President Obama tapped Barry Johnson, already a senior advisor in economic development policy to the president two years prior, to lead the new effort. Johnson, who now works in the private sector, facilitating cross-border investment, will be the opening keynote at November's North America Tourism & Hospitality Investment Conference in Miami. He will cover a range of topics concerning foreign direct investment. Ahead of the conference, being held at the Fontainebleau Miami Beach, Johnson sat down to discuss the current state of investment in the United States, its benefits, pitfalls and why FDI is as important economically as it is culturally.
Why did President Obama create SelectUSA?
Johnson: The president realized the role foreign direct investment (FDI) played as a lane for local economic development. The U.S. was still No. 1 as a destination for FDI, but by a lesser margin historically. The determination was made that there wasn't a White House-initiated, cross-federal effort to promote investment into the U.S. In the past, it just sort of had come—an obvious place for it.
What were the initial goals?
Johnson: It was about telling the international marketplace that the U.S. is open for business and to encourage FDI under the same terms and expectations that are afforded to domestic companies. For instance, in China, you need foreign partners, same as the UAE. That's not the case here; we have an open investment policy and stand ready to facilitate. And to say to all 50 states, Washington, D.C., and its five territories that the federal government is alert to the role it needs to play in helping them compete in this global, full-contact sport called attracting investment.
Why is FDI important?
Johnson: Business is what happens when there is meeting. The big thing not measured in FDI is we are building culture engagement. FDI is more than just building business investment; it's facilitating economic diplomacy and friendship diplomacy and opening eyes.
What are some of the obstacles thwarting FDI and how can they be overcome?
Johnson: Obstacles are everywhere, but in terms of U.S. attractiveness, for the last two years, we've been ranked No. 1 on attractiveness of investment by A.T. Kearney's Foreign Direct Investment Confidence Index. Are there things that can be improved? Sure. For one, tax policy. One way other economies have competed is by their tax code. We are due for a reset or modernization of the tax code, presumably to be more competitive. Still, countries invest here, because, net-net, there are advantages like the stability and rule of law.
Foreign investors from the likes of China and South Korea have had an increasing taste for hotel assets. Is this heightened competition harmful to domestic investors?
Johnson: A free market economy is just that and it takes two to tango: buyers and sellers. People are stepping up and selling assets. In a country the size of the U.S., with a range of business opportunities in every sector, it's a place where all people can play. There are large-cap investors coming in and deploying large sums, and not interested in doing $150-million deals; they want to do billion-dollar deals, like what we saw with the Waldorf Astoria transaction. Those are projects small- to mid-cap investors wouldn’t be doing anyway. There is a range of things and enough for everyone.
I have spoken to CEOs, like Jeff Immelt from GE, that do not believe international investment is a problem. They believe that competition is good for business. And if someone is coming across the border with a project that is going to raise the bar, then so be it. It's what U.S. automakers learned: Evolve or die.
Where there is a question to raise is when that a non-U.S. company comes and get offered publicly funded incentives, grants, loans or land to get them there that a domestic rival can't get; there’s a discussion that is valid and an important issue to raise. What circumstances do you cause the public to pay and invest in a non-U.S. business coming to market that may have a domestic competitor?
The EB-5 immigrant investor program is coming up for reauthorization by the end of the month. What is your take on EB-5 in its current state and does it need changes?
Johnson: EB-5 comes up a lot, but EB-5 is not FDI. EB-5 is an immigration play. It is not first and foremost growing and moving business to another country. It's, 'There’s a business in the U.S. and I want immigration status; I am going to support the business to get a green card.'
What are the benefits to the attendees of a conference like NATHIC?
Johnson: Conversation is everything: connecting, engaging across borders with common interests is everything—it’s the basis. Some people come hunting for a transaction, I say, come hunting for a good relationship with someone in a field you want to know about. Build that trust and understand the culture; understand what has happened right and what has failed. Bringing people with shared interests together is a way toward better understanding. We all will have different perspectives. Being able to connect leads to better understanding. That's an important thing NATHIC is doing.
What are you looking to impart to the audience?
Johnson: I am looking to bring a 21st-century perspective on how important FDI is and how it works. How is the investment climate into which people are investing? Also, there is this: Investors are tourists first; more tourism equals more investment. The states are doing a better job of showing what’s great about America.
Barry Johnson will deliver the morning keynote address on Nov. 5 at NATHIC. Click here to register for the conference, Nov. 4-6 at the Fontainebleau Miami Beach.