What do Girdwood’s Alyeska Prince Hotel, Dillingham’s Peter Pan Seafood’s processing facility, BP’s Milne Point heavy oil project, and the Pebble Partnership’s exploration efforts all have in common? They all wouldn’t exist without significant investment of foreign capital.
While I am very grateful Alaskans gave proposition 4 a well deserved drumming at the polls, I am concerned that some of the inflammatory rhetoric from that debate may spill over into our Alaska psyche and important public policy debates.
One reoccurring theme is the notion that foreign investment is bad for Alaska. We owe it to those investing in our State to stand up and dispel this ill-thought notion. There is no question that direct foreign investment like that from the lower 48 or from within Alaska is a very good thing for Alaska’s economy.
It is well understood that if you can inject new capital from outside sources, a local economy can prosper. This is why many states and municipalities give significant tax breaks simply to attract foreign capital.
A good example is the State of Alabama which has provided hundreds of million of dollars worth of tax incentives, worker training and other inducements to attract automotive assembly plants there. Alabama was rewarded with thousands of newly created manufacturing jobs and associated economic growth resulting from foreign investment in major assembly plants by Honda, Toyota, Hyundai and Mercedes Benz.
In Alaska, one way we can achieve such desired investment is by making our natural resources available to the global market place on commercially-reasonable and environmentally-sensitive terms. For example, in the mineral industry, prospective lands open to mineral exploration, coupled with a capable and competitive workforce, predictable yet stringent environmental policies and stable tax policies have resulted in significant domestic and foreign investment and resulting economic prosperity. Much of this investment happens to come from our good neighbor Canada, and land in the most impoverished rural corners of our state.
Canada is a leader in global mineral exploration and development. Somewhat like Switzerland’s established banking industry based on privacy, Canada has developed the financial markets and infrastructure to support the unique business of mineral exploration, an industry which requires large sums of risk tolerant venture capital. So it should come as no surprise when about three-fourths of the investment in Alaska mineral exploration comes from Canadian-based companies. Between 1981 and 2006, Canadian companies spent a total of $3 billion on mineral exploration and development in Alaska. In 2006 alone, they spent $373 million. In 2006 Canadian mineral exploration and production companies directly employed 1,700 Alaskans.
According to the Alaska Department of Labor, the mining industry’s average annual wage is $82,000. And this foreign investment according to political ads is supposed to be Darth Vader, a curse to Alaska? I don’t get it. More Alaskans are working and making a solid middle-class wage, stringent environmental protections are in place, and we have a robust and growing mineral sector to build on an economy supported by other important resources like oil and gas, fishing, tourism and timber.
And while all this productive capital is flowing into our state in the mineral sector, we continue to have significant foreign investments in oil and gas, tourism trade, air freight and commercial fishing and processing. Where would our economy be if we lacked foreign investment by companies such as seafood processors Peter Pan, Westward and Unisea Seafoods; oil and gas producers Royal Dutch Shell and BP; or tour operators such as Carnival Cruise Lines?
It was certainly a good thing for Girdwood and Alaskan ski enthusiasts when Seibu, a major Japanese conglomerate, purchased Alyeska Resort in 1980 and made significant capital improvements, including the tram and Alyeska Prince Hotel. The resort is now owned by Cirque Property, a privately owned real estate investment company based in Utah. Cirque again is breathing vitality into the resort through invested capital. On a big powder day, do we really care if the investment is foreign or domestic?
Don’t undersell the importance of our home grown capital investment. The Anchorage skyline is a much different place thanks to investments by Alaska Native Corporations and other local entrepreneurs who have demonstrated their continued faith in the future of our great state. While we show our pride for those among us investing in our future, let’s not lose sight of the tremendous benefit that new capital from outside sources, both domestic and foreign, can play in our state’s economy.
A firm and predictable regulatory system, a predictable tax regime and a capable and prepared work force are critical to continue to attract the capital needed to grow our economy. This is what it is going to take to keep the necessary capital investment in Alaska, regardless of whether it is foreign, domestic or Alaska grown.
We live in a global village and Alaska needs outside capital to thrive as a state. Here’s a call to quit the evil foreign company rhetoric.
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