Louisiana and the Baton Rouge and New Orleans areas were in the bottom half nationally of state and major metro area rankings for foreign direct investment in 2011, but officials say stats in that just-released report are rapidly changing.
The nationwide analysis by the nonprofit Brookings Institution and banking giant JPMorgan Chase covered Louisiana’s economically tumultuous period of 1991 through 2011 and focused on jobs created or maintained by foreign-owned businesses. It did not dig into the impact of foreign capital investment in large industrial facilities that have been announced for south Louisiana in recent years.
“According to the U.S. Bureau of Labor Statistics, for the first 16 years of that time period, Louisiana’s job growth heavily underperformed that of the country, ranking No. 38 nationally,” said Stephen Moret, secretary of the Louisiana Department of Economic Development.
“However, in the final four years of the reporting period (2008-11, inclusive), job growth in Louisiana substantially outperformed that of the South and U.S., ranking No. 7 nationally,” Moret added.
“We’ve seen more overseas investment in the past three years (in the Baton Rouge area) than at any time in memory,” said Iain Vasey, who tracks foreign investment for the Baton Rouge Area Chamber.
“For the past five years, we in Louisiana have been No. 1 in the nation for foreign direct investment per capita,” said Michael Hecht, president and chief executive officer at Greater New Orleans Inc. Hecht said the New Orleans area has contributed significantly to those recent gains.
“Our data ends in 2011,” emphasized Kenan Fikri, one of the authors of the Brookings report. “We’re measuring jobs.”
Fikri acknowledged that capital investment and the higher pay of people employed in heavy industry are not measured in the report.
Because of the report’s focus on jobs, Fikri explained, $5 million used to build a grocery store that employs 200 full-time workers could make a state or region look better on paper than a $100 million industrial facility that employs 50 higher-paid workers.
Fikri said Brookings is cognizant of the announcement of large industrial facilities in Louisiana since 2011.
“Louisiana should have a major advantage in the future,” Fikri said. “It has the infrastructure that foreign investors need. It has the workers. It has the robust supply chains on which they rely.”
With 57,896 workers employed at foreign-owned businesses in 2011, Louisiana ranked 28th in the nation. That was an increase of 10,976 workers over the total for 1991, but the state still dropped three rungs on the nation’s ladder.
Among the nation’s 100 largest metropolitan statistical areas, the 10-parish New Orleans area ranked 73rd. The nine-parish Baton Rouge area was two notches lower.
Brookings officials defined foreign direct investments as either those that resulted in majority ownership of an existing company in this country, or those that established a new foreign-owned company in the U.S.
Such foreign investment is important, Brookings researchers reported, because it commands 20.3 percent of goods exported from the U.S., 18.9 percent of corporate research and development in this nation, 12 percent of productivity growth and 5 percent of employment.
In the U.S. in 2011, there were more than 5.6 million workers at foreign-owned businesses, Brookings reported.
Among the 50 states and the District of Columbia in 2011, California topped the chart with 593,133 workers at foreign-owned businesses. Montana, with 6,131 such jobs, finished last.
The number of employees at foreign-owned businesses in the Baton Rouge area declined by 1,020 over the 20-year period, finishing at 11,430 in 2011. The largest five industries by employment were precision instruments, 2,100 jobs, or 18.3 percent of the area’s total; pesticides and fertilizers, 1,900 jobs, 16.3 percent; basic chemicals, 1,600 jobs, 13.7 percent; investigation and security, 400 jobs, 3.3 percent; and computer systems design, 400 jobs, 3.3 percent.
The New Orleans area experienced the loss of 5,820 jobs at foreign companies over the same period, finishing at 11,650. The largest industries by employment were traveler accommodations, 900, 7.8 percent of total jobs; research and development services, 700 jobs, 6.4 percent; iron and steel products, 600 jobs, 5.3 percent; support activities for mining, 600 jobs, 5.3 percent; and rubber products, 400 jobs, 3.5 percent.
Statewide, the largest five industries by employment were support activities for mining, which includes oil and gas extraction, 6,900 jobs, or 12 percent of the state’s total; administrative services, 4,000 jobs, 6.9 percent; employment services, 2,600 jobs, 4.4 percent; special food services, 2,400 jobs, 4.1 percent; and basic chemicals, 2,300 jobs.
That was then.
“Both the Baton Rouge (area) and New Orleans (area) have been attracting job-creating (foreign direct investment) projects at an accelerating pace since 2008,” Moret said in response to the Brookings report.
As an example, Moret said, French chemical company SNF Flopam announced in late 2010 that it would build a $362 million manufacturing facility near Plaquemine in Iberville Parish.
SNF Flopam officials have estimated they will employ 500 full-time workers and another 100 permanent contract workers by 2015.
In New Orleans, Moret said, French video game developer Gameloft announced in late 2011 that it would establish a studio that would hire 146 employees over a decade and pay them an average annual salary of more than $60,000.
“According to ‘fDi Intelligence’ (a subscription service of The Financial Times Ltd.), those two (Baton Rouge and New Orleans) attracted a combined 17 FDI projects from 2008 to 2013,” Moret said.
“Since 2008, according to data from ‘fDi Intelligence’ and the U.S. census, Louisiana has attracted more FDI per capita than any other state,” Moret emphasized.
“You have to look beyond the job count,” Vasey added. “You have to look beyond 2011.”
Said Vasey: “These large capital expenditures … far outweigh the actual job count.”
German chemical producer BASF has invested more than $300 million in the Baton Rouge area since 2011, Vasey noted. Air Liquide, the French producer of industrial gases, has invested more than $100 million over the same period.
Employees at such facilities are paid high wages that cause a ripple effect across local economies, Vasey said, adding that large industrial facilities also generate significant economic stability.
“You don’t build a $5 billion plant and plan to operate it for only a few years,” Vasey said.
And billions are being moved into Louisiana.
In Calcasieu Parish, officials of South Africa’s Sasol Ltd. have announced plans to spend between $16 billion and $21 billion to build both an ethane cracker and a gas-to-liquids plant near Westlake.
The cracker plant would convert ethane, a component of natural gas, into ethylene, a base chemical of plastics, resins, adhesives and a variety of synthetic products.
Statewide, Louisiana’s largest foreign employers over the two decades in order were England, Switzerland, France, Germany and Canada.
For the Baton Rouge area, the top five foreign employers were from England, Switzerland, Canada, Germany and Japan.
For New Orleans, it was England, France, Netherlands, Switzerland and Luxembourg.
Although China barely budged the needle, Brookings’ Fikri said FDI dollars to the U.S. and Louisiana from the world’s largest population are expected to grow exponentially in the future.
“China’s the biggest player,” Fikri said of predictions for future decades.