Consider the following:
Transfer of wealth: Cash is flowing in unprecedented amounts from US consumers to petroleum exporting countries and to production workers in emerging markets. The resulting profits need to find a home somewhere; our Park Avenue office building is owned by a Dubai sheikh.
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Loss of control: Mergers and acquisitions continue to expand, and that includes business power shifting to European and Asian multinationals. Typically, this is followed by inevitable job losses, even as the FDI numbers show gains. The US Congress has been considering how to add micro-management steps to the international investment review process, as part of the fall-out from the Dubai Ports World flare-up. Some economists warn against the danger in so much US Treasury debt being held by foreign powers – if they decide to sell, interest rates will soar.
- Immigration and jobs: US immigration policies seem to have welcomed unlimited numbers of illegal immigrants yet kept out all but a few skilled professionals. The H-1B visa restrictions add to the pressure to offshore work that cannot be staffed onshore. Union leaders suggest that millions of white-collar jobs will be offshored. Many US state legislatures are proposing their own remedies, while waiting for the proposed federal legislation that offers earned amnesty and guest worker programmes.
Wall Street expects 2006 to continue having robust M&A deal flow, so the macro FDI indicators will be strong, but attention to cash flow is said to be more intense and the focus is tighter. Acquirers will be aggressive in seeking out synergy savings (job cuts) as well as stronger revenue growth. If that is the case, readers on the investment attraction side of the equation face the challenges of integration as well as recruitment. Now is a good time to pay attention to divisions and units of large companies that are already resident. Work with them in the hope that the search for M&A synergies will lead to a local increase in their activity. Similarly, there may be opportunities to gain jobs from offshoring in the pursuit of talent, not just labour cost arbitrage. The fiercest competition for business expansion activity may well be outsourcing or an acquisition – not another state or country.
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Daniel Malachuk works with business and government leaders on global direct investment strategies. He has advised many of the world’s leading companies and served in the public sector as director of White House operations.
E-mail:malachuk@oxford-analytica.com