The Contra Costa Times reports in a May 30, 2012 article that Hillwood chairman Ross Perot Jr thinks this is the right time to invest in California. As the Times reports “Hillwood is the master developer of Alliance California, the sprawling complex of distribution centers that surrounds San Bernardino International Airport.” [Perot said his company] is generally optimistic when it comes to business prospects in California — one reason being the strength of the state’s technology sector. Perot also stated that he believes “California will continue to dominate (shipping).”
Mr Perot’s sentiments appear to be borne out by a recent study conducted at California State University Fullerton released last week indicating that ”Southern California appears to be well into recovery, with economic activity and job growth in the region expected to increase over the next three to six months” as cited by Mary Ann Milbourn in the Orange County Register this week.
The California Economy and overseas companies
California’s economy is the eighth largest economy in the world (2011), if the states of the U.S. were compared with other countries. As of 2010, the gross state product (GSP) is about $1.9 trillion, which is 13% of the United States gross domestic product (GDP).
According to the US Bureau of Economic Analysis (BEA), in 2005, foreign-controlled companies employed 542,600 California workers, the most of any state. Major sources of foreign investment in California in 2005 were Japan, the United Kingdom, Switzerland, France, and Germany. Foreign investment in California was responsible for 4.6 percent of the state’s total private-industry employment in 2009. Total direct travel spending in California reached $96.7 billion in 2008, a 0.8% increase over the preceding year.
What makes California such an attractive place to do business
TurkofAmerica, A Turkish-American nationwide business magazine, cites some persuasive reasons for investing in California in a 2007 article entitled “Why You Should Invest in California?” – much of which holds true today.
They provide significant detail to support California’s attractiveness, including: California leading the nation in trends and innovation, research and development (R&D), and as a destination for almost half of the nation’s venture capital investment. They also cite the state’s embrace of technology, status as the [now 8th] largest economy in the world, the state’s position as a gateway to the Pacific, superb infrastructure and weather, favorable economic development and foreign trade zones, as well as the sheer number of businesses within the state, as well as the size of the state’s enormous agricultural sector.
Foreign Companies should approach California with enthusiasm – while preparing themselves for challenges
The challenges
The Golden State does pose challenges to inward investors however, including the most expensive housing markets in the U.S. In 2008, when measured as a percentage of GDP, California had the 6th highest tax burden of the fifty states. Some experts also cite California’s burdensome regulatory climate as a hindrance to investment.
Should companies choose to do so, however, it is imperative they partner with local advisors well versed in all that is necessary to successfully enter and prosper in the Golden State. From California’s complex tax and labor laws to a myriad of state regulatory mandates – any business seeking to enter or expand in the state must as a point of necessity engage best counsel when seeking to incorporate, raise funds, monitor and comply with state and federal regulations, and much more.
The quest for opportunity
While the recent downturn has placed California in a precarious position in employment, housing and critical infrastructure and education needs, among others, as the Los Angeles Times noted in 2010 ”amid a slow recovery from the deep economic downturn, industrial space is available at bargain prices, [and] the dollar’s sharp decline since 2001 has made manufacturing more attractive.
Indeed, the Times cites efforts like The Riverside County Economic Development Agency, which “opened an office for foreign trade in 2009″. “Commissioner Tom Freeman said he’s met with officials from Japan, Canada, China, Romania, Ecuador, the European Union, Israel, El Salvador and South Korea since then” reports the Times. Indeed, the Riverside Press-Enterprise highlighted the visit of a trade delegation from China at the end of 2011. “We’re rolling out the welcome mat,” Freeman said. “We’re creating programs that encourage foreign direct investment.”
As the Los Angeles Times noted in 2009, citing Richard Brown, a pharmaceutical business development consultant and partner at Plexus Ventures in Tokyo: “[California biotechs have] the essential ingredients for success: scientific innovation, commercial vision and financial backing” in explaining why Japanese pharmaceutical companies are attracted by the Golden State’s entrepreneurial culture and have been investing in California biotech companies.
Indeed, The Israel Conference, taking place this week in Los Angeles, exemplifies California’s importance as a gateway for Israeli high tech companies into the North American market.
Working to make California more attractive for foreign investors
The first-ever California Economic Summit held on May 11, 2012 in Santa Clara, California – was a gathering of leaders focused on working together to put California’s economy on a sustainable path for growth, inspired by the successful experience of the Oregon Leadership Summits that have taken place annually since 2001. This sort of statewide leadership among both political as well as business leaders within California demonstrates the desire within the state to tackle problems and remain a focus of international foreign direct investment well into the future.
These examples are only a few among many of why California’s business culture exemplifies an international, entrepreneurial can-do outlook – and should send a strong message to overseas investors and companies seeking to do business in California – that while they must prepare for what is perhaps a more regulated business environment than one they are accustomed to – they may also find opportunity in the state far beyond that which they may perhaps have ever anticipated.
This post originally appeared in International Business Development and has been reprinted here with permission