Organization for International Investment
Encyclopedia
Based in Washington, D.C., the Organization for International Investment (OFII) is a trade association representing the interests of US subsidiaries of overseas corporations. OFII advocates for non-discriminatory treatment in the United States
for its member companies.
, Sony
, Unilever
and four other non-US-based corporations.
As an aggressive advocate for fair, non-discriminatory treatment, OFII serves its member companies by monitoring and reporting new regulatory developments and by lobbying policymakers at the Federal and State level. With over 150 member companies, OFII’s membership base has a constituent relationship with nearly every politician in the United States.
OFII began using the term “insourcing
” in 2004 to describe jobs created through Foreign Direct Investment in the United States. Since then, the term appears regularly in government publications including a Congressional Research Services report published in 2005 (and updated in 2008) and in publications on promoting International Trade Administration of the United States Department of Commerce.
in the United States
Inward Foreign Direct Investment [FDI] constitutes 13.6% of US GDP. According to the Bureau of Economic Analysis
, the United States
received $237 billion in FDI in 2007.
In 2006, US affiliates of majority-owned foreign companies employed over 5 million workers – 4.6% of US private sector industry employment [3]. Between 2003 and 2007, over 3300 projects have yielded $184 billion in investment or about 447,000 new jobs. The activities of these companies comprise approximately 19 percent of all US exports ($169.2 billion). Approximately 60% of all inward FDI goes to the service sector while 39% goes to manufacturing and the remaining 1% is in agriculture. This investment constitutes 12% of overall private sector employment.[3]
In addition to contributing to total employment, US affiliates of majority owned corporations remunerate their employees at a higher level than US firms. Wages for workers this sector averaged $66,042 compared to the median income of $50,124 in other industries.
Inward Foreign Direct Investment: Mergers and Acquisitions
In 2006, there was a total of $161.5 billion of new Inward Foreign Direct Investment in the United States
. Of this total, 91.5 percent was invested through Merger and Acquisition transactions.
In a report for the Organization for International Investment, Professor Matt Slaughter of the Tuck School of Business at Dartmouth cites three channels through which Mergers and Acquisitions create better performing firms:
1) Revenues – Firms grow faster with new market opportunities often boosting employment and capital investment
2) Costs – Can be lowered because of operation at larger scale and realizing synergies from combining best practices across companies
3) Diversification – Gains can be realized, such as entering new markets and better managing ideas, internal capital markets, and risk.
When the rationale for completing a Merger and Acquisitions is to improve the bottom line of the above factors, Slaughter argues, significant advantages are possible. However, when firms expand to pursue goals other than profit maximization the benefits of these transactions may be lost.
Inward Foreign Direct Investment: Greenfield
Projects
While constituting a smaller percentage of total inward foreign direct investment flows, new projects or “greenfield” investments contribute to economic growth. Since 2003, Greenfield investments have increased 42 percent
Greenfield projects are expected to create approximately 175,000 jobs from investments begun in 2003. Major investments come from Toyota Motor Company, the Hanjin
Group, Adidas
, the Tata Motors
, and Vodafone
. Total investment totals $109.5 billion [8].
In 2005, these companies spent $32 billion on research and development and $121 billion on plants and equipment.[8]
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
for its member companies.
Background
OFII traces its roots back to 1990 when a group of US subsidiaries of Foreign-Owned Corporations worked together to fight a proposed tax in California on global profits. The original group included NestleNestlé
Nestlé S.A. is the world's largest food and nutrition company. Founded and headquartered in Vevey, Switzerland, Nestlé originated in a 1905 merger of the Anglo-Swiss Milk Company, established in 1867 by brothers George Page and Charles Page, and Farine Lactée Henri Nestlé, founded in 1866 by Henri...
, Sony
Sony
, commonly referred to as Sony, is a Japanese multinational conglomerate corporation headquartered in Minato, Tokyo, Japan and the world's fifth largest media conglomerate measured by revenues....
, Unilever
Unilever
Unilever is a British-Dutch multinational corporation that owns many of the world's consumer product brands in foods, beverages, cleaning agents and personal care products....
and four other non-US-based corporations.
As an aggressive advocate for fair, non-discriminatory treatment, OFII serves its member companies by monitoring and reporting new regulatory developments and by lobbying policymakers at the Federal and State level. With over 150 member companies, OFII’s membership base has a constituent relationship with nearly every politician in the United States.
OFII began using the term “insourcing
Insourcing
Insourcing is the opposite of outsourcing; that is insourcing is often defined as the delegation of operations or jobs from production within a business to an internal entity that specializes in that operation...
” in 2004 to describe jobs created through Foreign Direct Investment in the United States. Since then, the term appears regularly in government publications including a Congressional Research Services report published in 2005 (and updated in 2008) and in publications on promoting International Trade Administration of the United States Department of Commerce.
Issues
Inward Foreign Direct InvestmentForeign direct investment
Foreign direct investment or foreign investment refers to the net inflows of investment to acquire a lasting management interest in an enterprise operating in an economy other than that of the investor.. It is the sum of equity capital,other long-term capital, and short-term capital as shown in...
in the United States
Inward Foreign Direct Investment [FDI] constitutes 13.6% of US GDP. According to the Bureau of Economic Analysis
Bureau of Economic Analysis
The Bureau of Economic Analysis is an agency in the United States Department of Commerce that provides important economic statistics including the gross domestic product of the United States. Its stated mission is to "promote a better understanding of the U.S...
, the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
received $237 billion in FDI in 2007.
In 2006, US affiliates of majority-owned foreign companies employed over 5 million workers – 4.6% of US private sector industry employment [3]. Between 2003 and 2007, over 3300 projects have yielded $184 billion in investment or about 447,000 new jobs. The activities of these companies comprise approximately 19 percent of all US exports ($169.2 billion). Approximately 60% of all inward FDI goes to the service sector while 39% goes to manufacturing and the remaining 1% is in agriculture. This investment constitutes 12% of overall private sector employment.[3]
In addition to contributing to total employment, US affiliates of majority owned corporations remunerate their employees at a higher level than US firms. Wages for workers this sector averaged $66,042 compared to the median income of $50,124 in other industries.
Inward Foreign Direct Investment: Mergers and Acquisitions
Mergers and acquisitions
Mergers and acquisitions refers to the aspect of corporate strategy, corporate finance and management dealing with the buying, selling, dividing and combining of different companies and similar entities that can help an enterprise grow rapidly in its sector or location of origin, or a new field or...
In 2006, there was a total of $161.5 billion of new Inward Foreign Direct Investment in the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
. Of this total, 91.5 percent was invested through Merger and Acquisition transactions.
In a report for the Organization for International Investment, Professor Matt Slaughter of the Tuck School of Business at Dartmouth cites three channels through which Mergers and Acquisitions create better performing firms:
1) Revenues – Firms grow faster with new market opportunities often boosting employment and capital investment
2) Costs – Can be lowered because of operation at larger scale and realizing synergies from combining best practices across companies
3) Diversification – Gains can be realized, such as entering new markets and better managing ideas, internal capital markets, and risk.
When the rationale for completing a Merger and Acquisitions is to improve the bottom line of the above factors, Slaughter argues, significant advantages are possible. However, when firms expand to pursue goals other than profit maximization the benefits of these transactions may be lost.
Inward Foreign Direct Investment: Greenfield
Greenfield project
In many disciplines a greenfield is a project that lacks any constraints imposed by prior work. The analogy is to that of construction on greenfield land where there is no need to remodel or demolish an existing structure...
Projects
While constituting a smaller percentage of total inward foreign direct investment flows, new projects or “greenfield” investments contribute to economic growth. Since 2003, Greenfield investments have increased 42 percent
Greenfield projects are expected to create approximately 175,000 jobs from investments begun in 2003. Major investments come from Toyota Motor Company, the Hanjin
Hanjin
The Hanjin Group is a South Korean conglomerate, or Jaebeol. The group is a holding company that includes a shipping company, Hanjin Shipping , and Korean Air , which was acquired in 1969...
Group, Adidas
Adidas
Adidas AG is a German sports apparel manufacturer and parent company of the Adidas Group, which consists of the Reebok sportswear company, TaylorMade-Adidas golf company , and Rockport...
, the Tata Motors
Tata Motors
Tata Motors Limited is an Indian multinational automotive corporation headquartered in Mumbai, India. Part of the Tata Group, it was formerly known as TELCO...
, and Vodafone
Vodafone
Vodafone Group Plc is a global telecommunications company headquartered in London, United Kingdom. It is the world's largest mobile telecommunications company measured by revenues and the world's second-largest measured by subscribers , with around 341 million proportionate subscribers as of...
. Total investment totals $109.5 billion [8].
In 2005, these companies spent $32 billion on research and development and $121 billion on plants and equipment.[8]
Further reading
- Official Website of the Organization for International Investment – http://www.ofii.org
- Congressional Quarterly Barshay, Jill. 2005. "The New Kids On K Street. (Cover story)." CQ Weekly 63, no. 28: 1890-1896. (accessed October 6, 2008. http://www.ofii.org/newsroom/news/ofiicqweekly.pdf
- United States Bureau of Economic Analysis – http://www.bea.gov/bea/ai1.htm#FDIUS