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Posted on: Tuesday - Oct 4, 2016

Tennessee continues to be an attractive place for foreign-owned companies looking to invest in the United States.

In the past decade, the number of foreign-based companies operating in Tennessee has jumped more than 43 percent, according to research by TNECD’s Center for Economic Research in Tennessee (CERT).

Today, 919 foreign-owned companies call Tennessee home. In 2007, there were 640 foreign-owned establishments. 

In the last 10 years, companies based abroad have invested more than $18.4 billion of foreign direct investment (FDI) into Tennessee.

Such totals have helped enable Tennessee to top the nation two of the past three years in jobs created through FDI, according IBM-PLI’s Global Location Trends 2016 report.

The 919 foreign-based establishments operating across Tennessee have invested $33.3 billion and employ more than 123,000 Tennesseans. 

Tennessee remains one of the top destinations for Japanese corporate investment in the U.S.  The Volunteer State ranks third in the nation for Japanese FDI, according to fdiMarkets. Japanese-based companies such as Nissan, DENSO, Bridgestone, Calsonic Kansei, M-Tek are among the biggest foreign-based employers in Tennessee.

Of the 123,00 Tennessee jobs created by FDI, nearly 40 percent (49,104 jobs) were created by Japanese-based firms. That followed by German-based companies, which have invested nearly $5.3 billion and employ 13,855 Tennesseans.

TNECD has continually sought to recruit internationally for new businesses. To accelerate FDI flowing into Tennessee, TNECD has added international offices in Germany, Italy and South Korea. Future offices in China, the United Kingdom and Western Europe are in store.

So why recruit internationally? 

For starters, FDI diversifies the state’s economy, increases employment and boosts the state’s gross domestic product. 

In fiscal year 2016, TNECD secured job and capital investment commitments in Tennessee from 39 foreign-owned operations. Foreign investments in Tennessee totaled $1.2 billion for fiscal year 2016, combining for 4,769 job commitments.

Japanese companies invested the largest portion of FDI ($710 million), followed by Chinese ($254 million) and Canadian firms ($115 million). The projects with biggest investments were DENSO Manufacturing ($400 million in Maryville), JTEKT Automotive ($218 million Vonore), and America Wonder Porcelain ($150 million in Lebanon). 

The attraction of FDI to Tennessee is a tremendous chance for the state to strengthen its economy. CERT finds the advantages of recruiting internationally extend well beyond the initial FDI and jobs committed by companies.

Of the 39 FDI projects in fiscal year 2016, 30 received grant funding from TNECD. 

CERT analyzed the 30 FDI projects that received non-tax incentives from TNECD in fiscal year 2016. These projects account for 4,100 direct jobs created through the expansions or relocations. These jobs will pay an average of $47,000 per year, resulting in $1.7 billion in new incomes during the next decade.

CERT estimates an additional 7,000 induced and indirect jobs will be created statewide in order to support these FDI investments. These 30 project are expected to trigger new jobs and other economic activity across practically all sectors of Tennessee’s economy – most prominently the manufacturing sector, but also the finance and insurance, real estate, health care and retail sectors. 

When combining the direct jobs with the indirect and induced jobs, TNECD’s 2016 FDI projects are projected to generate $4.2 billion in new income for Tennessee workers in the next decade. 

The projects are projected to generate $2.25 billion in economic output – or the value of new goods and services produced in Tennessee as a result of the projects –during the next decade. 

CERT finds that TNECD’s recruitment of foreign-owned businesses in fiscal year 2016 is expected to generate $117.6 million in net fiscal benefits to the state over the next 10 years – excluding local property taxes generated for each project.

To support FDI and business growth, TNECD has devoted non-tax incentives for the 30 projects analyzed by CERT.

Considering these non-tax incentives as the state’s investment, CERT estimates the annual rate of return in FDI projects in fiscal year 2016 is expected to be 56.4 percent as a result of the anticipated economic and fiscal impacts. CERT’s model treats TNECD’s non-tax incentives and state support as the initial investment and net fiscal benefits to the state as the return on investment.

The payback period – or the length of time it will take the state to recover the costs of incentives from the additional state revenues generated by the projects – for the state’s initial investment is estimated at 2 years, according to CERT.

 

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