FT-Nikkei Investing in America ranking: Houston, Texas, leads the way as the best city for foreign investment in the US

TheFinancial Times and Nikkei have teamed up to highlight the challenges faced by foreign investors in the US in their Investing in America series. This initiative includes rankings of the best cities for doing business. The study takes into account more than 30 metrics: human resources, business environment, quality of life, needs of foreign companies, etc. Among the problems faced by foreign investors are bureaucracy, tax policy and regulatory challenges.

In 2023, Houston, Texas, was ranked first in the FT-Nikkei Investing in America ranking as the best city for foreign investment in the United States. The city actively attracts foreign companies through Houston First and the Greater Houston Partnership. They promote the development of tourism, business and innovative industries.

Houston, Texas – a modern economic el Dorado

Houston can be called a modern economic el Dorado thanks to its dynamic and diversified economy with strong links to international markets. Traditionally associated with oil and gas, the fourth most populous city in the US is now rapidly diversifying its economy. The city, which at different times was the state capital and ranked almost last in terms of quality of life, can now become a leader in the transition to a more sustainable and environmentally friendly economy.

The diversification of Houston’seconomy could make it more resilient to fluctuations in oil and gas prices, which in turn could increase the economic stability of the region. It is hoped that the development of solar energy in Houston and Texas will help reduce overall dependence on fossil fuels, which is important in the fight against climate change.

Texas’ advantage in solar energy production may help to reduce the cost of solar energy, making it more affordable for other regions and countries.

Finally, the growth of the solar industry could attract new investment to the region, which would boost job growth and economic development.

Houston is the largest export agglomeration in the US

Houston is no longer associated only with oil wells, cowboys and astronauts. Its economy is becoming more and more diverse. It is the largest export agglomeration in the US, ahead of New York. Although oil and gas make up the majority of exports, Houston and Texas are rapidly diversifying.

In March of this year, solar energy production in Texas exceeded fossil fuel production for the first time. The powerful metropolis is receiving a lot of investment in renewable energy and energy technology, and McKinsey estimates that the energy transition could create 560,000 new jobs, offsetting the loss of 650,000 jobs in the fossil fuel industry.

Houston is also reclaiming its historic role in the space industry. The local Ellington Field spaceport has become a launch and landing site, an incubator of sorts for aerospace technology. Intuitive Machines landed the first commercial spacecraft on the moon, and Axiom Space began operations at the spaceport. This is supported by prestigious universities like Rice University, known for its science and engineering programmes.

The city has the world’s largest medical complex, including MD Anderson, a cancer treatment centre. In 2022 alone, venture capital funds invested $2 billion in start-ups, which fuels the development of technology and innovation.

Foreign investment in the agglomeration

According to a GHP study, more than 1,700 foreign companies and 17 foreign banks operate in Houston. Many of them are related to fossil fuels – Aker, Braskem, Worley and Shell – while others are engaged in advanced technologies. For example, the Swiss ABB is engaged in automation and robotics, and the Belgian John Cockerill is building a gigafactory for electrolysis. More than fifty foreign corporations are planning to expand or relocate to Houston. Among them are Sino Biological, which has opened a laboratory near the Texas Medical Center, and Finc, which plans to build a smart edible mushroom factory.

Houston has 19 sister cities, among which Ulsan in South Korea stands out for its manufacturing facilities. Houston is actively attracting high-tech investment, such as $250 million from South Korea’s Sumitomo. Daikin Industries, the third-largest appliance manufacturer in the US, is also based in Houston due to favourable conditions such as low taxes and direct flights to Japan.

Diverse city demographics

The metropolis has the most diverse demographic, with one in four residents born abroad. Houston has significant immigrant communities from Latin America and Asia, including one of the largest Vietnamese communities in the US.

Emigration has been a major factor in the recent population growth of the metropolis. Locals are receptive to immigrants; most believe that they contribute more to the economy than they receive.

Houston has enough available labour, as the unemployment rate is in line with the national average. In May last year, the average hourly wage in Houston was $30.54, which is less than the national average of $31.48. At the same time, competition for managerial positions is higher: salaries for human resources, IT and healthcare managers are higher than the national average.

Like many US metropolises, Houston is facing challenges that could affect its growth. The 2024 Kinder Houston Area Survey found that crime and safety, as well as housing affordability, are the biggest challenges. Residents are concerned about inequalities in healthcare and education.

Another concern is political polarisation, as the city government clashes with the conservative governor over issues such as abortion rights and environmental regulation.

Houston’s firearm homicide rate is 17.5 per 100,000 people, almost three times the national average. Texas has a strong gun lobby and has passed only 12 of the 50 laws restricting gun ownership.

Although Houston appears to be an affordable city, housing prices have risen significantly since the pandemic, outpacing wage growth. The correlation between house prices and wages has increased from three to five times over the decade.

Energy infrastructure

Despite its status as the energy capital of the United States, Houston faces significant problems in the electricity grid. In July this year, Hurricane Beryl left millions of residents without power for more than a week. In 2021, winter storm Uri also caused widespread power outages. CenterPoint Energy is being held responsible for these problems and the state is investigating allegations of fraud and waste.

Texans are aware of the need to invest in burying power lines and modernising the grid. Last November, they voted to create the Texas Energy Fund, allocating $5 billion to support energy infrastructure.

Flooding is a serious problem for Houston. Although the streets are designed to drain flood waters, residents want to keep flood-prone areas undeveloped. It is worth noting that there is growing concern about climate change. Last year, 4/5 of residents supported a ban on construction in flood-prone areas. Some institutions are already preparing for such situations by installing submarine-style doors and planning for self-sufficiency in energy to reduce the burden on city resources.

Corporate spending and incentives

Houston benefits from conservative state policies that support business. Texas has long been known for its tax-free status for businesses, although some companies do pay a complex ‘franchise tax’. It is worth noting that business support policies have contributed to corporate relocations to Texas by well-known brands such as Chevron, Tesla, Oracle and HP.

It seems progressive that Texas allows municipalities to offer tax breaks and other incentives to companies for construction. Houston offers grants for worker training and tax-free equipment purchases to attract new projects.

Tatiana Morarash