Foreign investors like US, but they own little
Headlines tell of foreign investments in US manufacturing, real estate, and securities, and on the surface they give an impression the US is being taken over by foreigners. With the clouds of recession gathering, inflation climbing unchecked, relatively low stock prices, and the value of the dollar fading, many Americans fear the US is vulnerable to being largely bought up by investors from wealthy nations.
Indeed, foreigners have been investing heavily in America over the past several years.
In the late 1960s and early 1970s the number of announced foreign investments from abroad was erratic, rising in 1973, declining in 1974 with the global recession precipitating by the Organization of Petroleum Exporting Countries, then picking up again in 1975.
Over the past three years, however, there has been a "very sharp uptrend in foreign investment," confirms Donald Bauer, director of foreign investment surveys for the Conference Board in New York. "Still," he quickly adds, "so far the foreign investments do not account for a significant portion of economic activity in the country. In the manufacturing sector, for example, only about 4 percent of all jobs in the US are in foreign-owned plants.
"It's very small when you look at the relationships in other countries," Mr. Bauer explains. "That 4 percent here compares with more than 20 percent in Canada and some countries in Western Europe. American investment in those countries represents and much higher proportion of employment and economic activity than foreign investment in the US."
So despite the headlines and concern voiced by some US congressmen, there's no general alarm about a peaceful capture of America through investment tactics and strategies.
"Headlines help sell newspapers," shrugs Tom Pierpoint, director of the Invest in the USA program of the US Department of Commerce.
"Everybody wants a piece of the action," he comments about the pickup in foreign money sunk into the US. And that's good news, not bad. In fact, his office counsels directly with prospective foreign investors and puts them in touch with industrial development agencies of various states eager for new capital investment.
Mr. Bauer of the Conference Board notes that foreign investment in the US, "by and large, has been a success story" -- for both sides. Weakness of the dollar has been a factor and the political stability of the US also promises a safe haven for investments.
More important, though, the US is the largest single market in the world "and for foreign companies that are truly developing into multinational corporations, it simply is not a market they can ignore," he says.
Many of the firms now investing in the US are convinced market penetration here can be accomplished only through manufacturing in this country. They believe that if they remain in Europe, for instance, and export to the US, they will never achieve the sales volume and profitability that can be obtained by actually manufacturing here.
"One of the reasons for that, of course, is the US in recent years has become increasingly concerned about its trade deficit," Mr. Bauer says. "Many of the foreign companies investing here now are worried there may be a limit to the amount of goods they can export to the US."
In tracking foreign investments, the Commerce Department identified transactions in 1976 valued at $2.1 billion. Included were acquisitions of US companies, establishment of new plants, equity increases above 10 percent, real estte purchases, and joint ventures.
In 1977, there were completed deals worth $3.3 billion, a figure that grew to activity but puts an estimated price tag of approximately $8.1 billion on foreign investments here.
Industrial nations such as West Germany, the United Kingdom, and Canada continued to account for the bulk of foreign manufacturing investment in the US last year. "But the growth in foreign investment in 1979 primarily was due to growing activity by firms in Switzerland, Japan, and the Netherlands," says Mr. Bauer.
While the Europeans, Japanese, and Canadians have been the "heavy hitters" in US investment, the Arab nations have accounted for substantially less activity than they're generally given credit for. Arab investments in the US amount to "virtually nothing," contends Milton Berger, director of the Office of Foreign Investment at the Commerce Department.
Michael Salkin, economist at Bank of America's world headquarters in San Francisco, doesn't consider foreign investment a threat. "The objet is to be able to import capital into your economy," he says.
"It doesn't matter whether the capital comes from Wyoming or France. Foreigners investing here then have a stake in the real productivity and real well-being of our economy," he adds. "So they base their decisions on improving the investments they own, helping to keep prosperous the economies in which their money is tied up. It helps a lot."