US investment push holds promise but payoff unclear

US President Barack Obama President Barack Obama's push to attract foreign direct investment to the United States holds promise, but political gridlock in Washington could throw a wrench in the works, analysts say. And, with some specifics still unclear , it remains to be seen whether his bid to lure international firms and create more American jobs will work out.
In what officials billed as an "unprecedented effort," Obama on Thursday announced a federal inter-agency body to coordinate and streamline efforts to attract foreign investors.
"There are a lot of wonderful countries out there. But this is a place where you can do business, create great products, deliver great services, make money, and do good at the same time," he told business leaders.
"So you should find out why there's no substitute for those proud words: 'Made in America.' And here's three more words: 'Select the USA.'"
Getting foreign companies to invest more in the United States was aimed at "creating good-paying American jobs," Obama said, in a nod to the 11.3 million Americans who are officially out of work and the millions more who have given up looking for jobs.
The announcement followed the first government shutdown in 17 years amid bitter partisanship in Congress, which, according to a Moody's survey, sparked a temporary plunge in business confidence.
It also came against the backdrop of a steadily sinking US share of the global pie of foreign direct investment in contrast to the significant rise of developing economies.
In 2012, the US share fell to 17 percent from 37 percent in 2000, according to the Organization for International Investment.
In comparison, developing economies rose from 24 percent to 34 percent during that period, while the European Union stayed largely unchanged, inching up from 31 percent to 34 percent.
Thilo Hanemann, research director at Rhodium Group (RHG), called the "SelectUSA" initiative a "good start."
"In the long-term, however, the single most important factor for competing for foreign investment is that the US remains an attractive, innovative and vibrant economy with a stable outlook," he said.
Key to doing so, he added, is fixing structural problems such as the country's fiscal situation, as well as its healthcare, immigration and education systems -- points Obama touched on in his address.
"Unfortunately the political gridlock in Washington sends the wrong signal with regard to solving those structural issues and threatens the long-term attractiveness of the US as a destination for foreign investment," he said.
"Recent efforts to improve the US investment promotion framework are laudable, but they are overshadowed by the political stalemate."
A series of political confrontations over the budget, which he dubbed "manufactured crises," have hurt business and consumer confidence, said IHS Chief Economist Nariman Behravesh.
"I think the administration is sort of trying to show that it is not being bogged down by the nonsense in Washington and it's got this grander scheme, sees lots of opportunities, it's very upbeat about the US," he said.
"It's trying to put out a very positive message at a time when domestic politics are rather cantankerous."
While sending a welcome sign overseas, Obama's push also serves to tell a struggling domestic audience that "'Here I am, President Obama, doing as much as I can on the economy," Behravesh said.
So will it work? Behravesh, for one, was optimistic although he noted that, in the end, real jobs growth would come from US companies.
"Foreign companies are important, they're good, but they're not that big in the US."
According to the Organization for International Investment, foreign companies supported just 5.6 million American jobs in 2011, albeit "well-paying" ones.
Still, "it's a good thing to do," Behravesh said, adding that the so-called pay-off period for such a scheme was typically three to five years.
For others, questions remain about how exactly it will be implemented.
Alan Parter, president of Parter International, Inc., a New York-based business consulting firm, queried the federal government's exact role.
For one, are "they actually going to get involved with specific investment plans and companies?" asked the former deputy commissioner of commerce for New York State who has worked extensively with foreign firms and countries.
Saying it was "extraordinarily difficult" to measure the impact of political issues such as dysfunction in Washington, Parter emphasized that economic issues were prime decision drivers for potential investors.
"How strong is this going to be?" he said of the program.
"It's difficult to see. But a lot like chicken soup, it couldn't hurt."
Source: AFP