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Bright start: Foxconn Technology Group chairman, Terry Gou, and former governor of Wisconsin, Scott Walker, at the groundbreaking ceremony for the Foxconn facility in Mount Pleasant in 2017


economic development impact of the specific investment, researchers at the Brookings Institution, aWashington DC-based think tank, developed an inclusive incentives ‘scorecard’ to give policy-makers a better chance to make every penny count. This is even more vital for cash-strapped local authorities in the wake of the Covid-19 pandemic. “An inclusive incentives scorecard can help


cities better align economic development poli- cies to drive inclusive growth,” researchers Lourdes Germán and Joseph Parilla wrote in a research note in May. “This tool helps decision- makers better target incentives to generate inclu- sive growth by focusing on four areas of business behaviours: goodjob creation; skills trainingand workforce development; job access and sustaina- bility; businessownership and governance.”


Economicsense No matter how finely targeted incentives are, they are pointless if the economics of the pro- posed investment don’t add up. Foxconn’s failed splash in Mount Pleasant, Wisconsin is a prime example. In 2017, the company pocketed more than $4bn in tax incentives to produce advanced LCDdisplays in a deal that then-presi- dent Donald Trump touted as the “Silicon Valley of the Midwest”. However, the region lacked a local supply


chain for LCD displays and eventually the pro- ject was dramatically scaled downin 2021 after years of little progress. The company reduced its initial committed investment of $10bn to just $672m, while state authorities reduced the incentive package accordingly. “Incentives can serve as a powerful tool in


the site selection process – but by no means are they a silver bullet,” says Jay Garner, president and founder of Garner Economics and chair of the Site SelectorsGuild. “A competitive location


June/July 2021 www.fDiIntelligence.com


must have theworkforce, real estate, infrastruc- ture and other essential elements required by the prospective company.” Mark Williams, founder and president of


the site selector firm Strategic Development Group, agrees: “Most site selection decisions are based on the fundamentals of a site, the busi- ness case of a site itself.” He adds, however, that after locations are narrowed down on the basis of these qualities, incentive negotiations begin and at this point they become a “veryimportant means of differentiating sites from each other”.


Happyreturns Whenthey succeed, incentives can produce very high returns on investment, as has been the case with BMW’s production site in Spartanburg, South Carolina. In 1992, the state offeredBMWan incentive package of $150mfor the promise of 2000 jobs, includinganextensive employee training programme.BMWwould fol- low up by investing in another 13 projects in South Carolina between 2003 and 2021, creat- ing 3455 jobs, according to fDiMarkets data. “When you look back, the return on that


investment in the beginning has been made many times over in terms of economic output and jobs created,” Mr Williams says. The debate around incentives continues.


As competition for investment intensifies, incentives are a way for local authorities to add value to their propositions. However, failed cases such as Amazon’s HQ2, together with the fiscal distress left by the Covid-19 cri- sis, show a more targeted approach is needed. Though incentives may be less consequential than the business basics of a location when attracting investment across US states, depend- ing on howthey are used, they can profoundly influence the trajectory of a community, for better or worse.■


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