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TICKER - Open For Business? The U.S. Commerce Department Launches "Invest In America? -- With A Whimper
Part outreach program, part public relations effort, the U.S. government's Invest in America initiative, announced last month, is charged with attracting more inbound funds and cleaning up the nation's image with foreign investors.
Part outreach program, part public relations effort, the U.S. government's Invest in America initiative, announced last month, is charged with attracting more inbound funds and cleaning up the nation's image with foreign investors. Unveiling the new program, Franklin Lavin, U.S. Commerce Department undersecretary for international trade, said, "We need to get our game up if we want to continue to lead." But weeks after the initiative was announced, the playbook remains unclear. According to the Commerce Department, only one full-time staffer has been hired, in Washington. Existing overseas trade staff, who normally focus on outbound investments, will be expected to help spread the "invest in America" message. Told that the U.S. had launched a program to boost foreign direct investment, one London-based economist at an international investment bank responded: "Well, they've done a great job. I haven't even heard of it." This is not the time for the U.S. to procrastinate. Despite the size of its economy, it has lost its place as leader of the pack in recent years. Although the U.S. has been attracting ever-larger sums each year since 2000 -- it managed to bring in $183.6 billion in 2006 -- the country briefly lost the top spot in 2005. That year the U.S. attracted $109.8 billion, according to the U.S. Bureau of Economic Analysis. The U.K. attracted $164 billion, and China, including Hong Kong, was just behind the U.S., with $108 billion. The new FDI push by Commerce indicates how competitive other countries, especially China and India, have become, says Drew Matus, a New Yorkbased senior economist at Lehman Brothers: "For a long time we didn't need to work hard to attract FDI. The U.S. was the most stable, fastest-growing place in the world." But America's image and its appeal to foreign investors suffered last year in the aftermath of the DP World ports controversy. Indeed, Lavin told the American Business Group of Abu Dhabi last month that the Invest in America program is meant to help depoliticize the process for investing in the U.S. With Invest in America, the U.S. is trying to catch up to other developed nations. The U.K., for example, has had a governmental organization dedicated to promoting FDI since 1977. Then again, some analysts say, the fluctuations in FDI may have little to do with public relations. Lehman Brothers' Matus explains that FDI is cyclical in nature and plays a relatively insignificant role in the American economy, where capital markets offer investors an alternative way in. Macroeconomic variables, such as exchange rates, also affect a country's ability to attract FDI, asserts Brad Setser, head of global research at Roubini Global Economics in New York.
But with the U.S. running a current-account deficit of $860 billion, he points out, "There is a very, very substantial need for financial inflows from the rest of the world -- and that can be in the form of FDI."