More foreign direct investment needed to get economy moving

Last week, the McKinsey Global Institute released statistics on the mightly blow struck by the financial crisis.

The value of the world’s financial assets fell by $16 trillion to $178 trillion. That’s still a lot of dough, but the disruption touched more than our 401(k) plans.

Looking at the flow of capital into and out of countries, McKinsey calculated an 82 percent decline to $1.9 trillion in 2008 from $10.5 trillion in 2007.

That means capital that had flowed freely all over the world slippled to a trickle.

At the Carnegie Mellon University conference that preceded the G-20 Summit, David M. Marchick was outspoken about his concern should foreign direct investment not improve. “FDI is responsible for producing higher paying jobs and higher levels of R&D,” he said.

Marchick, managing director for global government and regulatory affairs for the Carlyle Group, cited data that foreign direct investment is responsible for 5 percent of all jobs in the United States, but 20 percent of jobs in manufacturing.

As a result of the financial crisis, such investment has plummetted. In the United States, inbound investment declined by half, while outbound investment dropped by 75 percent, he said.

Plus, the United States often gets squeamish about where its foreign direct investment comes from. Remember the ‘80s when the Japanese were going to own America? Or when Dubai Ports World tried to buy five U.S. container ports in 2006? Not our finest hours.

In Pennsylvania, it’s clear some foreign investment is not only welcomed but embraced. As Gov. Rendell reminds us constantly, Spain’s Gamesa chose the state to build two factories to make wind turbines.

And now it appears that South Korea’s CT&T Co. Ltd. will locate assembly and sales operations for its electric cars in Philadelphia and possibly Pittsburgh, creating 400 jobs.
But what if China wants to buy Pennsylvania coal mines?
Marchick said he wasn’t seeing too many examples of protectionism in this downturn. But he hopes that the G-20 efforts at promoting economic cooperation will tamp down those urges when they do arise.