Business Facilities - April 2008 - (Page 12)

COVER STORY Businesses On The Move Upstate New York is one area that is often overlooked. Our clients find that many of the municipalities provide environmental, educational, and economic benefits that meet their needs. Utah also actively recruits businesses and can be a good fit for companies seeking to set up operations. BF: What foreign countries are U.S. companies currently finding to be good choices for business locations, and why? Do you see this changing over the next 10 to 15 years? POWELL: As U.S. companies continue to expand their operations globally, India, China, Vietnam, the Philippines, and Eastern Europe remain solid choices. The cost of doing business is generally highly competitive and they each have a plentiful employee base. India’s government is continuing to develop its infrastructure and ports, and it places a high emphasis on educating and developing its workforce. Vietnam and the Philippines are developing their workforces and we’ve seen several companies setting up operations there. In the future, as the world economy continues to expand and supply chain needs develop, we expect South America, Mexico, and Africa to become increasingly attractive locations for companies. In fact, the results of KPMG’s 2008 Competitive Alternatives Study, which compares business costs in 136 cities in 10 countries in North America, Europe, and Asia Pacific, bears that out. Of the countries studied, Mexico is currently the most cost-effective place to conduct business, with costs approximately 20.5% below the U.S. baseline. As an emerging industrialized country, 12 APRIL 2008 it is well-positioned to experience strong growth in the years ahead. Other countries that rank high in the study across a range of factors include Canada and the United States, partly reflecting the weaker U.S. dollar. BF: Companies expanding in the United States have grown to expect a bevy of financial incentive offers, even competing offers. Do locations in other countries play the incentives game differently? Do you see a substantial difference in the quantity and quality of financial incentives offered by locations outside the United States, and does a U.S. company looking abroad need to adjust its expectations? POWELL: In the United States, the states have control of credits and incentives. In other countries, incentives are administered differently. And so, the political structure and the financial flexibility of each country’s government play a huge role in how incentives are handled. In Europe and other parts of the world, incentives are very specific to a country or region. Understanding the process in each country can provide opportunities for incentive solutions for site selection projects. Within the 25 member countries of the European Union (EU), the use of incentives is governed by the European Commission (EC) in Brussels, Belgium. The EC sets ceilings for the amount of incentives that can be provided in any location within the EU based on the location’s per capita income relative to the EU average. This means that the level of incentives allowed is higher in the less affluent regions of the EU, which include the central and eastern European countries that joined “ As the world economy supply chain needs continues to expand and develop, we expect South America, Mexico, and Africa to become increasingly attractive locations for companies. —Hartley Powell ” in 2004. The ceilings are expressed in percentage terms, and incentives may usually not exceed a certain proportion of a project’s capital expenditure or of the payroll for newly created jobs within a certain period. This system may seem simple and appears to leave little room for variation, but that is not necessarily the case. Many companies make unwise choices by taking regulations at face value, believing that “if we invest in Poland or Hungary, we will get 35% or more back in cash grants.” Two important points need to be understood, though, to make sense of incentives in the EU. First, the ceilings are limits intended to level the playing field among regions in the EU. However, no company or investment project is guaranteed any amount of incentives. Even in locations where the incentive ceiling is high, a project may not qualify for incentives or may receive an amount well below the maximum allowed. Some countries, such as Estonia, hardly provide any incentives at all, even though under EC regulations they are allowed to do so. Additionally, each country has a large variety of incentive programs, both nation-

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Business Facilities - April 2008 Contents First Word Snapshots Corporate Moves: Ohio Businesses On the Move Corporate Moves: Nebraska If You Build It, They Will Come A Tale of Two Industries Economic Transformation In the Islands Diversity: A New York State of Mind Growing in the Sun Key Kansas Industries Get a Boost How To Choose the Right Commercial Real Estate Broker Missouri Downtowns Dare to Dream Advertiser Index Ask the Expert

Business Facilities - April 2008

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