Obama Administration Underscores Significance of Inbound Foreign Direct Investment
Earlier this month the U.S. State Department clarified its position on the importance of inbound foreign direct investment (FDI) to the U.S. economy. State released a fact sheet on July 1 entitled "The State Department, Open Investment, and American Jobs." The fact sheet underscores the importance of FDI to economic growth and job creation in the U.S.
The fact sheet credits the Committee on Foreign Investment in the United States (CFIUS) with concluding action on over 150 transactions in 2008. This represents an increase of at least 9% over the 138 transactions that CFIUS reviewed in 2007. Of the 2008 transactions, 92% were mergers and acquisitions of U.S. businesses. The balance was likely to have been joint ventures or loan transactions. The State Department points out that, as a result of its membership on CFIUS, it has a direct role in the rulings that the panel makes.
Without doubt, inbound acquisitions and investments are quantitatively significant. In 2006, U.S. inbound FDI totaled $236.7 billion, or 1.8% of GDP. U.S. affiliates of foreign firms spent $395.8 billion on U.S. payrolls and $34.3 billion on U.S. R&D.
Because of these direct economic effects, the State Department wants its message to be crystal clear:
The United States has a significant stake, as both the world’s largest source and recipient of foreign direct investment, in working with our economic partners both multilaterally and bilaterally to implement policies that facilitate global investment flows.
State’s pronouncements and their forceful delivery add to the expectation that inbound FDI will assist in pulling the U.S. economy out of its current slump.
One of the challenges is that until now the economic development community was hampered by lack of comparative state FDI inflow data to assess relative performance. fDi Intelligence has made a new data set available that fills the measurement gap - http://www.strengtheningbrandamerica.com/brand-america/database.php In the spirit of you get what you measure, this data set should help states make better strategic choices on their promotional budget allocation for capital attraction.