Sharp rise in foreign investment in U.S.

Press, 30 May 1987, Page 27

Sharp rise in foreign investment in U.S.

PA Washington Foreigners spent a record SUS3I.S billion last year to buy or start up U.S. businesses, a sharp 36.2 per cent increase from 1985, the Commerce Department announced. European, Canadian, and Japanese investors accounted for the bulk of the 1986 spending, according to department figures.

The increased investment, made either directly by foreigners or indirectly through their existing U.S. affiliates, was the third consecutive annual increase. The upswing in foreign investment has been accompanied, during many of those years, by a decline in the dollar against other

currencies and a rise in protectionist sentiment here.

More than half the 1986 investments were in the final quarter, spurred by U.S. tax reform, the department said. Many deals were completed in late 1986 to take advantage of tax provisions like preferential treatment of capital gains and accelerated depreciation schedules that were eliminated by the new tax laws which went into effect on January 1. The Commerce Department said other reasons for the pickup in foreign investment were lower U.S. inflation and continuing economic growth, as well as big trade surpluses for countries like Japan and West Germany that

left their investors with money to invest in the United States.

A cheaper U.S. dollar also may have induced foreign firms to shift operations to the United States, the department said.

European countries accounted for SUSI7.I billion dollars of the investments, up from $15.4 billion in 1985. Among European investors, those from the Netherlands were the most active, dramatically increasing their 1986 spending to $4.3 billion from $771 million in 1985. British investment was down to $1.2 billion from $2.3 billion the year before.

Canadian investment jumpedsharply, partly be-

cause of the take-over of Allied Stores by Canada’s Campeau Corp, to $5.2 billion. In 1985 Canadian investors spent $2.9 billion in the United States.

Japanese investments were up very sharply to SUS 4.7 billion last year, from $1.2 billion. The Commerce Department report bore out the thrust of a Japanese report, released earlier in Tokyo, that overseas Japanese investment nearly doubled in the financial year ending March 31 to a record SUS 2.3 billion. About 46 per cent of the money was spent in the United States.