South Carolina is a global economy.
The state's history as a textile powerhouse has largely been replaced by foreign direct investment (FDI). Today, there are 576 international companies located in the Upstate South Carolina region from 35 countries, employing 162,000 people. Here's an example of what that impact looks like. German car giant BMW's South Carolina plant produces more than 1,500 cars each day. The majority, about 70%, are exported across the world.
Those are a few statistics shared by John Lummus, president and CEO of the Upstate SC Alliance. He was one of several presenters at this year's Global Carolina Connections conference, which took place August 30 at Furman University in Greenville, SC. The conference was co-founded 10 years ago by Parker Poe's Sam Moses, leader of the firm's Business Expansion + Location Solutions Team.
North Carolina has been no stranger to FDI, either. There are about 230,000 jobs in the state that are attributable to FDI, said Christopher Chung, CEO of the Economic Development Partnership of North Carolina. International companies are attracted to the Southeast because of high population growth, favorable clean energy reforms, and a relatively low cost of doing business. "The Southeast in general enjoys a very favorable reputation among companies outside the U.S.," Chung said.
Here are some key takeaways from the conference.
Foreign Affairs, Geopolitics Factor Into Foreign Investment and Trade
Germany, Mexico, and Canada are among the largest trading partners of the Carolinas. But there are certain policies that can work against those relationships.
Parker Poe's Elizabeth Gibbes, who serves as honorary consul of Germany for the coastal areas of South Carolina and Georgia, moderated a panel about foreign affairs. The panel was comprised of James Hill, consul general of Canada for the Southeast in Atlanta, Melanie Moltmann, consul general of Germany for the Southeast in Atlanta, and Miguel Antonio Cuesta Zarco, deputy consul general of Mexico for the Southeast in Raleigh.
A trading policy that sounds good on paper at a high level can have negative consequences, especially for countries that already have integrated economies, Hill said during the panel. In other words, a country or state that's developing a trade policy for itself could have much wider, global implications.
Another challenge for trading relationships is shifting geopolitics. The war in Ukraine, for example, has impacted trade between Ukraine and Germany, Moltmann said.
Countries that ignore these geopolitical shifts will deal with consequences later on, Hill said.
The panel also discussed the positive impacts of trade agreements like the North American Free Trade Agreement (NAFTA) and the United States-Mexico-Canada Agreement (USMCA). Both have helped bring economic benefits to each country involved, the panelists said.
Sustainability is another important component of investment between trading partners. Companies are looking to mitigate their environmental impact, and more of their customers are demanding the use of clean energy sources, Moltmann said, so national and local policies that advance clean energy and sustainability initiatives for companies are critical.
The State of the Industrial Construction Market
What the pandemic brought to the development world can be summed up in one word. Volatility.
There's still some of that around, but it's been trending down in recent months, a panel of design, construction, and real estate development professionals discussed with Raleigh partner Collier Marsh moderating.
On one end, the pandemic brought a boon for industrial and warehouse construction as companies sought more space, said Derek Mathis, who oversees development of build-to-suit and industrial properties as senior vice president at SunCap Property Group. But it also severely disrupted the supply chain, leaving developers, contractors, and landowners with lag times between orders.
One other impact: it costs 40% more to build a building today than it did before the pandemic, said Bill Joslin, director of the industrial practice area at McMillan Pazdan Smith Architecture.
Some of those challenges continue today. There are still long delays getting certain electrical gear, the panelists said.
Another key takeaway from the panel was about the availability of suitable land. The best land gets developed first, said Barry Cutshall, vice president of preconstruction at Myers & Chapman. That leaves mostly land that has what he called surface risk like unsuitable soils and rocks. Construction teams need to prioritize evaluating each site before going vertical.
As the market continues to right itself, the panelists remained hopeful about the industry. The Southeast continues to see population gains. Other factors like a low cost of doing business are attractive for companies, especially international ones.
Aerospace in the Carolinas
The aerospace industry has made its imprint on the Carolinas. That was made clear during a panel session with Mark Harris, director of site operations for GKN Aerospace in South Carolina, and Kate Konopasek, director of manufacturing at Toray Composite Materials America, also in South Carolina.
Both companies produce components used in Boeing airplanes.
The two discussed, among other issues, the topic of labor. GKN works to take advantage of and tap into the vast array of available labor from former military employees who are based at various U.S. Department of Defense bases across the Carolinas. The skills these employees bring are highly transferrable to the aerospace industry, Harris said.
What Continues to Drive FDI in the Carolinas
It's been demonstrated that foreign companies are attracted to invest in the Carolinas. But how do companies decide where to locate and how can each state remain attractive?
Chung, of the Economic Development Partnership of North Carolina, discussed this topic with Brie Sachse of Siemens.
A quick primer: Siemens is a German industrial manufacturing company with a global reach. It makes everything from harbor cranes to light rail vehicles. The company has had a presence in the United States for over 160 years.
One large project recently broke ground in Lexington, NC. The $220 million project will create more than 500 new jobs by 2028. The project will include an advanced manufacturing and rail services facility.
Sachse, vice president and head of U.S. government affairs, called the facility an East Coast hub.
The company sought out North Carolina because it needed 200 acres of space and it wanted to be closer to its customers.
When it comes to FDI, Siemens knew it needed to be in a location with a strong workforce. The Carolinas have a reputation in manufacturing so the North Carolina location made a lot of sense, she said.
On the federal level, the U.S. needs to think about things like permitting reform, Sachse said. That means cutting some of the red tape to help companies meet a clear timeline for building a project.
Another thing that continues to drive FDI in the Carolinas is the relationships that have been built in recent decades among the states' international business community. Moses said continuing to strengthen those relationships was part of he and his co-founders' motivation to start Global Carolina Connections in the first place.
Final Takeaways
Beth Webb, Parker Poe Consulting's director of collaboration, introduced South Carolina Lt. Gov. Pamela Evette for a keynote address. Evette struck on the importance of ensuring that a future workforce is able to learn about various trades while still in school.
In many ways, the annual conference serves another important purpose. Once international companies arrive in the U.S., what do various federal, state, and local government agencies and companies who have a stake in the growth and success of FDI in the Carolinas need to consider to ensure that these companies continue to grow and prosper in the region in a sustainable way?
The conference provides a platform for companies who have made investments in the U.S. to learn about challenges being faced by foreign companies operating in the Carolinas, best practices deployed by such companies to address those challenges, and various resources available to support such efforts.