Foreign policy | Maine must enter a new era in attracting international investment
“Beyond our Borders” is a new column by Janine Bisaillon-Cary, president of the Maine International Trade Center, which will address import and export issues in the state. It will appear every other month.
The recent purchase of Domtar’s Woodland Mill by Hong Kong-based International Grand Investment Corp. is stimulating a lot of conversation about foreign direct investment in Maine. More than 100 years old, the former Domtar facility in Baileyville has been producing mostly pulp products for export markets in China and Asia over the past two years. This sale represents one of Hong Kong’s first investments in the state — most foreign investment in Maine has been from Canada, the U.K. and Europe. It also comes at a time when the industry is in need of major capital investments; IGIC estimates it will cost a total of $20 million to $30 million to fully modernize the Woodland Mill.
Although there are often reservations about investments “from away,” many of our natural resource-based industries have for years had foreign investment and successful partnerships with local business communities. According to the U.S. Department of Commerce, subsidiaries of foreign companies pay 32% higher wages than traditional U.S.-owned companies; often invest in manufacturing companies, thus building up the state’s weakening manufacturing base; and, due to their strong ties to the international marketplace, tend to be more export-oriented, bringing even more outside money into the state.
Foreign investment is not the answer to all of Maine’s woes, but it does provide a necessary capital infusion into major employment industries such as pulp and paper. This not only affects the primary investment, but also the supply chain to that industry. In the case of the Baileyville investment, many related industries and service providers are dependent on the health of that plant. Companies such as Kenway of Augusta, WahlcoMetroflex of Lewiston (itself recently acquired by U.K.-based Senior plc) and Sullivan and Merritt of Bangor all service the pulp and paper industry with industrial components and services. In terms of infrastructure, groups including Savage Safe Handling of Auburn supply chemical products and logistics services for pulp and paper companies. In addition, pulp represents the majority of the product shipped through the port of Eastport, which relies heavily on the industry’s continued strength and development. Eastport recently celebrated a record 415,000 tons of pulp exports for 2010, allowing officials to finance upgrades to their facility and increase logistics capacities for additional products.
A further benefit of foreign investment is the stimulation of research, development and diversity within some of Maine’s traditional or natural resource-based sectors — much the way Sappi (another foreign-owned entity, from South Africa) has done with its advanced materials laboratory in Westbrook. According to the Business Roundtable, a Washington, D.C., think tank, affiliates of foreign companies also spend more on research and development than U.S.-owned companies, with more than $39 billion spent by foreign subsidiaries on R&D in 2008 and $183 billion spent on plants and equipment. As economists continuously emphasize, adding value to our rich natural resources and research and development in our emerging industries are essential to future growth and development in our economy.
Opening the door
This year, Gov. John Baldacci, in cooperation with the Maine International Trade Center, the Maine Department of Economic and Community Development, the Maine Technology Institute and the private sector, formed the new “Invest in Maine” initiative. This industry-driven initiative is seen not only as a way to attract startup investment from overseas, but also as a good conduit for our companies interested in diversifying into new markets and new projects through joint venture opportunities. Though the focus of this initiative in the near term is to cultivate investment in renewable energy and advanced materials, the model is applicable to numerous industry sectors.
Already, Invest in Maine has brought in investment groups from Spain, Germany, France and Norway. Many of the companies are impressed with Maine’s high-quality manufacturing, productive labor force and deep-water and rail logistics capacities. Some of the companies are reporting initial steps being taken on joint venture opportunities. In addition, Annette Bossler, the new Invest in Maine managing director, is embarking on a trip to Japan and Korea, where many large, heavy industrial groups have begun investing in the U.S. and Canada on ocean energy, wind energy, advanced composite materials and turbine manufacturing.
Foreign investment in the U.S. has increased 500% over the past five years (from $63 billion to more than $320 billion).This is a critical time for Maine to develop a comprehensive investment strategy to strengthen our existing companies, further develop our emerging industry sectors and bring in some much-needed capital and jobs into the state. Perhaps in this new era with a focus on business-friendly policies and streamlining regulations, Maine will have a fighting chance to capture some of these investment opportunities.
Janine Bisaillon-Cary can be reached at info@mitc.com.
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