How Nebraska Is Winning Foreign Business
Jie Shi has an easy explanation for why he chose Omaha—a place many Chinese have never heard of—for the U.S. headquarters of his LED lighting company, SFT International. “This is where Warren Buffett lives,” says Shi.
The allure of Buffett, widely admired in China, isn’t the only reason Shi didn’t go to New York or Los Angeles. His decision to plant his company’s U.S. roots in the Cornhusker State last year was the result of an aggressive and novel effort begun by Nebraska Governor Dave Heineman.
Shortly after taking office in 2005, Heineman set out to create a “reverse trade mission” to bring government officials and business owners from all over the world to Nebraska. After two such missions, in which he hosted more than 200 visitors from China, Germany, Japan, South Korea, and Brazil, Heineman has plenty to brag about: $4.17 billion in foreign investment from 28 companies since 2008, creating more than 1,000 jobs in Omaha. “There is an extraordinary interest in companies around the world to bring in their products to the United States,” says Heineman, a Republican who recently chaired the National Governors Association. “I would encourage every governor to take a look at it. If you’re willing to invest the time and effort, the results will be excellent.”
Home to ConAgra Foods, Union Pacific, and Buffett holding company Berkshire Hathaway, Nebraska had a 3.8 percent unemployment rate in June, the second-lowest in the nation.
The primary draw for foreign investors is a robust set of tax incentives that helped Nebraska rank first in the nation among states for new corporate headquarters, call centers, and newly established operations, according to the Tax Foundation, a research group based in Washington, D.C. The incentives help offset a corporate tax rate of 7.8 percent.
Depending on the amount of planned investment and number of new jobs, companies can receive property tax exemptions for up to 10 years, sales tax refunds on capital purchases, and investment credits. Nebraska officials also boast of the state’s low cost of living and central location for companies that wish to distribute their products across the U.S. “A lot of international companies have made errors by putting distribution centers near the port of entry,” says Joe Chapuran, the international development manager for the Nebraska Department of Economic Development. “That can bring transportation costs way up.”
The reverse trade missions are one piece of a comprehensive effort to attract foreign investment. Nebraska opened an overseas trade office in Japan and hired JZW International, a consulting company and importer in China, to help recruit new business. Chapuran and other state aides have traveled to both those countries, as well as Europe and Brazil, to persuade executives and public officials to visit Nebraska. The state pays for everything—including hotel charges, food, and transportation—once participants arrive, although executives have to pay for their own flights.
While the agency’s website features an interview with Buffett promoting the attractions of the state, translated into Chinese, he doesn’t make an appearance at the sessions. Visitors are treated to factory tours and dinners showcasing Nebraska beef. “We put on an A-class event with a lot of access to the governor,” Chapuran says.
During his 2011 visit, Shi decided after two days that he wanted to establish his U.S. headquarters in Nebraska. On a Wednesday at 9 p.m., he asked state officials to help him make it happen before his visit was scheduled to end on Friday morning, Chapuran recalls. The Chinese businessman had been trying for months to get paperwork approved to bring his U.S. headquarters to Los Angeles, but a team of lawyers and state officials worked through the next day and night to incorporate SFT America in Nebraska and to open a business bank account.
Shi plans to set up a distribution center in Omaha to serve North America, where his company is already selling light bulbs through Amazon.com and other retailers. He may also build a factory. “Without the reverse trade mission, I would not have understood Nebraska as well,” he says. “It made a huge difference.”