California region courts foreign investment
California has bled manufacturing jobs for decades as low-cost foreign labor has enticed U.S. companies to fatten their profits by making their products overseas.
But the state is on sale amid a slow recovery from the deep economic downturn. Industrial space is available at bargain prices. The dollar’s sharp decline since 2001 has made manufacturing here more attractive. Tens of thousands of blue-collar workers are idle and itching to get back to work.
That’s why cities in the Inland Empire are courting foreign companies to set up factories in their communities to help battle the region’s unemployment rate of 14.7%.
The Riverside County Economic Development Agency opened an office for foreign trade a year ago. Commissioner Tom Freeman said he’s met with officials from Japan, Canada, China, Romania, Ecuador, the European Union, Israel, El Salvador and South Korea since then.
“We’re rolling out the welcome mat,” Freeman said. “We’re creating programs that encourage foreign direct investment.”
Some early successes include Wakunaga of America Co., a subsidiary of a Japanese health supplement company, which is building a 52,000-square-foot manufacturing and distribution center in Mira Loma. A South Korean firm will soon announce a $60-million investment in the Coachella Valley, Freeman said.
The United States is the world’s largest recipient of foreign direct investment, helped by its open economy, stable government, rule of law and huge consumer market. More than $300 billion of such investment flowed into the United States in 2008, according to the International Trade Administration.
Foreign companies employed 605,600 California workers in 2007, the last year for which data were available, according to the Bureau of Economic Analysis. Nearly one-quarter of these workers were employed in manufacturing.
Attracting new industries is key to the Inland Empire’s growth. The region, which comprises the more populous parts of Riverside and San Bernardino counties, has shed 183,600 jobs since December 2006, many of them in construction and logistics.
“The two most important sectors for us were arguably the ones that were hit the worst,” said Marc Weidenmier, professor of economics at Claremont McKenna College. “This area needs to develop other things.”
It won’t be easy. California remains expensive. Its budget woes are legendary. Even some economists are skeptical that the business-friendly Inland Empire can become a go-to spot for foreign investors.
“California’s a bad place to do business,” said John Husing, an economist who studies the Inland Empire. “Part of it is cost, but more important than that is the unstable regulatory climate.”
But the state also is home to about 37 million consumers and good transportation connections to the rest of the country. That’s what attracted Nepco Industrial Co., a South Korean company that makes picture frames.
The firm started in Fullerton three years ago with just four employees. It recently opened a new plant in Chino that employs 17 workers, including four it added recently.
“We put an ad in a Spanish-language newspaper for three days and had over 100 applications,” said Tommy Kim, director of Nepco’s U.S. operations, as he walked through its new 36,000-square-foot factory.
Inside, Nepco workers feed Styrofoam packaging and cups into a whirring machine, which condenses the materials into heavy plastic blocks that look like dough. Those blocks are chopped into small pellets, which are then molded into polyurethane picture frames of various shapes and sizes.
The factory runs 24 hours a day.
Nepco sends the finished frames to U.S. suppliers, which in turn sell them to retailers such as Target Corp. “The wages are a little higher here than overseas, but we could cut time by not sending things back to China,” Kim said.
Officials in the region are doing their best to encourage other foreign investors to follow Nepco’s lead. In March, the Barstow Area Chamber of Commerce hosted the consulate general of Indonesia. The city of Ontario has opened an office in Shenzen, China, and has started a program to attract foreign direct investment.
Riverside County opened two foreign trade zones, where companies don’t have to pay tariffs on imports. It gives tax incentives to companies that build in its enterprise zones. And Riverside County supervisors recently passed a resolution encouraging foreigners to set up businesses in the county through the EB-5 visa program, in which foreign nationals can qualify for visas by investing $1 million to create 10 full-time jobs in the U.S.
“We have a great geographic position and an international business-friendly environment,” Freeman said. “As tough as it is to do business in California sometimes, you can still be competitive.”