The US Federal Reserve’s 2.7% central economic growth forecast for 2012 gives little cause for optimism for president Barack Obama’s administration. To make matters worse, in October 2011 the Senate blocked the president's American Jobs Act, which was intended to create up to 1.9 million new jobs in the country. Yet, despite the act's failure, within was evidence that Washington is increasingly looking for new sources of FDI.

While working on the bill, Mr Obama's advisers outlined a plan to increase inward FDI in the US by $1000bn over a five-year period, with a major chunk of new investments coming from emerging economies. This came with a call to change the country's FDI promotion strategy, with Robert Hormats, under secretary of state for economic affairs, claiming that the US needs to implement a more proactive approach in seeking new investors.

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One step ahead

Regional authorities say that they have been undertaking various steps to attract inward FDI, both from developed and emerging markets, a long time before Mr Hormats and Mr Obama's advisers made their suggestions. “We are constantly examining other markets to predict future potential and asking ourselves whether we are still in the right places,” says Dr Gerald Gordon, president of the Fairfax County Economic Development Authority. Located in Washington, DC's metropolitan area, Fairfax County was the first US entity of that level to open overseas representative offices, and as well as its offices in London, Munich, Tel Aviv and Seoul, it has had permanent representation in the Indian city of Bangalore since 2004.

Missouri, a state located in the US Midwest, also aims at increasing its visibility in regions which boast much stronger growth than the US. “In 2011, the state of Missouri established new offices in China, India and Brazil to expand both trade and investment opportunities. We engage on a regular basis with the trade commissioners and other commissioners and government officials to build the profile of Missouri and to expand our business network,” says Dennis Pruitt, vice-president of international business recruitment at Missouri Partnership, a public-private corporation for regional development. 

Asia-bound

Regardless of the fuss surrounding Mr Obama’s jobs bill, in the fourth quarter of 2011, leading state officials from all over the US were flocking to Asia. In October, Mr Hormats himself joined the six governor-strong mission to Beijing, led by Washington state’s Christine Gregoire, followed a month later by Northeast Indiana Regional Partnership representatives travelling to Taizhou in China and Virginia governor Bob McDonnell visiting Mumbai in India.

On top of that, some US regions are taking an unconventional approach to getting themselves noticed. Suzi Pegg, Pittsburgh Regional Alliance vice-president of global marketing, says that apart from conventional high-level meetings, city representatives tour together with the Pittsburgh Symphony Orchestra to conduct business talks in tune with spectacular renditions of Brahms and Rachmaninoff. “I would characterise our efforts to promote the Pittsburgh region for FDI as robust,” says Ms Pegg.

Small fries

The number of greenfield investments in the US from emerging economies is on the increase, but it is yet to gain any real momentum. As fDi Markets data indicates, between 2003 and 2011 the total number of projects coming from investors from BRIC (Brazil, Russia, India and China) countries was 557. At the same time German investors launched more than 1100 projects, which is a similar level as the rate of investment from Japan. The number of projects from BRIC countries in 2011 was 131, on a par with investments coming from France, Spain and Italy – countries that may have strong companies, but at the same time are still deeply distressed by the eurozone crisis.

According to Mark O’Connell, CEO of foreign investment consultancy OCO Global, the main reason for that is businesses from BRIC countries are reluctant to fund expansion projects from scratch. “FDI from emerging markets is characterised by a small number of larger conglomerates often with government involvement, and can be quite political in nature,” says Mr O’Connell, who stresses that in the case of such conglomerates, mergers and acquisitions and equity investment are a more popular form of foreign activity.

But with the slow rate of economic growth in the developed world and investors from these countries in many cases sitting on their hands, partners from the fast-growing economies of Asia and Latin America are increasingly considered as the ones who can, at least partially, fill the void. The endeavours of regional authorities, if further supported by national strategy, could do the trick, as well as bringing into play new means of drawing investors in.

“The US needs to use its diaspora and alumni links in a much more proactive way to get engagement with decision makers and entrepreneurs from emerging markets,” says Mr O’Connell.