Colliers Special Report: Why South Carolina will Continue to be a Favorite for Foreign Investors

South Carolina may have received greater national attention for many of its economic developments announcements in recent years, especially its foreign direct investments (FDI), but anyone who’s been watching the state knows that South Carolina has dominated FDI for a long time. Billboard names like Michelin, BMW, Mercedes, Fuji, AG Bayer, Hoffman La Roche, Adidas, and now Volvo have joined a long line of foreign investors who have chosen to build manufacturing facilities, distribution centers and headquarters in this Southern state. While the state’s more recent efforts to attract foreign companies have played a major part in sending South Carolina to the top of FDI rankings, the foundations of today’s success can be traced back through the state’s history and development, indicating that the recent success is only the start to further FDI growth.

South Carolina’s recent streak of success in attracting major foreign investment can be seen most immediately in the state’s dominance in three primary drivers. While every company has different methods for choosing a new location, three factors are at the top of nearly every list: strong workforce, international presence, and global connectivity. All three factors allow companies to expand their global reach, connecting them to suppliers and customers – and South Carolina checks all three boxes.

Here’s how:

• Strong Workforce

ReadySC, a worker training program established in 1961 by the General Assembly, partners with the state’s technical colleges to provide companies with a skilled labor force that can be trained to their needs months in advance, allowing new companies to begin production immediately. South Carolina also has the second-lowest unionization rate nationwide, a common factor in determining a state’s business friendly environment.

• International Presence

South Carolina has a long history of success with foreign investment. The continued success of the companies already here attracts others considering South Carolina as the next location to expand their business. Additionally, South Carolina’s Department of Commerce (SCDC) actively pursues investment of foreign companies. The department provides assistance and consultation on each step of the process, from finding a site and labor to help with importing and exporting their products. To better assist foreign companies, the SCDC has set up four international offices in Germany, China, Japan and India.

• Global Connectivity

South Carolina’s land, water, and air transportation systems give companies the ability to connect easily with regional, national, and global markets. South Carolina has effectively leveraged the use of Foreign Trade Zones (FTZ). FTZ provide favorable treatment of duties that are cost effective and efficient for foreign companies to import raw materials and goods for production and export finished products to consumers. Adding to this ease of transport is South Carolina’s central location on the Eastern seaboard. In a report from the South Carolina Department of Commerce (SCDC), two-thirds of the nation’s population is within a 24-hour drive of Columbia, the state capital. South Carolina’s expansive transportation network allows companies to efficiently and quickly transport their products from facility to customer.

 

 

 

 

How Did South Carolina Become a Leader in FDI?

While the current forces driving foreign investment in South Carolina can be summarized as location, labor force and business climate the historical forces that made South Carolina into a powerful contender in FDI can be traced back to the turn of the nineteenth century – or, more accurately, to the emergence of the state’s textile industry.

In South Carolina, a convergence of raw materials, cheap labor, cotton and hydroelectricity spurred industrialization. Textile plants began popping up along the rivers from Greenville to Columbia, followed by the population and infrastructure to support them. For decades, South Carolina’s textile industry sourced its materials and machinery from within the nation, largely due to the ease of transport and lower costs.

All of this changed in the mid-twentieth century when, in the early 1950s, Milliken’s textile factories began relying on foreign textile machinery to produce their products due to the durability and superior technology of European machines. Milliken’s shift in technology opened a new market for foreign textile machine manufacturers. The size of Milliken in the Spartanburg area and the sheer number of textile mills in the Upstate created a niche for the manufacturers, luring them to South Carolina to be close to the companies that use their products. In 1960, Greenville claimed the title of Textile Capital of the World. Soon after, Swedish companies like Rieter Corporation and Sulzer Ruti came to Spartanburg, and in 1965 a German company, Karl Menzel Maschinenfabrik, followed suit, setting up a production facility which has grown significantly since then. Between 1960 and 1970, many smaller foreign companies began trickling into South Carolina. This foreign investment would pave the way for not only the Upstate, but the state as a whole.

In the 1970s, states began competing for the attention of foreign companies considering expansion in the United States, using economic development incentives to increase their attractiveness to foreign investors. The South Carolina Development Board took the initiative in finding and supporting new foreign investments for the state. To improve visibility and accessibility in foreign countries, the Development Board opened an office in Germany in 1975. In its outreach, South Carolina leveraged the success of the early foreign investors from the 1950s and 1960s as proof that the state was a profitable place to invest.

This led to a number of foreign companies moving into the state between the late 1970s and 2011, including AG Bayer (1978) in Charleston, FN Manufacturing (1982) in Columbia, Bosch (1985) in Anderson, Beneteau (1986) in Marion, Fuji (1988) in Greenwood, Nan Ya Plastic (1990) in Lake City, Hoffmann- La Roche (1991) and Honda (1997) in Florence, and Haier (2000) in Camden.

In 1975, Michelin, a French-based tire company, opened two plants, one in Anderson and another in Greenville, kickstarting South Carolina’s modern automotive industry. These plants were such a success that after thirteen years, Michelin located its North American headquarters in Greenville, demonstrating that South Carolina success was beyond the factory floor. Currently, Michelin has ten manufacturing plants and employ nearly 10,000 people.

This would be very important when BMW was making its decision several years later. BMW’s decision to come to Spartanburg, South Carolina was influenced by many factors including the often overlooked FTZ. Spartanburg is now BMW’s largest global production facility.  In March of 2015, the South Carolina Port Authority exported its 2 millionth BMW car made in South Carolina and in early 2016 BMW announced that the export value of its passenger vehicles through the Port of Charleston in 2015 totaled $9.8 Billion, confirming the company’s South Carolina facility as the leading U.S. automotive exporter by value.

In 1993, the South Carolina Development Board became a cabinet post and was renamed the South Carolina Department of Commerce (SCDC). With a new charter, the SCDC was able to improve their marketing strategy for Foreign Direct Investment in South Carolina. The SCDC opened up its second international office in Japan in 1983. Since then, two more offices have opened, one in China (2005) and another in India (2014). They now offer companies support in several areas of the process by advising on location selection, business costs, and current incentives available to those who choose South Carolina for their next business venture. Most recently, Commerce has created a senior level department, International Strategy and Trade that recognizes the importance of global relationships.

 

 

 

South Carolina’s FDI in the 21st Century

Recent foreign investment announcements show that South Carolina is continuing to build on its historical success with FDI. The additions of Continental Tire in Sumter County (2011) and Giti Tire in Chester County (2011) launched the state into becoming the number one tire exporter nationwide. Then, thanks to leadership from the South Carolina Department of Commerce, Volvo Car Group announced a $500 million initial investment to build their first North American factory in the Lowcountry. Once the facility begins operations in 2018, it will produce 100,000 cars a year, generating 2,000 new jobs over the next ten years.

In addition to the factors that have historically fueled foreign investment in South Carolina, the state has found further success with FDI in the twenty-first century through expansion. New FDI announcements for 2015 were mainly expansions of foreign companies already calling South Carolina home, including Mercedes Benz, Husqvarna North America, and Kronotex USA.

Although FDI in South Carolina attention is often focused on the automotive industry, the state has over 1,200 foreign companies in a diverse set of industries from over 40 countries. At yearend 2015, South Carolina recruited $2.35 billion in FDI, 56% of the state’s capital investment, and created more than 6,300 new jobs. In fact, the state ranked first in the nation for jobs linked to FDI, according to the 2015 IBM-plant Location International Report, the third time South Carolina has taken the top spot in the past four years.

In addition to the strong labor pool that many foreign companies cite when choosing to move to South Carolina, the state has gained a reputation for the welcoming attitude of South Carolinians – and increasingly, companies are attributing their decision to move to the state and the success they have found there to this hospitality.

In their announcement with South Carolina Commerce, Volvo’s CEO, Lex Kerseemakers, said, “We were impressed with the friendliness, work ethic and passion of the people in the Charleston area.”

In 2013, Michelin North America Chairman and President Pete Selleck was quoted as saying, “South Carolina plays such an important role in our company’s global business strategy. It’s a testament to the business-friendly climate in the state and the dedicated, productive and skilled workforce that serves as the engine behind our success.”

Foreign Direct Investment Outlook

Given the state’s historical strength in foreign investment and its recent FDI successes in the twenty-first century, South Carolina well positioned to retain its number one position in FDI. As foreign companies who have already invested in the state announce expansions and further investment, the state’s numerous FDI endeavors are able maximize the success of current businesses to attract new investors, as happened with Volvo. More importantly, while the state has gained a solid reputation in the automotive industry, the diversity of foreign companies finding success within its borders will continue to pique the interest of a wide variety of industries. The factors that have been driving the automotive industry’s success in South Carolina – the labor pool, the global connectivity, the international presence – are present across the state, meaning that South Carolina’s FDI potential has only barely been tapped. In short, South Carolina has solidly leveraged its past success into future opportunity and shows every indication that it will continue to do so as its stature on the world stage grows.

For more statewide commercial real estate news check out our market reports at: www.colliers.com/southcarolina/insights

 

To download the complete report: Why South Carolina will Continue to be a Favorite for Foreign Investors.

 

 

 

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