FINANCIAL TIMES - February 9 1999
US: Investors head for Europe By Shilpa Mohan in Washington
Defying conventional economic wisdom, US manufacturers last year allocated 65 per cent of their foreign direct investment (FDI) to high-wage and mature labour markets in preference to low-wage developing countries.
The finding, released in a research report by Deloitte Consulting, the international management consultancy, reported that Europe remained the largest recipient of US manufacturing FDI, receiving a total of $16.4bn.
The UK received the largest share of US investment in Europe with allocations amounting to $5.5bn.
"Reducing currency risks and easier cross-border transactions facilitated by the introduction of the euro as well as further deregulation of industry will continue to attract US manufacturers to invest in the region," said Michael Fradette, practice director of manufacturing in the Americas at Deloitte Consulting.
The stability of high-wage markets attracted many businesses in light of the frequent volatility of developing markets, particularly in Asia, last year. Well developed infrastructure, undeveloped niche markets, and skilled labour were other key elements that made high-wage markets a prime choice for US multinationals expanding abroad.
Geography appeared to be a key component in US multinational decision-making. Canada, the second largest recipient of US manufacturing investment, captured $4.2bn of FDI, tripling the amount of foreign direct investment compared with 1997.
To the south, Mexico, a popular emerging market, captured $2.9bn, the first increase in its US direct investment since 1994.
Despite the turmoil of the Asian market last year, not all Asian markets experienced a withdrawal of US foreign direct investments.
Singapore captured the largest share of US investment in Asia with roughly $2.2bn, outdoing China, Hong Kong, South Korea, Taiwan, Australia and New Zealand which all experienced a slight growth in US investment by the beginning of last year.