AEDC defends foreign office costs

In June, state legislators questioned contracts made by the Arkansas Economic Development Commission in foreign countries, particularly China and Japan, which prompted a response from the agency’s director, Maria Haley.

TalkBusiness.net, a content partner with The City Wire, was the first to report on this story.

At a Wednesday Legislative subcommittee meeting , Haley responded publicly to lawmakers’ inquiries with a written report that also shed light on a number of other foreign trade and investment activity undertaken by AEDC.

Haley’s report spells out that Arkansas is shifting its state strategy from "automotive to aviation/aerospace and technology recruitment."

CHINA & JAPAN
Her letter informed the committee that through its contract with Yuan and Associates, Arkansas has been promoted to more than 400 Chinese companies as well as a number of senior level government officials.

AEDC opened its first China office in 2008 and state economic leaders have confided publicly and privately that they view investments in and from China as a major undertaking for Arkansas’ economic development efforts for the next quarter century.  The agency’s Chinese activities have included identifying targeted industries, creating promotional materials in Mandarin, identifying potential sister cities for collaboration, and qualifying investment opportunities.

China is relaxing its rules and thresholds for outbound investment, but to date, North America only has about 3% of that investment, the report stated.

"The state’s strategy for attracting a share of the 3% of investment from China to North America entails a ‘push-pull’ mechanism," Haley said in her letter.

"The China Office will ‘push’ Chinese investors to Arkansas through a series of branding programs in cooperation with Chinese government agencies, promotion organizations, and business community. At the same time, the AEDC will ‘pull’ Chinese investors through attractive incentives, flexible policies, and a customized business service model designed for Chinese investors," the report also stated.

Haley discussed in greater detail AEDC’s Japanese office, which is headed by former Hino executive Hideichiro Chikahiro. The office, which started in 1985 and was reorganized in 2007, "has been instrumental in the recruiting efforts of Mitsubishi Power Systems Americas," Haley told lawmakers. Mitsubishi has announced its intent to build a $100 million wind turbine manufacturing plant in Fort Smith ultimately employing 400 workers.

There are 18 Japanese companies in Arkansas employing close to 5,500 Arkansans.

EUROPE & ELSEWHERE
While Asia represents fertile investment opportunities for Arkansas, European interests remain important to state employment. European-owned businesses account for roughly 65% of all foreign investment in Arkansas, according to the AEDC report.

There are 30 German-owned companies; 20 French-owned companies; and 8 with connections to the United Kingdom. All told, those three countries provide more than 8,000 Arkansas jobs.

Collectively, all foreign investors in Arkansas employ more than 30,000 of the state’s citizens. They lean heavily toward the manufacturing sector in areas such as industrial machinery, fabricated metals, rubber and plastics. Foreign investors account for 10.2% of total manufacturing employment in Arkansas and 3.4% of the state’s total private industry employment.

EXPORTS
Haley also provided insight on Arkansas exports and trade, which includes 1,484 Arkansas companies. Of those firms, 77% are considered "small" or "medium-sized" businesses with fewer than 500 employees each.

Arkansas ranked 36th in the U.S. in the value of total exports in 2009, according to AEDC. Those exports were valued at $5.3 billion.

But last year was a tough year due to the recession. The state’s volume of exports declined 8.8% from 2008 to 2009; however, the report notes that total exports in 2009 were 66% above total exports in 2004.

Aircraft and parts accounted for 32% of that export activity. Machinery totaled 9% of exports followed by cereals at 8% and organic chemicals at 6%.

And Arkansas’ trading partners may surprise.

The state sends 20% of its exports to Canada, a $1.1 billion destination market. Mexico, at 10%, is the second largest export market for Arkansas products followed by France at 6%, China at 4% and the U.K. at 4%.