How to Lure Foreign Money: Lessons from Fort Dodge, Iowa

Small manufacturing towns throughout the Midwest have been ravaged by foreign competition for some 30 years. Now, call it irony, or call it smart business, some of these same communities are trying to reinvent themselves by turning toward foreign competition.

It’s a challenge though to stand out from the hundreds of other American communities that are going after those same foreign euros, yen, and renminbi. So, what makes an American town stand out?

Consider the case of Fort Dodge, Iowa: a success story in the making.

The city has bled jobs to cheaper foreign manufacturing locations for decades. The latest blow came in 2009 when appliance maker Electrolux announced it was shutting its factory in nearby Webster City and moving to Juarez, Mexico.

“We’ve looked into data of how many people have traveled from Fort Dodge proper over to Webster City to work at Electrolux, and we’ve estimated it at around 700 over the last few years have lost their jobs in that Electrolux closing,” said Fort Doge Mayor Matt Bemrich.

That’s a big blow for a city of 25,000.

Bemrich said, “It definitely affected families and people who had worked there for a number of years; you had generational employment there. So yea, it was devastating. But instead of crying about it, for lack of a better term, we went out and aggressively said, ‘Well, what do we do to replace those jobs?'”

One way to replace those jobs is take advantage of globalization. In October, Fort Dodge reeled in a big fish: a South Korean company, Cheil Jedang, or CJ, said it will invest $324 million in a new plant near Fort Dodge that makes additives for livestock feed. It’s expected to create some 200 local jobs.

CJ executive John Kang said in an e-mail that the company chose Fort Dodge primarily because Iowa has cheap corn. And there’s a facility nearby to help process that corn to make its product. The company was also interested in transportation logistics and access to qualified workers, which Kang said is still a concern.

Still, CJ could’ve chosen any number of Midwestern locations with corn and a wet mill. Fort Dodge city manager David Firk said to really seal the deal, Fort Dodge had to sell itself.

“We have to be competitive. It comes down to: Is this a place you want to live? Whether it’s the person making a decision on bringing a new industry here, as top level executives, do they want to live there? Can they get his or her best and brightest people to move to any city, let’s say move to Fort Dodge?”

John Kang with CJ said housing for Korean employees was a concern when choosing an American location.

Mayor Matt Bemrich says when the South Koreans came to visit, he saw how much quality of life issues matter. He said the folks from CJ were pretty excited about the golfing options.

“They were just amazed. In South Korea land being such a huge commodity there, and the available land in this region of the United States, we have a lot of golf courses.”

Maybe so. But there are lots of golf courses in Iowa, and everywhere in America.

John Kang with CJ said the golf courses in Fort Dodge were nice, but not a factor in the company’s decision.

David Swenson, an economist at Iowa State University, says medium-sized communities all over the Midwest are marketing quality of life benefits to attract businesses. But distinguishing smaller communities in one state from another is difficult.

“And there’s nothing magical about Iowa that foreign investment would be particularly attracted to. We don’t have the kind of combination of assets and productivity that would necessarily send out a very, very strong message to foreign investors.”

Swenson says in the end, foreign firms locate where it makes sense economically, not aesthetically.

So I asked Iowa Governor Terry Branstad if there’s anything he can do to make Iowa stand out for foreign investment?

“Well first of all, you gotta build the relationship. Relationships are so important. And also with leaders.”

It might sound odd to emphasize the personal. But that’s the way business still gets done in much of the world. Just having a meal with a Chinese businessman goes a long way toward establishing trust.

Branstad said he has a leg up in the relationship building department: He served as governor of Iowa for 16 years in the 1980’s and 1990’s, before being re-elected again in 2010. Branstad likes to tell the story about his meeting with Xi Jinping in Iowa 1985. At the time, Xi was a low-level Chinese official. He’s expected to become the next president of China. Branstad met with him again recently in Beijing.

“And he has a very positive feeling about Iowa. And he had the itinerary from his visit here 26 years ago. He said this, he said I was in your office at the state capitol of Des Moines, on the 26th day of April, 1985. And he said, he stayed with a family down in Muskateen who had two sons in college and a 13-year-old daughter. He was very impressed with the friendliness, the hospitality, and the way he was treated in Iowa.”

Branstad is confident that he can leverage that personal relationship into Chinese investment in Iowa. He has also turned his sights to South Korea, especially with the recent passage of the US-South Korean free trade agreement.

It’s quite possible there will be more Korean investment in Iowa beyond Fort Dodge. After all, there’s no better advertising than word-of-mouth.