Brookings Los Angeles Metro Region
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Economic development leaders from across five counties comprising the Greater Los Angeles Region convened for a discussion on focused foreign direct investment (FDI) planning. Hosted by JPMorgan Chase and facilitated by the Brookings Institution, the five counties of Los Angeles, Orange, Riverside, San Bernardino and Ventura shared FDI best practices for a regional, coordinated approach.
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Brookings Los Angeles Metro Region
- 1. GLOBAL CITIES INITIATIVE A J O I N T P R OJ ECT O F B R O O K I N GS A N D J P M O R GA N C H AS E Los Angeles, CA - August 6, 2015Metropolitan Policy Program at BROOKINGS
- 2. Greater Los Angeles Is a Truly Global Region Source: Brookings Exports 2 Rank $98 B Value FDI 2 Rank 271,000 Jobs Int’l Goods Movement 1 Rank $418 B Value Foreign Students 2 Rank 68,000 Students
- 3. Greater Los Angeles Is a Truly Global Region Source: Brookings Exports $97.7 BLos Angeles - Orange County Riverside - San Bernardino Ventura County Total FDI Jobs 271,180 11,750 36,170 $5.6 B $11.4 B $114.7 B 319,100
- 4. However, the Region’s Position Is Threatened Source: Brookings Exports 2.3% Growth rate, 08-14 37 Rank FDI 22 1991 Rank, FDI Intensity 25 2011 Rank, FDI Intensity •Region does not operate under a coordinated regional plan or initiative to maintain its position or drive future results •Fragmented export and FDI efforts could undermine the region’s strong position •U.S. and foreign metros are upping their game on the global front.
- 5. 1. Why Global 2. FDI Market Dynamics 3. Acting on Global Opportunities
- 6. 81% share of global economic growth occurring outside the U.S., 2015-2020 The Bulk of Economic Growth Is Occurring Outside the U.S. Source: World Economic Outlook, International Monetary Fund, 2015.
- 7. Global Middle Class - 2009 | Share of Global Totals 18%North America 36%Europe 28%Asia Pacific Source: Kharas and Gertz, “The New Global Middle Class,” 2010
- 8. Global Middle Class - 2030 | Share of Global Totals 7%North America 14%Europe 66%Asia Pacific Source: Kharas and Gertz, “The New Global Middle Class,” 2010
- 9. Source: Brookings, Census 2014 11.6% 2003 7.9% U.S. Export Share of GDP 2% 67% share of exporters Large Firms (500+ Employees) share of export value The U.S. Is Increasingly Export-Oriented, but Large Firms Dominate Exports Share of U.S. GDP Growth (2008-2014) 35%27%
- 10. Though Volatile, Global Investment Flows Are Growing 1984 1999 2012 FDI Flows Capital Investment, 1980-2012 $2 trillion $1 trillion Source: UNCTAD Global U.S.
- 11. The U.S. Is Capturing a Smaller Share of Global Investment 12 percent 26 percent 45 percent 1984 1999 2012 U.S. Share of Global FDI Capital Investment, 1980-2012 Source: UNCTAD
- 12. Why FDI Matters: Over 5 Million High-Wage Jobs 5.6 million employees in foreign-owned firms, 2011 Foreign-ownedDomestic $60,000 $77,000 Average Wages by Ownership 2011 Source: Brookings, Bureau of Economic Analysis
- 13. Why FDI Matters: Investment in Export-Intensive Manufacturing Firms 2012 FDI Flows Manufacturing 48% U.S. Goods Exports U.S. Manufacturing Employment 2% 20% Foreign-Owned Firms Goods-Producing Industries, 2011 Source: Brookings, Bureau of Economic Analysis
- 14. Why FDI Matters: Foreign-Owned Firms Invest Heavily in R&D 19 percent share of corporate R&D expenditures by foreign-owned firms, 2011 Source: Brookings, Bureau of Economic Analysis $45 billion corporate R&D expenditures by foreign-owned firms, 2011 77foreign metro areas the average U.S. metro area contains FDI from
- 15. Firms Benefit from Global Engagement Competitive Diversified Sustainable Exporters 10 percent more likely to survive over 7-year period than non-exporters. - Bernard and Jensen, 1999 “Without being acquired by a larger firm, it wouldn’t have been possible to maintain significant presence in foreign markets.” - Mid-sized tech and manufacturing firm, San Diego Since 2000, domestic sales for [our firm] have shrunk, while exports increased 400 percent... Our entire existence is predicated on growing exports.” - Foreign-owned manufacturer, Syracuse
- 16. Current Economic Development Approaches Are Outdated 50%2000 - 2012 Source: Conway Data, Inc Plant expansions and relocations of 50+ jobs or $1M+ investment:
- 17. Current Economic Development Approaches Are Outdated 1.9% state job creation from relocation Source: Jed Kolko, “Business Relocation and Homegrown Jobs, 1992-2006,” Public Policy Institute of California, 2010.
- 18. 1. Why Global 2. FDI Market Dynamics 3. Acting on Global Opportunities
- 19. Source: Census, Brookings Population 66% Land Area 12% Exports 65% FDI Jobs 74% Top 100 Metros Share of U.S. Totals Patents 78% 94% Venture Capital College Degrees 74% Metros Are the Market
- 20. Growth in Jobs Under Foreign Ownership Average year, 1991-2011 45% M&A 34% Expansion 21% Greenfield FDI Capital Inflows 1992-2008 87% M&A13% Greenfield Source: Brookings, Bureau of Economic Analysis Mergers and Acquisitions Are the Dominant Form of FDI
- 21. Greenfield Large, export-intensive manufacturing Small to mid-size locations of large retail firms Mid-sized manufacturing and services Source: Brookings, FDI in U.S. Metro Areas 1.3% of foreign-owned establishments have more than 500 employees 75% of metro areas have less than 10 such establishments. Average size of greenfield establishment at time of entry: San Diego: 27 employees Minneapolis: 35 employees Expansions of existing foreign-owned firms created twice as many jobs as new greenfield from 2001-2011.
- 22. Important source of new capital, transfers skills and technology to U.S. firms, and opens global distribution channels. Primary learning for metros: hard to get in front of deals, but BRE is critical. Acquired in 2007; no job loss and made a global research hub Maintains manufacturing and R&D facilities in MD MedImmune Montgomery County, MD Life Sciences San Diego, CA Firms gain foothold in U.S. market and innovation via M&A Takeda Pharmaceuticals: grew from 85 to 250 employees, (150 PhDs) Jim Beam Louisville, KY Doubled size of Maker’s Mark KY distillery Gained global distribution channels through Japanese parent Mergers & Acquisitions
- 23. 23 Sovereign Wealth Funds mid 1990s 16 60+ 2012 Number in existence: Text Private Investment Seattle-China Searching for opportunities in real estate, firms, public assets San Diego Looking for ways to fill need for venture capital and joint partnerships 9,231 2014 802 2006 Visas issued: 90% 2014 13% 2004 Share issued to Chinese investors: EB-5 Investor Visa Alternative Forms of Foreign Investment Cumulative foreign investment: $125 B 2011
- 24. 1. Why Global 2. FDI Market Dynamics 3. Acting on Global Opportunities
- 25. Goal: Catalyze a shift in economic growth policy and practice that results in more globally competitive metropolitan areas, positioning them for high-quality growth and better jobs for more workers in the 21st century economy. 1. Research 2. Convenings 3. Exchange GLOBAL CITIES INITIATIVE AJoint Project of Brookings and JPMorgan Chase
- 26. Lessons Emerging from the Exchange Exports: New Cohort Baltimore Fresno Houston Kansas City Philadelphia Salt Lake Seattle St. Louis Exports: Current Atlanta Charleston Chicago Columbus Des Moines Indianapolis Jacksonville Louisville-Lexington Los Angeles Milwaukee Mpls-St. Paul Phoenix Portland Sacramento San Antonio San Diego Syracuse Tampa Bay Upstate SC Wichita Columbus Mpls-St. Paul Portland San Antonio San Diego Seattle FDI Pilot
- 27. Key Approaches • Connections between innovation, exports, clusters, and FDI • Diversifying from computer & electronics with cluster initiatives: We Build Green Cities, Software, and Athletic & Outdoor • Led by Greater Portland Inc (regional) and Portland Development Commission (city) Portland Lessons Emerging from the Exchange
- 28. San Diego Key Approaches • Advanced industries and innovation • Life sciences M&A • Leveraging the Cali-Baja Binational Megaregion • Led by San Diego Regional EDC Lessons Emerging from the Exchange
- 29. Key Approaches • New approaches to BRE, focus on bringing value and market intelligence to firms • Building networks and relationships • Honda supply chain • Led by Columbus 2020 (regional) Columbus Lessons Emerging from the Exchange
- 30. Key Approaches • Nurturing and valuing key partnerships: connection with Canada (largest investor) - Similar: San Antonio and Mexico • State and regional collaboration around core strengths: Medical Device and Headquarters Minneapolis-St.Paul Lessons Emerging from the Exchange
- 31. Key Takeaways from Global Trade and Investment Plans Lead with Specializations with Global Reach Clusters, talent, innovation, connections M&A Is the Dominant Form of FDI Brings knowledge, cash infusion, export channels The Middle Market Is the Sweet Spot Target threshold firms and under-exporters Long-term commitment from central players, part of every day practice Global Engagement Must Be a Demonstrated Priority The Foundation is Business Retention and Expansion Understand and support the needs of existing firms
- 32. GLOBAL CITIES INITIATIVE A J O I N T P R OJ ECT O F B R O O K I N GS A N D J P M O R GA N C H AS E Los Angeles, CA - August 6, 2015Metropolitan Policy Program at BROOKINGS