The Bureau of Economic Analysis ( BEA ) defines foreign direct investment (FDI) as “ownership or control, directly or indirectly, by one foreign person, or entity, of 10 percent or more of the voting securities of an incorporated U.S. business enterprise or an equivalent interest in an unincorporated U.S. business enterprise.” FDI is generally divided into two categories: Greenfield Investment and Mergers & Acquisitions. Greenfield investments are those that create new enterprises and develop or expand production facilities. Mergers and Acquisitions involve the purchase of an existing enterprise. FDI plays an important role in the U.S. economy.
Updated: March 2011 (with 2010 prelim data)
Updated March 2011
Of the $2.3 trillion stock of FDI, 34 percent, or $791 billion, is invested in the U.S. manufacturing sector. Between 2005 and 2009, the total stock of FDI in the U.S. manufacturing sector increased by a compound annual growth rate (CAGR) of more than 12 percent. Within the manufacturing sector, most of the fastest growing subsectors receiving FDI, based on the CAGR of their stock FDI position, were Advanced Manufacturing subsectors. These included: computers and peripheral equipment, with a 73 percent CAGR; communications equipment, with a 52 percent CAGR; custom steel products from steel service centers, with a 42 percent CAGR; electrical equipment and components, with a 33 percent CAGR; and pharmaceuticals and medicines, with a 23 percent CAGR. In an economy that is as large and diverse as the United States, there are significant opportunities for Advanced Manufacturing firms in numerous industry sectors.
Key talking points: Real estate remains a safe and stable investment and is a critical component of the U.S. economy While international investments in real estate development projects alone may face some challenges, there are low-risk opportunities for international investors when utilizing real estate as a component of a business strategy.
Talking Points: International FDI trends are changing. Emerging markets are increasing their share of outward FDI.
Talking Points: Real estate investment should often be looked at as part of broader investment projects. For example, even projects designated as real estate investments had a variety of business functions, including business service centers and company headquarters.
Regarding real estate, it is important to remember that many of these growing sectors require some sort of real estate investment (such as store retailers and service providers). Over the last five years, international investors have continued to experience growth in a variety of industry sectors in the US. Particularly as the US recovers from the economic slowdown, international investment has grown in a variety of sectors, ranging from the extrusion of raw materials or commodities to high-tech manufacturing to services. These areas represent high value activities for multilateral firms.
1. Aaron Brickman Director, Invest in America U.S. Department of Commerce Washington, DC Foreign Investment and Real Estate
2. <ul><li>What is FDI? </li></ul><ul><li>FDI in the U.S. Economy </li></ul><ul><li>FDI in Real Estate </li></ul><ul><li>Why Foreign Firms Go Abroad </li></ul><ul><li>Opportunities and Challenges for Real Estate FDI </li></ul><ul><li>Emerging Trends in FDI </li></ul><ul><li>Invest in America </li></ul>Presentation Agenda
3. Foreign Direct Investment (FDI) Foreign-owned vs. Majority-owned ≥ 10% ≥ 50% Greenfield vs. Mergers and Investments Acquisitions
4. Foreign Direct Investment in the U.S. – 1980-2010 (Billions of dollars; Without current-cost adjustment) Source: U.S . Department of Commerce, Bureau of Economic Analysis *2009 preliminary U.S. FDI Trends FDI in the U.S.
5. Share of Global FDI Flows Captured by the United States: 1980-2009 Source: UNCTAD FDI Database U.S. FDI Trends U.S. and Global FDI Flows
6. FDI in the U.S. Economy 5.6 million $40 billion $55 billion $195 billion $408 billion 25 percent 18 percent Workers Employed by U.S. Affiliates of Foreign Firms in the U.S. in 2008 Amount U.S. Affiliates of Foreign Firms spent on R&D in the U.S. in 2008 Amount U.S. Affiliates of Foreign Firms Reinvested into the U.S. Economy in 2008 Size of FDI Flows into the U.S. in 2010 Amount of Wages Paid to Employees of U.S. Affiliates of Foreign Firms in 2008 U.S. Affiliates of Foreign Firms Pay on Average 25 percent Higher Wages and Salaries than U.S. Establishments U.S. Affiliates of Foreign Firms Generate over 18 percent of all U.S. Exports
7. U.S. FDI Trends Top 10 FDI Positions, 2009 2%|$48.4b 11% | $251.2b 12% | $271.9b 24% | $557.9b 11% | $259.6.1b 9% | $119b 5% | $119b 4% | $88.4b 2% | $47.5b 2% | $45.4b Source: Department of Commerce, Bureau of Economic Analysis – FDI by Ultimate Beneficiary Owner
8. U.S. FDI Trends Total FDI Stock in U.S. by Industry, 2009 Source: Department of Commerce, Bureau of Economic Analysis $2.3 trillion distributed into… Real Estate* = $38.7 billion *Note: FDI investment in businesses that are identified as part of the real estate sector.
9. U.S. FDI Trends Real Estate Trends Source: Department of Commerce, Bureau of Economic Analysis
10. U.S. FDI Trends Real Estate Trends Source: Department of Commerce, Bureau of Economic Analysis
11. U.S. FDI Trends Real Estate Trends Source: Department of Commerce, Bureau of Economic Analysis
12. Why Firms Go Global <ul><li>Access to new markets </li></ul><ul><li>Input advantages such as labor, technology, or natural resources </li></ul><ul><li>Access to host country benefits such as technology spillover or treatment as a domestic company </li></ul><ul><li>Brand acquisition </li></ul><ul><li>Export promotion support </li></ul>Firms choose to invest abroad for reasons including: Source: Dunning, John. “ Explaining Changing Patterns of International Production: In Defence of the Eclectic Theory.” Oxford Bulletin of Economics and Statistics, November 1979, vol. 41, issue 4, pp. 269-95.
13. FDI and Real Estate Challenges Opportunities Identifying opportunities for international investors Real estate as site selection Real estate development projects may not qualify for incentives designed for long-term job growth Incentives for real estate as part of an economic development project Job creation in real estate projects may be short-term/ temporary Creative real estate investments can revitalize communities FDI in real estate may exist as a component of a greenfield project Real estate investment as a business development strategy
15. 41% | $2.6b 45% | $34.2b 51% | $47.5b 43% | $11.6b 31% | $2.4b 35% | $5.5b 34% | $2.3b 63% | $24b Note: Numbers denote 5 year compound annual growth rate and total investment position in United States 38% | $45.4b 28% | $3.8b U.S. FDI Trends Top 10 FDI Growth Markets, 2009 Source: Department of Commerce, Bureau of Economic Analysis – FDI by Ultimate Beneficiary Owner
16. U.S. FDI Trends Real Estate Trends Source: fDi Markets Of 131 announced investments listed as real estate projects between 2003 and 2011, these investments fell into 5 primary business activities.
17. Top 10 FDI Growth Sectors in the United States (Compound annual growth rate in FDI position between 2005 and 2009 and dollars in 2009 on a historical cost basis) Miscellaneous Store Retailers Educational Services Copper, nickel, lead and zinc ore Computers and Peripheral Equipment Beverage and Tobacco Products Petroleum Refining (excluding oil/gas extraction) Communications Equipment Other Services (excl. public sector and private households) Steel Products from Purchased Steel 94% $3.573 billion $7.517 billion $19.464 billion $55.031 billion $6.556 billion $10.865 billion $3.856 billion $5.613 billion 89% 73% 73% 66% 57% 52% 50% 42% $6.991 billion Oil and Gas Extraction $35.347 billion 39% Source: Department of Commerce, Bureau of Economic Analysis U.S. FDI Trends Industry Perspectives
18. Maintaining Competitiveness <ul><li>Created March 2007 </li></ul><ul><li>Primary U.S. Government Mechanism to Manage Foreign Investment Promotion </li></ul><ul><li>What We Do: </li></ul><ul><ul><ul><li>Facilitate Business Inquiries </li></ul></ul></ul><ul><ul><ul><li>Act as Ombudsman </li></ul></ul></ul><ul><ul><ul><li>Connect Investors with U.S. States </li></ul></ul></ul><ul><ul><ul><li>Provide Policy Guidance </li></ul></ul></ul><ul><ul><ul><li>Educate Investors </li></ul></ul></ul><ul><ul><ul><li>Provide Guidance to U.S. Economic Development Organizations </li></ul></ul></ul>
19. Facilitate Business Inquiries Invest in America provides actionable information to foreign firms to help them… <ul><li>Incorporate a business in the U.S. </li></ul><ul><li>Understand basic U.S. tax and legal concepts </li></ul><ul><li>Learn about incentives available to businesses in the U.S. </li></ul><ul><li>Connect with U.S. state, city, or regional economic development offices to learn about investment opportunities </li></ul><ul><li>Apply for a business-related visa </li></ul>Foreign investors can communicate with Invest in America staff by phone or email in Washington, DC, or meet with members of the U.S. Foreign Commercial Service in 77 countries around the world.
20. Act as Ombudsman
21. Connect Investors with U.S. States Federal State and Local
22. Educate Investors <ul><li>Industry/University Cooperative Research Centers Programs (I/UCRC) </li></ul><ul><li>National Energy Technology Laboratory (NETL) Funding Opportunities </li></ul><ul><li>Renewable Energy Tax Credit </li></ul><ul><li>Loan Guarantee Program </li></ul><ul><li>ARPA-E Funding Opportunities </li></ul><ul><li>Updated Guide Available at http://www.investamerica.gov/ </li></ul><ul><li>Contact Invest in America with questions </li></ul>
23. Thank you Aaron Brickman Director, Invest in America U.S. Department of Commerce Tel: 202-482-1889 Email: email@example.com Web: http://www.investamerica.gov