Direct Foreign Investment: A Wisconsin Perspective

1. Direct Foreign Investment: A Wisconsin Perspective Wausau, WI September 27, 2011 Dr. David J. Ward CEO and Founder NorthStar Economics, Inc.

2. Presentation Outline Global Economic Overview Background on DFI US/WI The UW Task Force on International Economic Development The DFI Opportunity Curve Questions & Discussions

3. The Global Economy • World Population 2011 7.0 B • U.S. Population 2011 308 M • World Economy (GDP) 2010 $65.0T • U.S. GDP 2010 $14.5T • EU GDP 2010 $16.2T • China GDP 2010 $6.0T

4. U.S. Share of Global GDP • 1950 35% • 1970 27% • 2010 22% • US GDP has steadily risen from 1950-2010. Higher growth rates in emerging countries have grown the global GDP pie and marketplace.

5. The Global Middle Class:Where the Markets AreSource: Brookings “Size of the Global Middle Class” 2011 Table 1: Size of the Middle Class, Regions (millions of people and global share)

6. Key Markets for World Middle Class • Food – protein – meat, fish, dairy • Feed – China now has 700M pigs and has become a major buyer of US corn • Fiber – clothing, packaging, personal care products • Fuel – oil, gas, alternative fuels

7. US Economic Opportunity in The Global Economy • Exports – Another slide show in itself • Direct Foreign Investment – what we are talking about tonight

8. The US Economy is Global • US Exports in 2010 $1.28 T • US Imports in 2010 $1.91 T • DFI in the US in 2008 $325 B • DFI stock in the US in 2008 $2.1 T

9. The Wisconsin Economy is Global • Exports in 2010 $19.8 B • Foreign Firm Operations 2009 470+ • Major Foreign Investments by WI Firms Schneider Transport - China Manitowoc Corp. - China

10. US Direct Foreign Investment

11. US DFI Statistics • Stock of DFI in US $2.1Trillion • 2008 DFI in US $325Billion

12. Types of DFI in US • Reinvestment of earnings of foreign owned business • Acquisition of US assets – land, buildings • Invest and Build US Subsidiary • Acquire US company or division

13. Fears and Concerns about DFIin the US Economy • Foreign countries will steal our technology • Foreign countries will influence our government and politics • Foreign firms will control the economy • Fears are highlighted by the Japanese real estate investment in US assets in the 1990s and current Chinese ownership of US debt

14. Foreign-Owned Operations Economic Assets Source: Wisconsin Department of Commerce

15. 470 statewide 27 countries represented Operations are located in 51 of 72 (71%) Wisconsin counties Total employment is 60,000+ Economic Assets Foreign-Owned Operations Source: Wisconsin Department of Commerce

16. Employment in Foreign-Owned Operations by Industry Economic Assets SIC Codes Source: Wisconsin Department of Commerce, SIC Codes

17. Origin of Foreign-Owned Operations in Wisconsin Economic Relationships Source: Wisconsin Department of Commerce

18. Examples of DFI in Wisconsin • Alliance Laundry Systems – 2004-05 $375M IPO turns into $450M DFI as Ontario Teachers Retirement buys the company • Fincantieri acquires marine assets of Manitowoc Corp – 2009 for $120M • Seda International Packaging locates factory and North American HQ in Kenosha – 2011 for $76M

19. Examples of DFI in Wisconsin • Simonswerk Group sets up office and distribution center in Whitewater - 2011 • Decision Insight Information group selects New Berlin as its new HQ site - 2011 • Thomas Magnete GmbH to open manufacturing plant in Brookfield – 2011 $3 M investment

21. International Assets & Opportunities Scan • Statewide • Economic assets • Human capital & culture • Economic relationships • University of Wisconsin System assets and relationships • Growth opportunities

22. International Assets & Opportunities Scan • Approach • Initial high-level statewide scan and communication • UW System assets and relationships • Economic assets • Internationally significant assets and economies statewide • Human capital and culture • Economic relationships • Utilize New North as a Pilot Project • Prepare compelling documentation of resources

23. International Assets & Opportunities Scan • Purpose • Take initial inventory of the UW System and State international expertise and assets • Key questions • What international relationships exist and where? • What is the international expertise of the UW System and State? • What are our globally significant assets? • How do our assets and relationships align with emerging opportunities and growth regions?

24. Ethnic Heritage Human Capital & Culture Source: The Atlas of Ethnic Diversity in Wisconsin, 1998

25. International Assets & Opportunities Scan • Statewide • Economic assets • Human capital & culture • Economic relationships • University of Wisconsin System assets and relationships • Growth opportunities

26. Wisconsin’s Sister Cities/States & Trade Focus Economic Relationships Source: Wisconsin Department of Commerce

27. International Assets & Opportunities Scan • Statewide • Economic assets • Human capital & culture • Economic relationships • University of Wisconsin System assets and relationships • Growth opportunities

28. UW System Alumni Living Abroad UW System International Assets Sources: UW Eau Claire, Green Bay, Madison, Milwaukee, Oshkosh, Platteville, and Stout

29. UW System International Students UW System International Assets Sources: UW Madison, Milwaukee, Stevens Point; 2004-2010

30. UW System Students’ Study Abroad Destinations UW System International Assets Sources: UW Madison, Milwaukee, La Crosse, Platteville, Whitewater; 2006-2008

31. Initial Synthesis Where We Have the Greatest Existing Relationships & Focus

32. Initial Synthesis Key International Assets

33. International Assets & Opportunities Scan • Statewide • Economic assets • Human capital & culture • Economic relationships • University of Wisconsin System assets and relationships • Growth opportunities

34. Worldwide Top 30 GDP Growth Opportunities Source: World Bank, 2010

35. Worldwide Top 30 GDP & Growth Rates (2000-2008) Growth Opportunities Source: World Bank 2009 and 2010

36. Growth Opportunities China – UW & State Connections UW System Private Sector • Environmental Research & Technology • Aquarius Systems • Badger Meter • UW-Madison • China Initiative • Babcock Institute / World Dairy Expo • Chinese Champions Program • Industry, Infrastructure, & Transportation • Harley Davidson • Oshkosh Trucks • Johnson Controls • UW-Eau Claire • 1+2+1 China Program • Medical & Health Services • TomoTherapy • GE Medical • UW-Platteville • Confucius Institute • Agriculture • World Dairy Expo • Ginseng Board of Wisconsin • UW System-wide • Alumni branches • Beijing, Hong Kong, Singapore, Taiwan • Mandarin language instruction • Study abroad / student exchange • WARF (Wisconsin Alumni Research Foundation) • WiSys Technology Foundation • Business Associations • Metro Milwaukee Association of Commerce – China Council • Madison International Trade Association • New North (Green Bay / NE Wisconsin)

37. Some Key Issues and Questions • Can Wisconsin globally compete and win more DFI? • If so where is WI competitive advantage? • What about arguments related to foreign control of our (US & WI) economy? • Could the UW System play a role in building global contacts and attracting DFI?

38. Remember the Global Demandsof the Global Middle Class • Food • Feed • Fiber • Fuel • Will anyone be interested in the WI investment opportunity curve? • Will we develop the global case for investing in Wisconsin?

39. Why a DFI Strategy for Wisconsin • DFI investment creates jobs – Fincantieri • WI has a base of DFI to expand and grow – 470+ firms and more choosing the state • DFI often leads to exports • Wisconsin is positioned to meet global middle class demand • WI is often overlooked (fly over?) in VC and other domestic investment • Much of the DFI creates jobs that match the skills of the unemployed in Wisconsin

40. Questions and Discussion

41. David J. Ward, Ph.D., President • Phone: (608) 279-3393 • Email: dward@northstareconomics.com • Fax: (608) 441-8064 • www.northstareconomics.com