NHs Foreign Market

Run errands to the bank and grocery store, and you have likely conducted business with two foreign companies without leaving your local community. Chances are many NH residents don't realize how global their lives are. In fact, NH ranks fifth in the nation for the percentage of its private employment that is supported by investment from foreign-owned firms.

The most recent U.S. Department of Commerce data on foreign direct investment in the United States-from 2005-shows that 6.1 percent of NH's private employment is derived from foreign direct investment, tying the state with Hawaii nationally for fifth place and besting all other New England states except Connecticut.

A 2006 survey of foreign direct investment also conducted by the U.S. Department of Commerce, this time excluding financial institutions, places NH second nationally. That study has NH tied with Delaware and New Jersey, with 6.6 percent of non-bank private employment coming from foreign direct investment.

Foreign investment clearly packs a big financial punch in our small state, and in places that are often unnoticed. From the grocery store (Hannaford and Shop'n Save are Belgian, Shaw's is British) to banks (Citizens Bank, NH, is Scottish and TD Banknorth is Canadian) to the state's largest employers (BAE Systems in Nashua is British-owned and Lonza Biologics in Portsmouth is owned by the Swiss), foreign investment touches the daily lives of NH residents in ways that are profound to the state's economic well-being.

International Appeal
If some of those business names raised an eyebrow, you're not alone. New Hampshire's ability to attract foreign direct investment seems to be a well-kept secret, but one state officials want to get out. I can only guess that people assume we're fairly remote, says Dawn Wivell, director of the International Trade Resource Center in Portsmouth, of the surprised reactions she gets from businesses learning about NH's global activities. They always have the same reaction, New Hampshire does that?' I actually don't believe most people even know which companies are foreign owned.

The roughly 130 foreign-owned firms operating in NH employ more than 34,000 Granite State residents, according to the Commerce Department. That helps NH's standing as one of the most affluent states in the country as, on average, U.S. jobs at foreign-owned companies pay 25 percent higher wages than jobs at domestically-owned companies, the Commerce Department reported. More than 30 percent of those 130-plus firms are manufacturers-the state's third-largest private industry sector as well as one of the higher paying industries in NH.

So, who owns a piece of the Granite State? The United Kingdom, Germany and Canada are the largest foreign investors in NH. Several foreign-owned companies have been expanding in NH despite the flagging economy, including Lonza Biologics, which was the NH stop for a national press tour by the U.S. Department of Commerce in May to promote foreign direct investment during Invest in America week. A Swiss biosciences company, Lonza has made two additions to its facility at Pease International Tradeport, most recently last year. The company has invested millions in the 645,000 square foot facility that now employs nearly 700 people-about a tenth of the total workforce at Pease.

We've had inquiries from other people in the biochemical industries and I think part of the reason is people recognize a company like Lonza does not make decisions without having good information, says David Mullen, acting executive director of Pease Development Authority. They figure if Lonza made a positive decision on New Hampshire, then they should take a look as well.

While foreign direct investment can boost wages, create jobs and attract new business, it can also bring new research and technology, create new supply chains, increase U.S exports and contribute to productivity, according to a U.S. Commerce Department study. To help spur technology innovation, NH reinstated a research and development tax credit last year. Gov. John H. Lynch chose to announce the kickoff of the tax credit at German-owned Osram Sylvania in Manchester, which is expanding its local plant to build more efficient and longer lasting lights. (See side bar.) By encouraging innovation, this credit will help businesses create the products and the jobs of the future right here in New Hampshire, Gov. Lynch stated at the kickoff.

There are several foreign-owned companies developing innovative technology in NH, including BAE Systems and its tactical and surveillance technology for the aviation industry. Marubeni Sustainable Energy Inc., a Japanese company, purchased a Springfield biomass plant in 2007 and installed technology it says will reduce nitrogen oxide emissions by 70 percent. Company officials say that will make the Springfield plant one of the cleanest biomass facilities in New England.

Why NH?
The state's evolution into a haven for foreign direct investment has to do, in part, with its size, says economist Dennis Delay of the NH Center for Public Policy Studies. As a state of small- and mid-sized businesses, successful NH companies are ripe for acquisition by larger corporations. Much of NH's foreign direct investment has not been purposeful, but occurred as a result of mergers and acquisitions that happened to include NH-based operations. That was the case with the recent controversial acquisition of Anheuser-Busch Inc., which has a plant in Merrimack, by InBev of Belgium. And Delay notes BAE started out as Sanders Associates, which was bought by Lockheed and then by BAE.

Delay says a small state like NH does not have the resources to build the infrastructure needed to court large companies to move their headquarters here. In fact, with the exception of Canada, the state doesn't have the funding to recruit any foreign companies, says Michael Bergeron, business development manager for the NH Department of Resources and Economic Development (DRED).

That's not to say foreign-owned companies don't choose to open new operations in the United States. It's just less common, both in NH and nationwide. Genfoot, the manufacturer of Kamik outdoor footwear, opened a facility in Littleton's then newly-created industrial park in 1993. The company had several reasons for opening the new facility: It wanted to have a Made in America product while avoiding a 37.5 percent import category duty and still be close to its Quebec headquarters. Vice President Joseph Bichai says state officials bent over backward at that time to help train employees. The payoff is Genfoot's Littleton operation now has a workforce that can easily switch between injection molding and stitching depending on need-something he wishes he had in Canada. The Littleton operation produces more than one million boots a year.

New Hampshire has one of the most educated workforces in the country, and companies benefit from the state's willingness to tailor new training programs at local schools and universities to meet their needs. Great Bay Community College in Portsmouth has been doing that for Lonza since 2001, says Mullen of Pease.

Those educational resources are only one reason NH has caught the attention of foreign companies. What attracts companies is the skilled workforce and also the proximity to the Greater Boston and Cambridge economy, says Ross Gittell of the University of NH's Whittemore School of Business. Another reason is the relatively lower cost of doing business. It's not by accident BAE is right on the border.

Gittell says NH is a great place to be if you want to innovate, given the state's high percentage of high-tech workers and companies, and its skilled workforce. On the other hand, New England is losing population overall, so companies looking to locate in a growth economy may choose India or China, he says.

Additionally, NH offers monetary savings. Compared to other New England states, companies operating in NH save between 8 and 15 percent in taxes, says Bergeron of DRED, who uses such figures to entice new businesses here. That's because NH has no sales, personal and corporate income, capital gains, inventory, or use tax, he says. Also working in the state's favor is its proximity to Boston and the fact it has an active shipping port and a major airport.

Executives appreciate those benefits, but it seems the tipping point for many is the access to state officials and the willingness of those officials to work with businesses. When Genfoot Inc. executives dropped a business card at the Littleton town offices 15 years ago while searching for a location for their American operations, they got a call back the next day. The outdoor footwear company has since invested $20 million in its facility and employs between 25 and 80 people depending on the season. When OSRAM Sylvania approached state officials last fall for assistance with a proposal to expand their Manchester operations, the state replied immediately, and OSRAM decided to expand in NH instead of Germany.

Among those courting foreign investors is Benoit Lamontagne, who works for DRED in Colebrook as the business industrial agent for Grafton, Carroll and Coos counties. His job is to recruit Canadian companies to come south and open up shop. With the Canadian and American dollars close to par, his phone has been ringing steadily. With lower taxes and access to state officials, he says NH easily compares favorably to Maine and Vermont, despite Canadians having more knowledge of those states from television news affiliates. Lamontagne says more needs to be done to educate Canadian companies about what NH has to offer, which he is working to address. He's spending time talking to Canadian companies about NH, and in Quebec, that means doing so in French, adding that ever-important personal touch.

Branding Local or Global?
While many companies in NH have global roots, some choose to cultivate a local image. Here in New Hampshire, people think we are local and that's OK, says Cathleen A. Schmidt, president of Citizens Bank NH. When you're in banking, customers think of the banker they do business with. The bank's significant contributions to local charities and its investment in local projects enhance its local branding.

Not all foreign companies receive a warm welcome, particularly when it involves an American brand going overseas. Take the recent deal for InBev to acquire Anheuser-Busch Inc. While the deal creates the world's largest brewer, it puts a distinctly American brand, Budweiser, into foreign hands.

The announcement of that deal led to widespread disapproval by beer fans, and Anheuser-Busch has since been trying to extinguish the flames of controversy and convince beer drinkers the signature drink won't change. The deal struck a nerve in NH as well, where Anheuser-Busch Inc., employs 320 people at its Merrimack facility.

When the companies come together, our consumers will continue to see what they've come to expect from Anheuser-Busch and its traditions, says Dave Peacock, vice president of marketing. It will continue to be based in St. Louis, its 12 U.S breweries, including Merrimack, will remain open and its dedication to charities and local communities will remain, even as we build for the future. Our great American beers sold in the United States will continue to be crafted with the same ingredients in the same breweries by an American workforce.

If Peacock seems defensive, it might be because he knows all acquisitions do not result in retained local control and community involvement. Some of Keene's largest employers have recently been acquired by companies with headquarters outside NH (though not necessarily foreign-owned). As a result, The Colonial Theatre is finding it harder to attract corporate support as it must court executives out of state, says executive director Alec Doyle. FDI [foreign direct investment] in the state can take away from local ownership and control, and commitment and ties to New Hampshire and New Hampshire communities, says Gittell of UNH.

Brand recognition can also be an issue for foreign companies based in NH, at least as it applies to country of origin. About six months after opening its doors in Claremont, Fulling Mill, a British distributor of Orvis fly-fishing tackle, sought a $25,000 line of credit. The company was told it could get one, but it would need to be guaranteed by the principals in England, not just by officials at the U.S subsidiary, says Dana Dodge, the general manager in NH. Dodge says the company declined the credit, calling the incident an annoyance, and stressed the company is otherwise thrilled with its treatment by officials in Claremont and the state.

While some acquisitions showcase the new foreign ownership immediately, sometimes the decision to change the brand happens later. Elbit Systems, an Israeli company, acquired Kollsman, a defense contractor in Merrimack, in 2001. Until recently, the company retained the name Kollsman, but a realignment of the company resulted in a name change to Elbit Systems of America.

A Changing Landscape
In 2007, the United States received $237 billion in foreign direct investment. Between 2003 and 2007, foreign companies announced 3,300 new projects and added about 447,000 new jobs nationwide. A majority of those companies were in the services and manufacturing sectors. While the United States is still the largest economy in the world and leads in foreign direct investment, it has lost ground to emerging economies in China, India and Brazil. These countries, as well as veterans like the United Kingdom, attract an increasing amount of foreign investment.

Misperceptions are also creating roadblocks in the global marketplace. A May 2007 survey of chief executives by the Organization for International Investment found that one quarter of respondents claimed their parent-company colleagues were convinced the United States is becoming closed to foreign direct investment. Additionally, a 2005 FDI Confidence Index by business consultant A.T. Kearney found the United States dropped from second to third behind both China and India in terms of attractive locations for future foreign direct investment. Such perceptions led the federal government to create the Invest in America program in 2007 to counter those images and reduce barriers to foreign investment.

Federal officials dispute the studies, saying Americans welcome foreign direct investment with open arms, and in fact depend on it for continued prosperity. I firmly believe that Americans are the most open people in the world-open to people, to ideas, to investment, says David Bohigian, assistant secretary of commerce for market access and compliance. We worry about protectionist trends, but as long as we maintain that openness, we'll maintain and continue to build on our prosperity.

Among the trends worrying Bohigian is increased difficulty in accessing work visas and the false perception that federal U.S. officials-like those in China, France and Russia-scrutinize most foreign business deals. More than 1,000 foreign direct investment transactions occur each year in the United States, and just north of 100 are reviewed by the Committee on Foreign Investment due to national security concerns, he says. Since 1988, the committee has rejected only one deal.

When it comes to revising visa policies to ensure businesses can access American markets, Bohegian stresses the federal government has not turned no into yes. Instead it has made process improvements to ensure that-except for unpreventable slowdowns due to national security concerns-the visa process is as expeditious as possible. In India, for example, waiting time for visas to the United States has been reduced from months to weeks, and in China there is a referral program to fast track requests by people who have formerly worked with the U.S. consulate before. The federal government has also hired an ombudsman to help foreign companies navigate federal and state regulations and agencies.

When the World Bank, the Heritage Foundation or the World Economic Forum issues business reports, we want to make sure we come out number one, Bohegian says.