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Global Carolina Perspectives: Kenny McDonald and the Charlotte Regional Partnership

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CHARLOTTE, NC – Kenny McDonald is at the center of a world of economic activity. McDonald, who serves as executive vice president of the Charlotte Regional Partnership (CRP), just returned from his second economic development trip to Europe this year, having already visited South America a few months prior. And his base of operations is likewise a center of global business: the 16-county Charlotte region is home to nearly 1,000 foreign-owned companies.

McDonald oversees and executes business development, and markets the Charlotte region worldwide. Under McDonald’s direction, overseas recruitment at the CRP has increased significantly, and the number of international companies located in the Charlotte region has grown by 16% – all during a period of economic downturn.

McDonald holds an M.P.A from Georgia Southern University and an undergraduate degree from Dickinson State University. He is a graduate of both the Economic Development Institute at the University of Oklahoma and Leadership North Carolina. He earned his certified economic developer designation in 2003.

McDonald recently sat down with the Global Carolina Business Journal to discuss the Charlotte region’s growing reputation abroad, his most recent overseas trips, as well as the relationship between economic development and global trade in the Carolinas.

Global Carolina: With nearly 1,000 foreign-owned companies in the area, the Charlotte region is already a center of global business activity. And the trend continues upward, with many foreign companies having opened new facilities here in the last two years. Do you see the number of international companies continuing to increase?

Kenny McDonald: I do. I think we’ve reached a bit of a tipping point in terms of foreign companies considering the Carolinas as a business location. In many of the countries that we visit, the Charlotte brand is becoming more and more well-known. And that makes sense. With the access to the ports that companies have in the Carolinas – as well as recent growth in those ports – and with the many large foreign investments that have taken place in the Carolinas over a long period of time, it clearly demonstrates that we have a long history of working with foreign companies. The best examples are obviously the German, Austrian, and Swiss companies that have located here. In most places we travel in those countries we can point to other companies from those specific regions that have already come here and been successful. And I think that is a huge selling point. So we’ve gotten to the point where we can use our experience with other companies as a selling tool.

When we travel to countries with emerging economies, we’re now starting to see more investment from them as well. We have to make the case in these countries a bit differently, but we still have a very strong case as being a logical, good business location from which to reach the entire U.S. market.

GC: You just returned from another economic development trip to Europe. Were there specific companies or industries you were targeting to attract business to the Charlotte region?

The Charlotte Regional Partnership (CRP) is a nonprofit, public/private economic development organization dedicated to the growth and prosperity of Charlotte USA – a region of 2.6 million people located in North and South Carolina. The CRP's purpose is to allocate and leverage regional economic development resources to sustain and enhance the economic growth, vitality, and global competitiveness of the Charlotte region as a superior business location. Services include site location assistance and customized research for business prospects considering Charlotte USA.

KM: We are essentially targeting the same sectors in Europe as we are in North America, but we are more focused on the clusters that might exist in each individual country. For instance, we are going after the medical devices industry. A lot of foreign-owned companies in that industry are at some point faced with the issue of how they are going to enter the United States marketplace, given that it is still the largest and most lucrative healthcare market in the world. Some of these companies might choose not to enter the U.S. market, but they do have to address the issue. There are U.S. market challenges that can be significant and complex. Among these are the sheer size of our healthcare and our medical device markets, and the demographic changes that are driving a lot of the market changes. As an economic development agency, part of winning these projects is being able to facilitate the process and guide them to subject matter experts, legal counselors, and tax planning advisors.

In the energy field we’re going after a couple of subsectors. One of these would be the energy efficiencies market, companies that are creating systems, materials, and lighting solutions associated with making our homes or our businesses more energy-efficient. European companies have a longer history in the efficiencies field because their sensitivities to the expense and environmental impact have been so much stronger. Historically energy has been so much more expensive in Europe. I think the facts suggest that the United States is becoming more and more sensitive to these issues – using energy smarter as a way to save money and also to address environmental concerns. We’re now addressing these issues, and the efficiencies market is growing. There are a lot of companies in Europe looking to the United States as the next growth market for their industry.

And finally, we’re targeting defense and security operations – and I would include aerospace here as well – companies that are associated with the Department of Defense budget that address security concerns, either corporate or personal. Again, other parts of the world have had to deal with some of these issues for a longer period of time, issues that, fortunately, we have not had to deal with. We’re now starting to see growth in some of those markets. So we’re trying to get those companies to consider the United States, to consider the Carolinas, to consider the Charlotte region as a place to manufacture their goods or initially to just set up their sales offices and build a presence, a beachhead, in the United States.

GC: Speaking of energy, the recent Energy Inc. conference held in Charlotte featured on its panel two CEOs of large foreign-owned companies operating in the Carolinas: Areva NA and Siemens Energy. Many suppliers that came in around BMW in the automotive industry have seen great success. Do you see opportunities for local suppliers in helping Charlotte transform itself into the energy hub it is striving to become?

KM: The value chain in this industry is very complex and is certainly global. I do think that a lot of the know-how exists in the Carolinas to serve many of these needs, but certainly not all of the needs can be met by companies that already exist within our market. We are seeing the value chain starting to develop within the Carolinas and the United States fairly rapidly. However, there is a lot of know-how and technologies that exist in Europe and other parts of the world that have been developed to deal with these issues for decades prior to them becoming a priority or a market in the United States. But I think when people look to suppliers now, they don’t just look to North America, they look to globally source their parts for efficiencies of scale. For example, GE needs components to go into their turbines in Greenville, SC. They don’t just look within a 100-mile radius; they look for the best players in the world. So, that represents opportunities to bring companies in that would be close to us geographically, just because of where the mother ship is, if you will.

GC: German-based IMO Group, a manufacturer of parts used in wind turbines and tunneling equipment, recently set up in the Charleston area to supply bearings for the Clemson University Restoration Institute’s wind farm project there. Obviously that’s one example of a company coming in to capitalize on those opportunities and bringing investment and jobs to the Carolinas.

KM: That’s correct. About 10 years ago we located a company in the Charlotte region called Saertex, a textile company that was concentrated in automotive and a few other markets. They are now doing a lot of textiles for wind turbines and wind blades manufactured in the United States. That is actually the growth part of their business; they’re really growing quickly. That’s another example of a small company located here that’s a part of the energy and renewables value chain.

GC: The possibility for cross-industry synergies is another subject I wanted to touch on. Saertex is a very interesting example of a company that came in as a supplier for the automotive industry and has now found some real synergies between that industry and the new growth industry of renewables. Do you see other examples of that in the Charlotte region and the Carolinas as a whole?

KM: Actually there are a lot of examples of that, both regional and outside companies that have taken their core competencies and utilized them in other, emerging or growing fields. That’s happening in the medical devices field, the energy field, the defense field. We hosted a group of motorsports companies recently, and a lot of them are also doing defense industry work. Again, they began with their core competencies that are very high-level, specific engineering systems that were actually intended for motorsports but also have applications in the defense industry or the aerospace industry as well.

GC: The Charlotte Regional Partnership has increased its overseas activities and recently expanded its focus to South America. What are some of the best opportunities – and along with that, the challenges – in that area in bringing businesses to the Charlotte region?

KM: Well, it’s a different strategy. When we go to Europe, our organization – and I’d venture to say most of the state and local organizations – are very much seeking foreign direct investment back into the United States. We actually have a lot of existing companies locally that have already made a decision about Europe – either they’re not going to go after that market or they already have and they are there. Occasionally we have someone who wants to do business over there, and we’ll help them. But in rapidly growing markets like Brazil, we have actually a lot of companies from across the Southeast that are studying Brazil’s emerging middle class and the markets that are being created. The new middle class has more discretionary income; they’re buying new things, so there is real opportunity within our hemisphere. A lot of our bigger companies, Proctor and Gamble, for example, as well as a number of other companies, have been in South America for a long time. But there have not been a lot of small companies from the United States that have entered Brazil to serve and sell into that market. There now seems to be a lot of interest in doing that. So there is maybe a little bit more of a balance of trade and investment between the United States and Brazil.

There are certainly fewer companies in South America that have the size and experience to simply come to the United States – but there are some. There are hundreds of companies that have the potential to bring their product into the United States from Brazil. A company our organization recruited a few years ago, Sabo, which is a major automotive supplier, set up operations here after having a sales office in the Detroit metro area for a few years. The difference is, in Germany you have thousands, where in Brazil you have maybe hundreds of companies that would be eligible for that kind of conversation.

Brazilian companies are bringing food products into the United States, and they are also very experienced in the biomass and biofuels markets. We are looking into all of these opportunities for our region.

GC: The current U.S. administration and North Carolina Gov. Bev Perdue in particular, seem to be pushing exports pretty heavily as a way to drive the economy. What role do you see the Charlotte region playing there?

KM: Well, our organization remains pretty focused on foreign direct investment. We obviously have high unemployment in this area; we have a lot of people in need of jobs. That being the case, we’re very short-term focused right now to go after job opportunities that can be created very quickly.

On the other hand, Gov. Perdue in North Carolina and South Carolina Gov. Sanford, as well as the Obama administration have put a huge amount of effort into how to drive exports as a way to retain or create jobs in the United States. And to that end, we are the administrator for a regional Foreign Trade Zone in Charlotte, Foreign Trade Zone 57. So we’re actually working as much as we can with the federal government, the departments of commerce, and the departments of international trade in North and South Carolina, to try to understand how trade and investment can partner with each other. We feel like they build on each other. We’re essentially in the relationship business. We can’t afford the luxury of being very long-term right now; we have to remain very focused. That has its good and bad points, but again, we have a situation right now that we have to address.

GC: With the initiatives in place all the way from the federal level down to the local levels, I assume exports will play, if not an increasingly more prominent, then at least a more public role in the way people think about ways to drive the economy forward.

KM: The ports in North and South Carolina are becoming more aggressive and are growing. All of this is going to lead to some good things for the Carolinas. The growth and global awareness generated from activity at the ports in Charleston and Wilmington are good for the Charlotte region. The more commerce that comes through our ports, the more companies end up touching the Carolinas, and we feel that Charlotte is a critical piece of the Carolinas’ puzzle. It’s going to get a big piece of that pie when good things happen throughout the Carolinas.

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