Conference Presentation, Panel
2015 CA Summit - Opening the Golden Gate: Strategies to Attract Foreign Direct Investment
Milken InstituteCurtis S. Chin, Caroline Beteta, Juan Carlos Briseño, Sonnet Hui, Brian Peck, John Scull
- California expects to maintain its top status for foreign direct investment (FDI) but faces increasing competition from other states, prompting plans to address business unfriendliness perceptions through heightened awareness of tax incentives, exemptions, grants, and free services.
- The state intends to strengthen regional economic bases in Los Angeles and the Inland Empire by fostering collaboration between government and local economic development agencies to retain traditional investors, such as South Korean companies, and prevent their shift to other jurisdictions.
- Strategic trade and investment targets include a goal of 100,000 exchange students between the United States and Mexico by 2018, up from the current 25,000 to 30,000, alongside efforts to expand the STEP program for exports and secure strategic memorandums of understanding (MOUs) using project management methodologies.
- Investment in research and development for climate change and renewable energy is planned through High Level Economic Dialogue and agreements modeled on the Mission Innovation framework, aiming to link world-class universities and national labs to commercialize innovations in California.
- A significant portion of inbound FDI consists of mergers and acquisitions that create or maintain jobs, countering narratives regarding job losses, though data collection remains insufficient due to investments often being registered in hubs like Luxembourg or Ireland.
- Private investment firms like Hazen's Group anticipate capitalizing on the growing Chinese middle class's appetite for overseas travel and real estate, focusing on large-scale mixed-use developments in Los Angeles while navigating challenges related to entitlement and approval processes.
- Visit California plans to invest over $500 million within the next five years to promote the state lifestyle, expecting this to generate a "halo effect" where increased foreign tourism drives demand for business investment and positions hospitality as a business concierge.
- Future competitiveness relies on retaining human capital by improving student visa retention and post-graduation options to prevent the "export" of top talent, while simultaneously addressing deteriorating housing, transportation, and education systems to sustain the innovation ecosystem.
- Cross-border collaboration is expected to evolve beyond Texas and border states, with companies like Cinepolis and Vool considering California for internationalization and hybrid operations established between California and Mexican border regions (Tijuana, Tecate, Mexicali) to leverage wage parity and proximity.
- Infrastructure challenges regarding goods movement are expected to be addressed through public-private partnerships, such as the Otay Mesa 2 border crossing, while short-term CEQA reform is sought to expedite approval processes and modernize regulations that have not been updated for over 30 years.
- Risk factors include the potential loss of the "golden goose" if California fails to treat human capital properly, alongside perception issues such as confusion between locations like San Bernardino and Santa Monica that may hinder investment efforts.
- Political and strategic hurdles involve the need to overcome jurisdictional rivalries for a united front, defining a national identity for Mexico over the next 20 to 30 years, and implementing enterprise zones with clear regulations to demonstrate the benefits of foreign investment to local communities.
- Specific investment initiatives include the potential use of the EB-5 visa program for projects like the St. Gabriel Sheraton Hotel and the expectation that 2017 will be designated as "Mexico's year" in California, anchored by trade missions involving GO-Biz and tourism boards.
- Manufacturing growth in Mexico, driven by programs like Makila and Mepatran receiving four to five weekly CEO inquiries, is expected to complement rather than replace California operations, allowing for multi-border product movement before final assembly.
- Success in attracting investment and talent requires a balanced approach focusing on people, product, and promotion, alongside policy-level shifts that encourage risk-taking and prioritize economic development over special interests.