This presentation will explore ways to communicate the benefits of balancing more thoughtful and equitable tax policies and fiscal policies with attracting healthy foreign investment to ensure distribution of GVC gains for a broader community in Memphis, Tennessee (United States).

1. MEMPHIS: Improving
FDI Fiscal Policies For
Equitable Distribution of
Gains

2. OVERVIEW
This presentation will explore ways to communicate the benefits of balancing more thoughtful and equitable
tax policies and fiscal policies with attracting healthy foreign investment to ensure distribution of GVC gains for
a broader community in Memphis, Tennessee (United States). The target audience for this presentation are
City/County Government Officials (Policymakers) in Memphis Tennessee.
World Bank’s Trading for Development in the Age of Global Value Chains discusses the theory that foreign investment has the
potential to support “high-quality and sustainable jobs, as well as technology transfers that spur productivity spillovers.” The theory
is based on the structure of national and local policies, such as tax policies and other fiscal policies that can be instituted to spur
foreign investment. There also is a potential down-side to foreign investment, if the proposed policies only provide tax incentives for
investors and do not provide safeguards to ensure that these incentives directly produce jobs for all levels of citizens in the
country/city. Safeguards should also ensure that technology and productivity best practices are shared and implemented in the
country/city when investments are made.
It is understood that there is a need for countries or places, particularly developing countries/cities with scarce resources, to create
policies and mechanisms that help to lure foreign investment, but it can be a double-edged sword, if policies and incentives are not
balanced (do not consider the effects of the investment in a equitable way on all of society). I believe that there is a case to be made
to show city officials how to offer more modest fiscal incentives to foreign investors and convince investors of the benefits of long-
term investment that will create jobs and skills training opportunities for all levels of residents in the City. Municipalities and
investors should look at the long-term impacts and opportunities for a long-term trade/corporate relationship and long-term
investment that includes supporting education and workforce/labor development and protection initiatives.
To conclude, my intent is to share examples of best practices for government entities to find a balance between attracting long-term
foreign investment without providing overly generous tax incentives and perpetuating “low-wage haven” narratives in Memphis.
The hope is that future investment relationships and incentive structures will support the equitable distribution of gains in Memphis.
*Trading for Development in the Age of Global Value Chains (https://www.worldbank.org/en/publication/wdr2020)
*More information about the down-side of bad tax policies and best practices for creating sound tax policies can be found in the PCT (Platform for Collaboration on Tax) 2015. (https://www.tax-
platform.org/)

3. ISSUE: EXPLOITATIVE FISCAL
INVESTMENT POLICIES
• Efforts: Improving Memphis Corporation Recruitment/Tax Policy Design
• Finding ways to share investment best practices with local government officials
so that future investment will equally support the community’s needs and
investor needs; Suggest tools to dismantle the old model for attracting
investment which used the typical “low-wage”/overly generous tax incentive
model”
• Obstacles:
• Memphis’ reputation as “low-wage worker” haven
• Memphis’ reputation as a corporation-centric city rather than worker-centric city
• Government’s perception of lack of leveraging power with corporations due to
City’s perceived undesirable characteristics
• Lack of community stakeholder cohesiveness and understanding to help
pressure the government’s policies

4. AUDIENCE
City/County Government Officials (Policymakers)

5. OVERVIEW: MEMPHIS CONTEXT
The city government of Memphis has a past history of attracting large corporations and
foreign investment by offering generous tax incentives and perpetuating the city’s “low-
wage environment” narrative.
Unfortunately, poverty is a major problem in Memphis and low wages and
underemployment contribute to this major issue.
It could be inferred that the high underemployment rate and poverty rates in Memphis
are connected to the fiscal policies, mainly taxing policies, that Memphis utilizes to lure
economic investment in the city.
Overall
Poverty
Rate
Child
Poverty
Rate

6. LOCATION, LOGISTICS,
LOCATION!
• Cargo Memphis International Airport (MEM) is the busiest cargo airport in
North America, and the second-busiest in the world.
• Centrally located in the heart of the United States; Geographically convenient
to East& West Coasts/South/Mid-West
• Memphis’ location and logistics infrastructure is a VALUABLE LEVERAGING
POINT when attracting foreign investment and GVC investment

7. Global Value Chain Leaders in
Memphis
International
Paper
FedEx
XPO
Logistics
Supply
Chain
Smith &
Nephew
AutoZone

8. INVESTMENT LIMITATIONS
With a prime geographical location for trade, shipping and
logistics and several top companies that facilitate
successful global value chain connections globally, WHY
is there still a limited distribution of GVC gains to the
broader Memphis community?
https://mlk50.com/do-memphis-25-largest-employers-pay-workers-enough-to-
live-on-nearly-half-won-t-say-438bdd474d39

9. FDI & TAX POLICY

10. FDI & TAX POLICY

11. FDI & TAX POLICY

12. RESOURCES
• CHALLENGES
• Corporate Investment Fiscal Policies (Weak Deal Structure; Not in the City’s Longterm Best
Interest; Difficult Enforcement of Contracts)
• Overall Low Wages/Underemployment
• Municipal/Community Apathy
• Other Municipal Priorities
• COVID-19 Budget Shortfalls
• Bureaucracy
• Lack of confidence in City’s assets and their capacity to be leveraged

13. SOLUTIONS/SUGGESTIONS
City Government should create/promote:
• More sound/equitable investment packages that place priorities on long-term
investment and do not offer non-enforceable contracts in exchange for quick return,
overly generous tax/financial incentives/Prevents corporations from leaving the city
without consequences after receiving major upfront tax incentives to come to the city
• Corporation investment in communities and people in communities (workforce training
and enhanced skills development and leadership developed programs)
• Affordable access to quality childcare and affordable, reliable transport
• Dual education systems (general/vocational training); apprenticeship models
• Livable Wages—go beyond minimum wage to a livable wage (based on Memphis cost
of living); raise returns to workers (targeted subsidies/investment in affordable housing);
Stop “low-wage” opportunity narrative for prospective investors
• Investment in Active Labor Market Programs to enhance employability and connect
workers to jobs (work with the private sector)
Community Stakeholders should:
• Organize/Vote/Demand Better Municipal Fiscal Policies/Become Educated about
Investment/City Tax Policies/GVCs
Blog Post by Thomas Farole (Lead Economist in the World
Bank’s Social Protection and Jobs Global Practice)
December 2019
https://blogs.worldbank.org/jobs/making-global-value-chains-work-
workers

14. RESOURCES
• BEST PRACTICES/RESOURCES
• Attracting quality foreign direct investment in developing countries
https://www.theigc.org/blog/attracting-quality-foreign-direct-investment-developing-countries/
• Making Global Value Chains Work for Workers
https://blogs.worldbank.org/jobs/making-global-value-chains-work-workers
• Corporate Social Responsibility Clauses in Investment Treaties
https://www.iisd.org/itn/2018/12/21/corporate-social-responsibility-clauses-in-investment-
treaties-laurence-dubin/
(Note: Responsible Investment should go beyond “Social Responsibility through
Charity” only. Memphis is one of the most charitable cities in the US, but there is still an
excessive amount of blight and poverty in the city. Responsible investment begins before a
company comes to town and a deal is made. Sound/Equitable Fiscal policies should be
where social responsibility begins in order to attract quality investment.)

15. STAKEHOLDER BENEFITS
• What are the reasons that the government, private sector and other
stakeholders would want to participate in a healthier fiscal policy environment
re: investment?
• Government
• To build a new reputation for the city that combats the “blighted, low-wage” reputation of the city
• The better the city environment (healthy, vibrant, safe communities with no blight), the more attractive the market
for long-term investment
• Decreased potential for community backlash due to bad fiscal policies and deals
• Private Sector
• Potential attraction to a city that shows true concern for its citizens (thoughtful financial policies and development
strategies)
• Long-term investment opportunities
• Opportunity for other valuable, municipal incentives that balance more modest tax incentive models
• Better living environment for employees of all levels, including upper management of company
• Community Stakeholders
• Opportunity for more equitable access to gains
• Better wages
• Ability to influence Responsible use of taxpayer dollars