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In Focus: FDI Will Signal Better Days

The value and impact of FDI will remain an important part of the economic recovery from the coronavirus pandemic.

Q2 2020
For decades, the pursuit of foreign direct investment (FDI) has become a component of nearly every state and metro’s economic development strategy, and for good reason. FDI creates high-paying jobs in nearly every sector of the economy; it provides investment in communities both rural and urban; and it builds ties between places and people that forge incredibly important cultural ties. It could be said that foreign investment makes the world a better and safer place.

This is true in Ohio. Honda’s investment in the early 1980s changed the U.S. automotive industry and has become one of the most important economic drivers in the Columbus region four decades later. That investment — along with hundreds of others from around the world that have since joined Honda — has generated billions of dollars and stimulated thousands of jobs in Central Ohio and, in fact, throughout the country.

FDI as a Signal of Economic Health
While it is still too early to determine the full impact that COVID-19 will have on globalization, it will likely remain true that the value and impact of FDI will remain an important component of any recovery strategy. In fact, the return of foreign investments into the U.S. will signal that our economy is stable and growing. Investment into the United States is critical to create jobs and tax revenue locally, but it is also going to help ensure that our core supply chains are resilient and secure. Technology and know-how from around the world will help achieve this goal in the United States and in other markets around the world.

The U.S. will also benefit greatly from its own companies’ ability to create investment and jobs across the globe. Each time a company invests abroad, jobs are also created in their own country. Studies suggest that innovation is also enhanced through entering new markets.

Studies suggest that innovation is also enhanced through entering new markets. FDI as a Signal of Economic Competitiveness
For communities, there is a correlation between FDI in a region and overall competitiveness of the location. Foreign investments typically demand additional scrutiny by company management and by their boards because they are going into unknown territory. The ability of a location to secure such investments shows a location’s ability to control costs, reduce risk, and supply a talented, adaptable workforce. FDI also functions as a multiplier: if foreign investment is thriving in a location, other investments — both foreign and domestic — will soon follow to help support and enhance the foreign investment.

An initial investment like Honda’s also has the power to change perceptions of a location as an open and progressive place. From BrewDog beer to Magnanni shoes, many Columbus region residents not only make products made by foreign companies, but also consume and enjoy those products on a daily basis.

As we seek to recover and rebuild, foreign investment will be a highly sought-after prize — a sign that we’ve reached stable ground again and a necessary component for any regional economic strategy.

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