Tuesday, September 23, 2014

Global Pursuits

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Following decades of job loss to China and India, officials now court those countries to invest in America... and Arizona.

Governor Jan Brewer wasn’t looking for masonry tips on Great Wall-building when she flew to China in 2011. Nor was she seeking advice on how to govern a multicultural society when she visited India last summer.

She was trying to persuade business leaders in both countries to invest in Arizona, particularly the IT, solar energy and tourism industries. She’s selling potential investors on the prospect of low taxes and light regulations, and Arizonans on the possibility of potentially high-paying jobs. It could happen, but cultural differences, geopolitical issues, and the nuts-and-bolts of international trade might make the road less than silk-smooth.

Phoenix Mayor Greg Stanton also went to China last year, after an executive with the World Economic Forum invited him to talk about sustainability. Both Brewer and Stanton returned with influential contacts they say they couldn’t have met otherwise. India-born, Yuma-based orthopedic surgeon Ram Krishna, whom Brewer appointed to the state Board of Regents last May, tagged along – on his own dime, he says – to make sure she met the right people, which included execs with Indian IT companies Infosys and Repro.

There are local success stories. Since 1999, India-based Aegis Communications has run a telephone client-service center in Sierra Vista, which employs about 300 people, says Kevin Nolan, the company’s head of North American marketing. Like Aegis’ other 5,000 customer-service employees in the U.S., they do phone support for companies Nolan won’t identify, except to hint: “You’ve heard of one if you watch a lot of college football games on Saturdays.” The company picked Sierra Vista for its “fantastic labor pool” of educated, technically skilled military families. Nolan agrees, with a laugh, that it’s “a bit ironic” for an Indian company to create customer-service jobs, of all things, in the U.S.

Foreign investment in the U.S. is aggressively promoted by the federal Department of Commerce, and competition for these potential cash infusions rages all the way down to the state and city level, says Karen Dickinson, chair of the Arizona District Export Council and lawyer for the Phoenix firm Polsinelli.

The stakes are high. About 5 percent of U.S. private-sector jobs come from foreign direct investment (FDI), says Aaron Brickman, deputy executive director of the Commerce Department’s SelectUSA. Salaries average one-third higher, he adds. The majority of FDI comes from Europe and Japan, but Brickman expects China- or India-spawned jobs to pay well, too: “Frankly, we don’t want to have a race to the bottom.”

Arizona can draw more high-tech investment because it has a labor pool up to the challenge, says Michelle Kauk, communications director for the Greater Phoenix Economic Council. It’s also about 30 percent cheaper for a firm to operate in Phoenix than in San Francisco or Los Angeles, she says.

But sometimes things fall apart. Last year, Chinese solar-panel maker Suntech shut down a much-hyped plant in Goodyear. The reason was a 36 percent federal tariff on solar cells imported from China, a tax intended to boost the domestic solar-energy industry. But that’s done little to rain on enthusiasm for Chinese investment in local solar, Dickinson says. Sunshine remains a big selling point for Arizona, not to mention the many Valley firms that make glass, aluminum frames and other solar must-haves.

Before the renminbi and rupees really start to flow, other problems need to be worked out. High-tech often has military applications, and the federal government is loath to share defense know-how with rising global rivals. Moreover, ignorance of overseas business customs can sink any deal. As Phoenix auctioneer Deb Weidenhamer, who shuttles between Arizona and the Shanghai-based company she opened in 2010, cautions: “The cultural differences are real.”

“Oh, East is East, and West is West, and never the twain shall meet,” wrote Rudyard Kipling in 1889. How things change. Last year Brewer also flew to Taiwan, base of electronics firm Hon Hai, which is mulling an Arizona plant. She also plans to join Sonoran Governor Guillermo Padres on a trip to Israel to drum up business this year. They’ll offer another bit of 19th-century advice: “Go West.”

That Come-Hither Pitch
A multinational company seeking to grow might well ask, “Why Arizona?” Here are reasons offered by Brewer and other boosters:
Places to see: The Grand Canyon, Saguaro National Park, Meteor Crater and more
Rare raw materials like agriculturally in-demand potash
Low payroll taxes
A location close to California Parts and labor: A “supply chain” to sustain solar-panel manufacturing
The sun: 296 days of sunshine means weather rarely gets in the way.

 

 

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