What images does the slogan “Virginia is for lovers” conjure up? For a US resident, it could mean a romantic weekend getaway, or a vacation in a state that is rich in historical significance. For the head of a foreign company interested in investing in the US, though, the slogan is meaningless, if not confusing.

Virginia is preparing to address that. As part of a new initiative to co-ordinate the state’s international policy, economic development officials are reconsidering the way the state brands itself. “‘Virginia is for lovers’ doesn’t translate well overseas,” says Paul Grossman, director of international trade and investment at Virginia Economic Development Partnership. “We would like to come up with a new brand that resonates across all languages and cultures.”


This is the first time that Virginia has attempted to develop a cohesive strategy, says Mr Grossman. Previously, the various entities involved in inward investment and export promotion activities – the port authority, for instance, and various regional and municipal economic development agencies – operated in silos. “We want to deliver one message,” says Mr Grossman. “We are not trying to exert control over these agencies but we want everyone singing the same song.”

No national strategy

It is an interesting strategy considering the US is one of the few countries that has no centralised strategy for attracting inward investment. “It is not a co-ordinated system at all,” says Nathan Jensen, author of Nation-states and the Multinational Corporation: A Political Economy of Foreign Direct Investment and an assistant professor of political science in Arts & Sciences at Washington University in St Louis.

“The US federal government has been active in signing bilateral investment and trade treaties. But beyond that, most of the promotion is left to be done by the states,” he says.

The states have not necessarily objected to the federal government’s hands-off policy but most would appreciate a greater share of the federal budget devoted to these activities. “My wish-list from the federal government? Money,” says Mr Grossman. “We are a state competing with other nations. It would be nice to have federal dollars to put us on equal ground with our competitors.”

It is unlikely that significant funding will be found for such activities in the political and economic environment in the US right now. However, there are signs that the federal government is taking a more proactive role in attracting investment.

According to a business location consultant familiar with the workings of US investment promotion activities, there have been internal discussions at the US Department of Commerce about whether the US Commercial Service, the trade promotion arm of the International Trade Administration (ITA), should play a more active role in attracting FDI. Further ahead, according to the speculation, a marketing budget would be devoted to an ‘invest in the USA’ campaign.

“My guess is that Commerce will ease into it quietly, keeping a very low profile politically, such as by adding it to the workload of the US Commercial Service officers in the field and ITA’s mandate so that they can at least justify the staff spending their time, existing budget and efforts to be more helpful to the visiting state delegations,” the consultant speculates.

“That could lead to the creation of a new ITA office at the assistant secretary level to oversee the initiative at some point, and then they could try to build up budget approval – and political support – for a more proactive national marketing programme.”

Taking the lead

There is a precedent for the Department of Commerce taking the lead on such a programme: several years ago, it housed the now-disbanded US Travel and Tourism Agency, which promoted the US as a place to visit. Also, almost by default, department officials promote the US as an investment destination during overseas trips and when receiving visiting business people and foreign dignitaries. “As I travel, I have always talked about benefits of doing business with and within the US,” says David Bohigian, assistant secretary for market access and compliance at the ITA.

Beyond that, though, Mr Bohigian is speaking mostly in generalities. “Life is a sales call. The promotion of FDI has become a more integral part of our message. We are working to complement the tactical efforts that states and municipalities undertake to attract investment.” Much of Mr Bohigian’s sales pitch is centred on the strengths of the US market: the workforce, the open economy, consumers, infrastructure and markets.

Giving incentives

There are financial incentives to attract investment to the US, including a dollar-for-dollar reduction of taxes for qualifying R&D expenditures, a manufacturing deduction and employee credits.

If the federal government wants to promote greater inward investment, says Scott Hendon, partner in the Dallas office of BDO Seidman and a member of BDO International’s tax steering committee, it might want to consider becoming more tax competitive compared to other nations. There has been a shift in the past four or five years as other countries have reduced their national tax regimes, he says.

“The US needs to give more incentives for inbound investment and should lower the tax rate. We are simply not competitive anymore in that area,” says Mr Hendon.

Most of the investment in the US is driven at the state or regional level – a system that is still very effective, adds Mr Hendon. Incentives are granted in the form of property tax rebates, reduction in sales taxes and worker credits; and what the states lose in revenue they gain in employment and the influx of new investment. “Say you get a Toyota plant to locate in the state – that one plant will attract several suppliers as well,” he says.

Critics of the system say that companies use it to play states off against one another. Ironically, says Mr Jensen, tax incentives are a lower priority for companies as they make their investment decisions but that does not stop them from dangling a prospective investment in front of states to cut the best deal.

One measure that has proven to be effective in bringing over new investment is the streamlining of government procedures that a company must go through to set up operations, says Mr Jensen.

“Getting the necessary clearances for an investment in one stop: that would be the most effective move the government could take at the federal level,” he says. “A state government can and does simplify these procedures but some investments still have to be vetted by the federal government where they have no control.”

Approval hurdles

Mr Jensen adds that getting approval from the Committee on Foreign Investments in the US, for example, is becoming more of a headache [see box]. Fortunately, only a small number of companies must go through the process.

Getting necessary visas, however, is one administrative procedure that every foreign investor must undergo. “It doesn’t sound like a major issue but it can be a big problem,” says Mr Jensen. “If the federal government were to streamline this, it could have a big impact.”

Mr Bohigian agrees. “Many people rightly feel that it has become more difficult to obtain a visa, although the perception is far worse than the reality. But we have a story to tell: namely, that the State Department and Homeland Security have improved the process,” he says. A streamlined visa process? Perhaps a budget for an ‘invest in the USA’ campaign is not that far-fetched after all.



Was there ever a more hapless group of people than the governing officials at the Committee on Foreign Investments (CFIUS) in the US last year? The usually quiet regulatory body, which oversees foreign acquisitions of US companies with national security implications, was thrust into the spotlight after a national uproar over the news that Dubai Ports World was going to acquire six US port terminals – a transaction that had been approved by the agency.

Measures that ranged from a ban on foreign companies owning infrastructure in the US to an automatic investigation of any acquisition of a US firm by a foreign state-controlled firm were among the suggestions floated by members of Congress. As it turned out, there was no need. CFIUS, according to some attorneys who work with the agency, tightened its processes on its own.

“I would say the US today no longer has an open investment policy with respect to basic infrastructure, broadly defined,” says Jeff Bialos, a partner at attorneys Sutherland Asbill & Brennan.

The US Treasury Department, which chairs the committee, declined to comment for this article. However it is clear that, based on speeches by officials and other administration messages, the committee wishes to counter the negative image left by Dubai Ports’ failed acquisition.

“CFIUS is always being improved,” says David Bohigian, assistant secretary for market access and compliance in the US Commerce Department’s International Trade Administration. “Congress is looking at various options to reform the process and the administration is continuing to look at what might emerge.”

Aki Bayz, a partner at law firm Morrison & Foerster, says the vast majority of transactions are approved during the initial 30-day review. “CFIUS has struck the right balance between the needs of the business community and the ability of the government to investigate transactions that have national security implications,” he says. “The process has worked much as it did prior to Dubai.”

There are 12 other departments and agencies represented in CFIUS besides the Treasury. A typical filing starts with a 30-day review period. If any member has unresolved questions during the first stage of investigation he or she may request that CFIUS conduct a 45-day second stage investigation.

Circling the wagons


Historically, two types of acquisition have been submitted for review, according to Mr Bialos: sensitive technology that would go against US interest if acquired by a foreign company; or a unique asset that should remain under US control.

A change occurred at the agency after the 9/11 attacks to include homeland security concerns, he says. That broadened the scope of review to more routine technologies, such as telecoms infrastructure and general infrastructure, now broadly defined.

“Generally, this administration has been less open to foreign acquisitions of defence businesses even before 9/11,” says Mr Bialos, who has held several senior US government positions, including that of deputy under secretary of defence for industrial affairs, special adviser to the under secretary of state for economic, business and agricultural affairs, and principal deputy assistant secretary of commerce for import administration. “After that day, a circle-the-wagons mentality developed,” he says.

The Dubai Ports deal then significantly raised the bar, he says. Now, the review process is far more robust, involving more intensive scrutiny and the participation of senior level officials. As a result, more cases are going to full investigation beyond the initial 30-day review at more cost to the companies. There is a greater likelihood that the foreign company will be asked to submit to a variety of conditions to gain approval, some of which can be quite onerous, Mr Bialos says. “An evergreen clause, for instance, gives the US government the right to unwind the transaction if it deems necessary.”

Alan Gourley, a partner in law firm Crowell & Moring’s international trade group, agrees that the process became more difficult and less predictable as a result of the Dubai Ports controversy. “Immediately following that situation, there were at least a dozen bills introduced in Congress, which eventually solidified into two proposals – both of which would have made the process much more difficult,” he says. The proposals died when Congress and the Senate could not reconcile the differences in the bills.

New procedures

However, CFIUS itself reacted to those initiatives in a couple of demonstrative ways, according to Mr Gourley: “They instituted new procedures, such as making the acquiring entities disclose all of their officers and directors, including personal data about them” that are fed into various government watch lists.

Also, approval letters that were previously issued by the staff director are now signed by the assistant secretary of treasury for international affairs, says Mr Gourley.

At worst, though, these changes affect a miniscule number of companies investing in the US. Since it was established in 1988, the committee has reviewed between 2000 and 3000 cases. “For the tiny handful of deals that CFIUS looks at, there are thousands of companies investing,” says Mr Bohigian. “It is important to tell a broad story [about the US] around the world.”