A drive along the interstates and back roads of the Palmetto state highlights not only its changing landscape — from the highlands and Piedmont to maritime forest and salt marsh — but also its manageable size, revealing that South Carolina is as diverse as it is compact.

By Lydia Dishman
Contributing Writer

A drive along the interstates and back roads of the Palmetto state highlights not only its changing landscape — from the highlands and Piedmont to maritime forest and salt marsh — but also its manageable size, revealing that South Carolina is as diverse as it is compact.

The economic landscape is just as diverse. Tucked into these 30,000 square miles are a multitude of businesses that encompass both startups and well-established firms in virtually every industry sector. Among them are 637 foreign-affiliated companies, 455 of which are majority-owned, according to data provided by the S.C. Department of Commerce.

Doug Woodward, an economist at the University of South Carolina’s Moore School of Business, has studied the fluctuations of the local economic landscape for several decades. He says foreign investment in South Carolina is not a new fad; in fact, international chemical companies started arriving in the 1960s. Woodward says the Upstate is home to the largest concentration of German investors — he jokes that the Interstate 85 corridor there is called the autobahn — but says international investment has spread everywhere, including to smaller cities such as Camden, home to the Chinese manufacturer Haier Corp., and most recently to Orangeburg County, with Jafza International’s 1,300-acre free-trade zone.

Twenty-one percent of manufacturing jobs in South Carolina are supported by U.S. subsidiaries of foreign companies. The collective result of this investment puts South Carolina in an enviable position, especially during an economic downturn.

The draw
The weak dollar tops the list of reasons for foreign companies to locate operations in the United States. This is not new; the dollar has lost more than 30% of its value in the past several years against other major currencies.

But location also tops the list for South Carolina. From Columbia it is just about 650 miles to New York City or Miami. The S.C. Department of Commerce has found that, with the national population shifting to the South, “companies choosing South Carolina are closer to their markets and benefit from efficient truck and rail routes and top-quality port and airport operations. A South Carolina manufacturing or distribution site is within a day’s drive of half of the nation’s fastest-growing markets. South Carolina is also located within 1,000 miles of 35 states and roughly 75% of the total U.S. population.” These strategic advantages have been recognized by such businesses as BMW, Bosch and Michelin and recently captured the attention and dollars of a Middle Eastern company.

Jafza International managing director Chuck Heath spoke in the Charleston Regional Business Journal of his company’s decision to bring the Dubai logistics and distribution center to South Carolina. “I didn’t just wake up in the middle of the night and say, ‘Let’s go to Orangeburg,’” he said. “We had people on the ground, unbeknownst to anybody, canvassing the Southeast as a whole, and individual states specifically, looking at everything from demographic trends to the available work force to how business-friendly a state was to the number of multinational companies who were relocating or making new investments in the area.

“In the end, we came to equate South Carolina and Orangeburg with the conditions we had in Dubai when Jebel Ali was under development. The state has reliable power, sufficient labor and quality infrastructure. In fact, you’re already pretty close to the model we developed in Dubai.”

Kara Borie tells a similar story. “Companies are surprised to see the (relatively low) price of land and the availability and reliability of energy,” she says. Borie, a spokeswoman for the S.C. Commerce Department, says this is an incentive especially for those, like the Chinese, who are used to paying lower wages than Americans. “The cost of wages is offset by the price of land and energy,” Borie says.

Working it
Despite all the positives, some investors do get away. Last year, Toyota Motor Corp. picked Tupelo, Miss., as the place for its newest 2,000-worker plant, and Tennessee lured Volkswagen to Chattanooga, snagging a factory for the area.

Hal Johnson, executive director of the Upstate Alliance, recently returned from a trip to seven Chinese cities to explore opportunities for more Chinese businesses to locate in South Carolina. Johnson says describing the sheer size of office park and manufacturing facilities being constructed in China would be impossible. He believes South Carolina needs more “megasites” to entice larger developments.

Borie insists that plenty of acreage and spec buildings are available in practically every county in the state. She points to the agency’s Web site, which states, “The Department of Commerce can readily provide information about some 300 buildings and almost 400 sites.”

Looking forward
“Foreign direct investment brings long-term benefits to a host economy,” says USC’s Woodward, who cites job creation, upgraded technology, management and organizational competence, higher wages and higher productivity among these benefits.

He’s also outspoken about stemming the tide of complaints about American jobs being shipped overseas. “In-sourcing,” he states emphatically, “We need foreign investment; it is the solution to outsourcing.”

Of the previously mentioned 21% of S.C. manufacturing jobs supported by U.S. subsidiaries of foreign companies, more than one-fifth depend on exports.

An even more important statistic according to Woodward is that South Carolina ranked ninth in exports among 54 states and territories last year. He says shipping products out of the country is a way for the local economy to stay strong during lean times.

The “autobahn” seems to extend to the air and sea; Germany replaced Canada as South Carolina’s largest export market in 2007, according to Woodward. His research shows that the Germans purchased more than $3.76 billion in products, including vehicles, machinery and plastics.

Woodward says continued concentration on a variety of economic goals is the real ticket to the state’s long-term prosperity. That includes raising per capita income and developing competitive clusters.

“In the ’90s, people were wringing their hands, but I really believe we benefited from reaching out to (international) companies,” he says. “Now we need to redouble our efforts. We should be building up entrepreneurs and promoting exports. Other states are more aggressive. We’ve got to be out there and smart, and never let up.”

The china factor
To hear Nelson Lindsay tell the tale, how the Chinese appliance manufacturer Haier came to locate a plant in Camden was nothing short of serendipity. “It’s an unusual story,” says Lindsay, Kershaw County’s economic development director. “It started at a cocktail party when the former chairman of the economic board ran into Ron and Britt Vergnolle.”

At the time, the couple owned a Chinese/U.S. investment firm. They were working with Tsingtao-based Haier Company Ltd., which was looking to locate a refrigerator manufacturing facility in South Carolina.

“He said, ‘How about Kershaw?’” Lindsay recalls. “The rest, as they say, is history.”

That was in 1999, when Kershaw County scored big with the Haier Group. The first Chinese company to invest in South Carolina initially announced it would sink $30 million into a refrigerator manufacturing plant but that number reached $40 million by the end of the year, according to information provided by the S.C. Department of Commerce. Today, a little less than a decade later, Department of Commerce research indicates there are 11 Chinese companies whose investment totals more than $280 million in the state.

This investment has created more than 1,400 jobs in the state, including more than 100 Haier added when it announced a $6 million expansion to accommodate production of a new convertible, bottom-mount refrigerator last year. Though this is a fraction of the textile jobs lost to China, it could be the start of a trend reversal.

Department of Commerce officials reference a recent article in the Los Angeles Times, which said that for years, investment between the United States and China flowed one way, with American companies spending billions in the Asian nation. The Beijing government’s $5 billion stake in Morgan Stanley and $3 billion investment in the private equity firm Blackstone Group brought China’s overall investments in U.S. firms to $9.8 billion in 2007, up from $36 million the year before, according to Thomson Financial.

The Palmetto state has been aggressively pursuing more investment.

South Carolina’s Department of Commerce established an office in China in 2005. Kara Borie, a spokeswoman for the department, asserts, “Since that time, South Carolina has witnessed a lot of success in building relationships with China, growing exports and attracting Chinese investment.”

Additionally, she notes, the agency’s office in Columbia works to encourage S.C. businesses to export to China.

Those efforts are paying off. China purchased more than $700 million of goods from South Carolina last year. S.C. Department of Commerce tracking indicates that those export figures are growing. In the first quarter of 2008, exports have risen 28% in comparison to the same time last year.

Not content to rest on its laurels, the S.C. Department of Commerce will lead another trade and investment mission to China, Sept. 4-13, for companies looking for export sales opportunities.

Borie also points to a May 2007 “memorandum of understanding” South Carolina signed with the Chinese government, maintaining that this is a preferred location for Chinese investment in the United States.

“This has opened a lot of doors for Commerce’s recruitment as Chinese companies wanting to invest abroad typically have to get the blessing of the Chinese government,” she says.

Another delegation from the Upstate made a second foray in May. The president and CEO of the Upstate Alliance, Hal Johnson; Vivian Wong, founder of the Global Trade Consortium; Thomas Wong and Stan Vincent, both consortium board members; Greenville Mayor Knox White; and Frank Davis of the Greenville law firm Haynsworth Sinkler Boyd toured seven cities to explore the locating of Chinese businesses in South Carolina.

Johnson said the trip promoted a better understanding of how to do business in the United States — sometimes a formidable task. White, an immigration lawyer by trade, explained the pitfalls of dealing with the law’s complexities. “It doesn’t fit the global economy well,” he says. “You’ve got a limited basket of work visas.”

White says the Chinese are even more limited by the type of visa they can apply for.

White lauds Vivian Wong’s Global Trade Center facilities in Greenville, which include an exhibition hall where companies can learn about business practices and allay any fears about doing business in the United States.

“Vivian is providing a place to set up a small operation and be introduced to the legal, banking and real estate community so Chinese companies can feel at home,” White says.

In addition to working to build relationships, South Carolina also has offered incentives to make investment more attractive. The state requires no state property tax, local income tax, inventory tax or sales tax on manufacturing machinery, industrial power or materials for finished products. 

Lindsay says that, in addition, Kershaw County offered Haier property tax breaks and assistance with infrastructure. But he adds, “We didn’t do anything more for them than any other company (that locates here).”

The Upstate Alliance’s Johnson says he is confident that all these factors soon will add up to more economic benefits for South Carolina. White agrees, saying, “We have a leg up in terms of being on their radar screen in a way that others don’t — from reaching out and other foreign investors in the area. That is our strongest card to play.”