Nevada Commission on Economic Development, has the task of persuading companies that other places in Nevada—the Reno, Carson City and Lake Tahoe areas, for example—are great places to bring families and businesses, far from the chaos and depravity of Sin City. In fact, most of the manufacturing and exporting in the state comes from within 90 miles of Reno, many deserts away.

“I’ve been to small villages in rural China, and they’ve all heard of Las Vegas. But they’ve never heard of Nevada,” said DiStefano.

But smaller states have to pull out even more stops to attract foreign investment. Montana, for example, offers cold winters, a long distance to markets and a small workforce, so to attract foreign dollars, locals have built business networks for years, mostly with the buyers of agricultural products. In addition, the state has had a special relationship with the Far East, notably through Mike Mansfield, the state’s former U.S. senator who served a lengthy ambassadorship to Japan.

Max Baucus, Montana’s current senior senator, has organized economic summits in Montana for the past four years, trying to spark investment among his state’s mountains and vast prairies. This year, he brought the ambassadors of China, Korea, Bahrain, Panama, Indonesia and Chile to the summit in Butte, once the world’s copper mining capital but now the site of some of America’s most intractable environmental problems. The event featured such economic development all-stars as Microsoft founder Bill Gates and Federal Reserve Chairman Ben Bernanke. Baucus also took several of the ambassadors to visit Montana businesses at other sites around the state.

The visitors talked up their host’s economic potential and niches. For example, Naser Al Belooshi, the ambassador of Bahrain to the United States, noted that his country’s jewelry industry could use some of the platinum and palladium mined in Montana, according to local reports. He also mentioned growing soybeans in the Middle East—and Montana Gov. Brian Schweitzer, as it happens, is a soil scientist who speaks Arabic and spent several years helping to grow crops in the Middle East.

Gates and others also mentioned more futuristic investment opportunities in areas such as wind energy and clean-coal technology, issues championed by both Schweitzer and Chinese Ambassador Zhou Wenzhong.

A few weeks later, in late May, more than 40 Chinese investors and officials attended a business expo organized by Baucus in Montana. Baucus said the visit was different from other foreign delegations that have visited Montana as it consisted mostly of private-sector decision makers.

Beyond the promises of friendship and cooperation, most ambassadors would like something more specific: reduced trade barriers to sell their products in the United States. They picked good company for that message given that their host, Baucus, chairs the powerful Senate Finance Committee, which oversees trade issues and is instrumental in any trade agreement reaching the Senate floor.

Baucus’s longtime Republican counterpart on the committee, Chuck Grassley of Iowa, was also successful in attracting diplomats to his state, pioneering trips through Iowa for upward of 100 diplomats during every congressional session for two decades (see October 2005 issue of The Washington Diplomat).

It’s not just Heartland states with plenty of land and a need for jobs that are reaching out to the world. Locally, Fairfax County in Virginia, one of the nation’s richest, has a population and economy greater than many other states, thanks to its proximity to the endless federal dollars emanating from nearby Washington. But the county isn’t resting on its laurels: The Fairfax County Economic Development Authority (FCEDA) has offices in Silicon Valley, Bangalore, Seoul, London, Frankfurt and Tel Aviv, and provides a vast array of services to promote local business development.

And like Alabama, Fairfax County’s people and culture are a major draw, say its boosters. “Because we’re a federal town, and always have been, there’s a degree of sophistication, a degree of ‘cosmopolitan-ness’ that exists in the region,” said Gerald Gordon, chief executive officer and president of FCEDA. “People from outside the United States come here and feel comfortable.”

Fairfax is also one of the most ethnically diverse communities in the nation, if not the world. Some 50,000 Koreans and Korean-Americans and about 40,000 Indians and Indian-Americans live in the county. And in the rapidly growing school system, 40 percent of students have at least one parent born outside the United States. Furthermore, according to Gordon, foreign-born people don’t just live in isolated enclaves, but throughout the county, integrating themselves with native-born Americans.

That means people from abroad can find many of the conveniences of home—religious institutions, food and fellow countrymen—while also becoming part of the American community.

In all, 358 foreign-owned companies from 38 different nations operate in the county, employing some 20,000 people. “It’s not just a place that accepts foreign people,” said Gordon. “We want foreign people.”

About the Author

Sanjay Talwani is a contributing writer for The Washington Diplomat.

Last Edited on November 29, 1999