State Development Agencies Guide Foreign Companies Through Investment Process

To a foreign-owned company, the process of locating a business investment in the United States presents a significant challenge. While there may be a market for that company’s products or services, the establishment of a business presence in the United States can be a complex undertaking. Beyond differences in language and business practices, this country’s tax and regulatory environment is often quite different from that of the company’s base. Throw in the subtle differences among 50 different states, and the U.S. market might appear almost impenetrable.

The good news is that state development agencies, such as the one I oversee in Kentucky, can be of great service to such companies throughout the business location process. Whether titled for “economic development,” “commerce,” or “business and industry,” state agencies have a longstanding practice of assisting both domestic and foreign firms. The United States is not a homogeneous market, and there is no “one-stop” service center to provide all possible answers.

The desired business location is likely to be centered within a multi-state region, based on the presence of the company’s key customers or suppliers. The closest approach to many state agencies is through their foreign representative offices. For example, Kentucky has such offices in Europe and Japan, with full-time staff working to attract business to the state. Other foreign-trade offices in Mexico, South America, and China focus on expanding Kentucky exports to those countries.

As is often the case with domestic companies, a foreign-owned business may choose to be represented by a consulting firm or legal representative. State development agencies are well-practiced in working with these third parties, including providing initial assistance without benefit of full disclosure of the identity and plans of the business. (Once the process advances to the discussion of financial assistance or incentives, more disclosure is required.)

Information and data are particularly critical to early-stage review of potential project locations. Over the last five to 10 years, state development agencies have utilized the Internet to create search engines and databases that offer much useful information, such as:

• • Business and personal tax structure
• • Infrastructure and utilities
• • Work force and training resources
• • Population and demographics
• • Business and industry profiles
• • Financing and incentive programs
• • Available sites and buildings

These web-based resources have streamlined the location process by allowing foreign-owned companies to conduct a great deal of research without leaving their home offices. Potential locations can be prioritized, or perhaps eliminated, without undertaking expensive travel until necessary. Whether foreign or domestic, the business location decision remains a “process of elimination.” The more the company narrows its list of potential locations, the more time it can spend evaluating in detail those that are most likely to meet its business needs.

The Project Manager
It is also standard practice for many agencies to assign a “project manager” to work with each business as a single point of contact for state assistance. This includes both the information gathering and site evaluation stages of location assessment. The project manager works to understand the business agenda and the criteria that are most important to the company’s decision. He or she can then guide the company to relevant data or create a custom website of selected information for secure access by that company only.

The project manager can also serve as a liaison for the company with other key information providers in the business location process. These may include regulatory or permitting authorities, local development agencies, utility providers, property owners, railway companies, and construction, engineering, and legal firms. A business operation with a large energy usage will need confirmation of the availability and cost of energy for each potential location. Sales and lease prices on land and buildings must be identified through the property owner. Access to rail service must be confirmed with the rail provider.

When the foreign-owned business has narrowed potential sites to a manageable number for personal visits, the state’s project manager can make the necessary arrangements. Again using Kentucky as an example, this includes setting the detailed itinerary, having local representatives on hand at each property, and arranging transportation from site to site. When several sites must be viewed within a short time period, the agency has access to state aircraft and helicopters available for onsite visits by business clients.

In addition to touring the real estate, the business often makes time for a community tour to view other relevant facilities, such as schools, hospitals, and major employers. A small group of community representatives will be made available to discuss local resources and to answer questions from the company. The project manager coordinates all follow-up to ensure that the business receives all requested information and materials.

As the location process continues, the project manager can identify and secure needed contacts on specific issues. Appointments with existing employers may be secured for information regarding the local work force. Meetings with permitting agencies for construction, air and water quality, etc., can be arranged. Introductions to local and state elected officials can be made.

Closing the Deal and Beyond
Kentucky and other states work hard to maintain client confidentiality during this exploratory process. Even with a government-funded development agency, state open records and open meeting laws typically allow exceptions for discussions with business clients regarding proprietary information and investment plans. These laws may vary from state to state, so the business would be wise to make specific inquiries as to the limits of client confidentiality in each jurisdiction.

As a rule, state development agencies have an established framework of financial incentives to influence the final business location decision. Once the company has identified a handful of specific locations with all necessary resources at an acceptable cost level, then these financial inducements may help the company pinpoint its preferred option.

Typical state inducements may include:
• • Low-interest loans
• • Reduced income, sales, or property tax liability
• • Grants for training or infrastructure improvements

The state-assigned project manager assists the company in gaining an understanding of these programs and the means by which the assistance may be secured. The timing of this process can be critical, as official approval of state financial assistance must often precede the company’s formal announcement or its lease or purchase of property for the project.

Savvy states know that their assistance does not end with the project announcement. In Kentucky, we take great pride in providing “service after the sale,” working closely with community development agencies to continue to support the business. These services may include setting up the groundbreaking ceremony, providing temporary office space for new business executives while facilities are under construction, and providing recruitment and screening services for potential new employees.

Once the business is operational, both state and local development representatives are available to work with the business to address ongoing issues and concerns. If the business has additional expansion opportunities, the same or similar assistance is provided as for the first location. Just as the business does what it can to ensure a long and successful operation, an industrious, well-run state development agency strives to see that the company achieves that goal.