Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: FRIDAY, December 31, 1993                   TAG: 9312310087
SECTION: BUSINESS                    PAGE: A-11   EDITION: METRO 
SOURCE: San Francisco Chronicle
DATELINE:                                 LENGTH: Medium

THEY DON'T CALL IT THE "LAND OF OPPORTUNITY"

After hitting a 20-year low in 1992, foreign direct investment is rebounding fast, according to the Commerce Department. In the first nine months of this year, nearly $21 billion flowed into the United States, compared with slightly more than $2 billion for all of last year.

A recent survey by Joseph Carson, chief economist at Dean Witter Reynolds in New York, uncovered 40 major announcements in 1993 by foreign firms investing in new plants or plant expansions in the United States. Although Japanese firms stood out on the list and many of the investments were in Southern or Southwestern states, Carson found the plans covered a wide variety of industries, source countries and destination states.

This flow of investment, Carson said, "brightens the outlook for U.S. manufacturing, as it brings new capital and technology, which will help to strengthen, modernize and expand our industrial base."

Foreign direct investment in the United States totals about $500 billion, up from $126 billion in 1980. It represented about 2.7 percent of U.S. domestic wealth in 1991, slightly more than double the fraction in 1980.

Attracted by the low value of the dollar, the growing U.S. market and the high degree of political stability, "foreign direct investment will continue to improve in the United States through the end of the decade," said Mark Zandi, chief economist at Regional Financial Associates in West Chester, Pa.

Industries that stand to gain in 1994, the survey said, include auto parts, machine tools, building materials and engineering and construction.

Japanese auto manufacturers have led the way with the continued expansion of their Midwest and California auto plants. BMW and Daimler-Benz announced plans to begin producing cars in South Carolina and Alabama, and Audi may follow suit. Carson estimates that auto and truck production by these Japanese and European "transplants" could soar by 750,000 vehicles between 1993 and 1996.

Their orders and sales will ripple through the U.S. economy, adding as much as $30 billion in spending over three years, he figures.

Foreign investments will flow far beyond the auto industry. The German chemical giant BASF is building a plant in Louisiana. Formosa Plastics is building a factory in Houston. Gallatin Steel is building a mini-mill in Kentucky. Matsushita Microwave will open a facility in Illinois. And the list goes on.

A key factor in the foreign-investment boom is the weak value of the dollar, which makes U.S. equipment, land and labor relatively cheap by international standards. Hourly compensation in the United States is running slightly below that of Japan and 40 percent below that of Germany.

In the early 1980s, by contrast, U.S. industry fled overseas to escape an overvalued dollar, leading to what many observers decried as a "hollowing out" of U.S. manufacturing.

Today the rebounding economy makes the United States a more attractive market than recession-wracked Japan and much of Europe. And with the successful conclusion of NAFTA, investors in the United States will gain access to the entire North American market with its skilled labor and excellent transportation infrastructure.

Finally, political stability works to America's advantage.

"If you look at the political situation almost everywhere in the world, it's very tenuous," said Zandi. Pointing to problems in Eastern Europe, Germany's struggles with unification, Japan's political turmoil and South America's continuing instability, he said "the U.S. is head and shoulders above (almost) any country in the world."