Foreign direct investments in the U.S. are returning to the 2008 pre-crisis levels and Connecticut must step up its recruitment efforts to expand its share of this important economic development factor.
The following statement in the Wall Street Journal of June 15 could not have been more clear: "Foreigners are stepping up investment in the U.S. after retreating during the depths of the financial crisis, with the latest flurry spurred partly by Europeans seeking havens amid the Continent's debt crisis."
As I had pointed out in my Dec. 5 column in this newspaper, the European crisis does indeed present an economic opportunity as European firms look to find stable markets to which to move.
The need and importance of focusing significant efforts in foreign direct investments is also accentuated by a recent report prepared by PWC on behalf of the Organization for International Investments, a D.C.-based trade group. The study measures the impact of foreign direct investments on the U.S. and state by state.
According to this report "The supply chain and paycheck impact in the manufacturing sector is five jobs for every U.S. subsidiary employee, materially higher than the overall 3-to-1 jobs impact for all U.S. subsidiaries."
Translated to Connecticut, this means that in addition to the 30,000 direct manufacturing jobs created by foreign-owned companies, these investments also account for an additional 150,000 jobs.
The same organization also publishes results for "Greenfield Projects," defined as capital investment to build a new plant, factory or other business on the part of foreign-owned firms. Some interesting comparisons for 2011: CT attracted $43,000,000 and 234 jobs; Mass. $800,000,000 and 2,400 jobs; RI $100,000,000 and 246 jobs; VT attracted over $2 billion and more than 6,200 jobs.
Fully two-thirds of the $234 billion invested in the U.S. in 2011 came from Europe while China accounted for less than 1 percent of that amount.
Between 1976 and 1984 Connecticut was indeed at the forefront of recruitment efforts and the results are there for all to see: over 100,000 jobs now depend on foreign-owned firms and most of them are in the highly paid fields of manufacturing (30 percent) or financial services (17 percent). France, Germany, Netherlands, Switzerland and UK account for about 75 percent of these companies. We need to leverage these ties to attract more companies to our state
Other states are focusing significant efforts on recruiting foreign companies to their shore. North Carolina has an office in Hamburg; South Carolina is based in Munich; Massachusetts is in Berlin. This local presence is absolutely necessary if we are to have a reasonable chance at competing with states which also have important strategic advantages like a lower cost of doing business.
But we need to do more. Governor Malloy has been tireless in his efforts to attract businesses to our state but needs to expand his efforts overseas and especially in Europe. I would urge him to undertake semi-annual visits to Germany, UK, France, etc. Let's call on companies already based here to thank them for their confidence, to solicit further investments from the same firms and to identify additional companies considering investments in the U.S.
We can no longer postpone this important task. Our economic development is at stake and the multiplier effect far too beneficial to ignore it.
Paul Pirrotta is president of Paul Pirrotta International in Glastonbury. Reach him through paulpirrottainternational.com.