Aaron Brickman, senior vice president for strategy and development at the Organization for International Investment (OFII), a nonprofit trade association, also founded SelectUSA, a federal program to promote foreign direct investment in the US. He visited Global Finance to discuss the state of FDI worldwide.
Global Finance: What’s the state of FDI today?
Aaron Brickman: The US gets more FDI [than other countries do] due to more cross-border investment globally, but its market share is declining. Still, 2016 will be an up year for US foreign investment. The vast majority (of US FDI) comes from mergers and acquisitions, and it is becoming more competitive and location-neutral. We see rising investments globally from OECD and non-OECD countries, such as Malaysia and South Africa. The projects come increasingly from emerging economies. Every country in the world now can invest in the US market, especially if we factor in state-owned companies and sovereign funds.
GF: What factors drive FDI decisions and do incentives matter?
Brickman: Investment incentives are important for some companies, but they are not the critical factor. Attractive incentives cannot compensate for many other important factors, such as bad location. If several equal options are considered, though, incentives can lead one way or another.
The US government does not have national incentives but focuses on promotion, while states create their brands and negotiate incentives. The American FDI domain is still controlled by states, cities and counties, not the federal government. Interestingly, the US competes on a wage basis against the rest of the world, although FDI investors in the US on average pay more than local peers.
GF: What do you see as the role of SelectUSA today?
Brickman: SelectUSA delivers the message that the United States is open for business regardless of the headlines, and that it is the best location for global capital. It also has a facilitation element. The program supports investment inquiries and counsels economic development organizations on best practices. You cannot do promotion and facilitation, though, without a robust policy to build the best regulatory environment.
GF: What are OFII’s members—large foreign companies investing in the US market—most concerned about these days?
Brickman: The US is a very complex market with many states, counties and regulations, all of which is hard to understand. Foreign investors are also concerned about discriminatory provisions or attempts to discriminate against inbound companies. We advocate for leveling the playing field.
A big concern is the Treasury-proposed rule change to section 385 [of the Internal Revenue Code], which deals with anti-inversion and ended the Pfizer-Allergan proposed merger, but also singles out subsidiaries of foreign multinationals and increases their cost of borrowing, serving as a revenue grab. The Treasury ignores the investment promotion issue. Changing the rules of the game is exactly what the US government is advising other governments not to do. Transparency, rule of law, and predictability are the hallmarks of our investment policy.
GF: What are your thoughts about US national security reviews?
Brickman: It is important to keep CFIUS, the review process of foreign investment in the US, apolitical and transparent. CFIUS is more transparent on national security matters than [are the review processes of] most countries with similar mechanisms. If CFIUS becomes political, it is because American politicians try to score political points or because of the sovereign profile of the buyer.
GF: How are foreign investors reacting to the US election?
Brickman: Rising anti-foreign rhetoric is a significant problem. We also hope that the next administration will continue to prioritize FDI regardless of its political views—the Obama administration was perhaps the most pro-FDI in recent history—otherwise, investors may choose other locations for their projects.