- The Washington Times - Saturday, January 15, 2000

Obstacles hinder more foreign investment

Washington, a city whose reach often exceeds its grasp, wants to become a mecca for international business.

With its many foreign embassies, high-tech firms, federal agencies and tourist attractions, the city and the region would seem a natural draw to businesses from around the globe.

But business groups and local boards of trade involved in the effort to encourage more foreign commerce have been hampered in their efforts to promote the region by a number of factors.

International airline service has improved, but highway traffic congestion has gotten worse. Then there is the tight labor market, and the perception that the District can be "a dangerous and chaotic place."

Those who have been on the front line of the effort to improve the region's image as a base for international operations say they are starting to see some success. But they acknowledge they have a lot of work to do.

"The biggest challenge Washington faces is the pervasive perception of us as nothing more than the nation's capital," said Thomas Morr, managing partner of the Greater Washington Initiative, a coalition of local business groups led by the Greater Washington Board of Trade trying to lure foreign companies to the region.

"What these companies don't realize is how large and diverse our business community is. We are trying to educate people about why this is a good place to plant roots," Mr. Morr said.

There are signs that Washington might finally be shedding its image as little more than a government town.

While road traffic appears to be getting worse, crime has been heading down in recent years and international flights through the region are up.

In the past decade nonstop international service through Washington has grown, and now it is the second-largest international gateway to Europe from the East Coast, Mr. Morr said.

Weekly international departures from Washington Dulles International Airport have jumped 29 percent since 1996, according to the Metropolitan Washington Airports Authority.

Mr. Morr said increased international are flights are a clear sign that foreign businesses are finding more reasons to be in Washington.

Trade routes

"Commerce in ancient times always happened in places where trade routes crossed. Today, trade routes are related to aviation, and more recently to the Internet and e-commerce," he said.

Mr. Morr expects that more foreign companies will be drawn to the region since Northern Virginia has become a major hub of e-commerce. This notion was exemplified last week by Sterling, Va.-based America Online's surprise acquisition of Time Warner Inc., for about $166 billion, the largest merger in history.

"We need to begin proving to the rest of the world that we are much more than a government town, that we also are a center for science and technology," Mr. Morr said.

In fact, "There's a lot of new money coming into the area," said Marshall Ferrin, director of Incubator America, an Arlington-based organization that helps foreign high-tech firms get started in the region.

A 1998 study by Deloitte & Touche commissioned by the Initiative found that more than $17.5 billion, or 10 percent of the annual Gross Regional Product (GRP), was directly attributable to the international sector.

But the actual figure is probably higher because the amount of international business done by small-and medium-size firms in the region is hard to measure, said Marie Tibor, director of marketing and communications for the Initiative, which serves firms seeking to enter international markets or expand their foreign client base.

Recently the Initiative has focused on luring companies from Canada, the nation's largest trading partner.

"When I was thinking about opening a consulting business I was looking for place that had everything I was interested in," said Jim LeBlanc, president of J. LeBlanc International LLC, which consults companies on doing business in foreign markets.

"I realized this was the best place, because it has the international aspect, business, politics and now a growing technology sector," said Mr. LeBlanc who moved here six years ago.

"Washington is no longer just a government town. I think this region is showing all the signs of establishing itself as a true technology cluster. It is taking a while to get the word out, but it is well underway," Mr. LeBlanc added.

Washington over Ottawa

Another Canadian company decided last year that it was better to have its international base of operations in Washington than in Ottawa, the capital of Canadian.

"We decided that having our international business development person in Ottawa was not nearly as useful as Washington," said Grice Mulligan, senior director of international business development for FreeBalance Inc., which develops off-the-shelf financial systems for governments.

The reason, said Mr. Mulligan, was that Washington is home to major international lending institutions like the World Bank and the Inter-American Development Bank. Washington was a prime location to meet international businesses seeking, not just funding, but also new business.

"In our case Washington was the only logical choice," said Mr. Mulligan, adding that FreeBalance's business this year will likely be 10 times what it was last year, partly as a result of the move.

The Deloitte & Touche report said that there are some 700 foreign-owned firms in the Washington region linked to 29 countries that generate an estimated $6.8 billion in revenue.

International business is substantially intertwined with other enterprises throughout the local economy, but does not get as much attention as they do, the Deloitte & Touche study said.

In part, that is because it is harder to define and it spans all sectors. Since its activities are diverse and ubiquitous, its contributions to the economy's vitality and growth potential have been undervalued, noted the study.

Major attractions

]International companies are drawn to the region because of its highly educated work force and proximity to the nation's capital, said businessmen dealing in the international sector.

There's a great labor force that is high-tech oriented, said Robert M. Salvucci, president of SAP Public Sector and Education Inc., a German-based company that creates program applications for the U.S. government.

"The more work you're doing with state or local governments, the more likely you would want to have a presence in Washington."

Washington's international business sector runs the gamut, from high-tech companies like Mr. Salvucci's, to magazine publishers, such as National Geographic.

One of the biggest draws for international companies is the high-tech sector. More than 3,000 high-tech firms are based in the region, making it one of the hottest tech cities in the country.

Foreign companies, businessmen said, use the services of these companies. Companies like Mr. Salvucci's bid for government contracts for computer applications, while also hoping to make contacts with the rich array of public relations and consulting firms that feed the Washington establishment.

"It's a boom," said Mr. Ferrin. "The big comparative advantage is … the effect of strong information, tech businesses and the presence of the federal government as a business partner."

International gateway

The first stop for most foreign companies looking to do business in Washington is the International Gateway, located in the Greater Washington Board of Trade offices in the Ronald Reagan Building and International Trade Center.

The Initiative has used the International Gateway to receive national and international business visitors who are considering the region as a location for business expansion.

The Initiative, named one of the top 10 economic development agencies in the nation last year, works with economic development officials in greater Washington jurisdictions to promote the region across the United States and around the world as a premier location for business.

Recognizing the importance of the international sector to the region's economy, the Board of Trade's directors voted last year to invest in a resource center to help businesses in the region compete in the global economy.

Since its unofficial opening in late September, the International Gateway already has provided services to more than 750 regional, national and international businesses.

While many international companies are doing business with the technology sector, other companies, like National Geographic, are adding to foreign business receipts.

The magazine, which publishes over 9 million English-language copies monthly, has undertaken an ambitious campaign to expand internationally. This is one of its strategic priorities, said Terry Adamson, senior vice president.

The magazine expects to launch four or five foreign-language editions this year, in addition to the seven already in place. As well, the company hopes to bring its National Geographic cable channel to the United States this year.

Mr. Adamson said the company is helped by being headquartered in Washington since it has access to foreign embassies, which are often helpful in launching publications and its projects abroad.

For instance, when National Geographic introduced its Polish-language edition in September, it had the full support of the Polish government. The first edition sold 600,000 copies.

"We attribute that in part because National Geographic was a magazine allowed in the country during the Cold War and it was seen by so many Polish people. It was their window on the world," said Mr. Adamson.

Still, he said the company also heavily relies on local technology talent for its production efforts.

"We're very helped by what's going on in Washington with technology," said Mr. Adamson. "It's very much a plus."

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