If you were scorched reading the recent flame wars over the desirability of foreign investment in US business landmarks Anheuser-Busch Companies and railroad CSX ignited by my BNET colleague Peter Galuszka, you understand why this subject is becoming a third rail in American economic policy debates.
Now Harvard Business School professor Mihir Desai makes a case in The American for why it’s in the best interests of the US to attract more foreign investment rather than less. Read it here.
The bottom line: The US makes more money on foreign investment than foreign investors make here.
Not So Smart Money?
Foreign investors have not proven adept at making a significant profit with many of their plays, says Desai. Example: The Abu Dhabi Investment Authority’s $7.9 billion investment in Citigroup last year has lost about half its value based on the company’s stock drop. Meanwhile US multinationals are placing much better better bets with their investments abroad.
“Indeed, perhaps America should be rolling out the welcome mat and thanking foreign direct investors,” writes Desai. “On average, these investments appear to transfer wealth from abroad to the United States. What’s not to like about that?”
At any rate, it’s time to start paying closer attention to this issue as federal regulators look at ways that could discourage foreign investment in some cases and encourage it in others.
Here are several places to start:
- Treasury Secretary Henry M. Paulson says the US should encourage soverign wealth investments.
- The Securities and Exchange Commission is proposing regulatory changes that would make it easier for American citizens to invest in international companies, as well as enhance American competitiveness overseas.
- Oil-rich countries are taking advantage of their increasing wealth and the weakened dollar to purchase high-profile American buildings and other landmarks.
- Congressional Office Brief: Why Does U.S. Investment Abroad Earn Higher Returns Than Foreign Investment in the United States?
Give us a real world view. Has your enterprise come under the auspices of foreign entities? What changes occurred? Does your company/financial institution/ benefit from foreign invesment?
Like what you’ve read here? Hate it? Think BNET can be better? Let us know! Email us directly, or take the Help Us Build a Better BNET poll on BNET Intercom.
