Foreign Firms Open Offices Near Washington, D.C.

A growing number of foreign companies are opening offices in the Washington D.C. metropolitan area, hoping a closer proximity to the so-called headquarters for global businesses will generate greater business.

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STEVE INSKEEP, host:

Next we'll report on what you could call reverse outsourcing. We've been hearing for years about companies that send work overseas to take advantage of cheap labor. The corporate headquarters may stay here in the United States, but the factory or the back office is in India or China or Indonesia.

Now a growing number of foreign companies are setting up their global headquarters here, as Danielle Karson reports.

(Soundbite of highway)

DANIELLE KARSON: If you drive down Route 28 in a section of Northern Virginia called the Dulles Corridor, company logos fly by. There's BAG Systems, AugustaWestland, and Software AG, three of the more than 350 foreign-owned firms with offices in the Washington region. They employ about 20,000 people and contribute millions of dollars to the local tax base.

Strategic Thought Inc., a British risk management software company, moved to Herndon, Virginia three years ago. It has nine employees and has landed some big name contracts, including NASA and Lockheed Martin.

General manager Karl Pringle says doing business across the pond became a huge nuisance, even with something as simple as picking up the phone.

Mr. KARL PRINGLE (General Manager, Strategic Thought Inc.): Most American organizations, particularly government, find it difficult to make transatlantic calls. Their internal phone systems are designed only to make domestic calls. So for in order for them to contact us, they'd have to go through a series of approvals to do that. So it just made it very difficult for them to do business with us.

KARSON: But the company is on a roll now and plans to open offices in the Midwest and the West Coast. Pringle says if the company hopes to go global, setting up shop in the U.S. is key.

Mr. PRINGLE: There's a lot of talk around China, and yes, it is growing quickly. But if you lack a GDP, the U.S. dominates - dwarfs every other country in the world from that perspective. So the market is here. The big multinationals tend to be based here, and so the growth opportunities are huge.

KARSON: Tapping into such a huge market is an irresistible lure for many foreign companies. Jairus(ph), a small South Korean firm, opened an office in McLean, Virginia about two years ago. Jairus makes a device that when you turn it on...

(Soundbite of Jairus device)

KARSON: ...scans the irises of a person's eyes for encryption and other security uses. The company has contracts with a number of government agencies, including the U.S. Navy and the National Security Agency. Jairus vice president Jason Namcum(ph) considers the U.S. market the gold standard for foreign companies.

Mr. JASON NAMCUM (Vice President, Jairus): Consumers, governments and whatnot is very sophisticated and price conscious. So we felt that if we can succeed in penetrating U.S. markets, literally we can open door for any other marketplaces in the world.

KARSON: Many foreign companies choose to locate near Washington because it's close to the federal government, an international airport, and both the large high-tech labor pool.

Mr. NAMCUM: There's a lot of government-related suppliers and vendors located in Northern Virginia area, so it was important for us to establish ourselves here, so we can get better access to those prime contractors and suppliers and also government customers.

KARSON: When a foreign company relocates or opens an office in the U.S., it's usually the result of a long courtship. Fairfax County, Virginia spends half a million dollars a year wooing foreign firms and has offices in Seoul, Frankford, Bangalore, London and Tel Aviv.

Chief executive Gerald Gordon says foreign businesses enrich the community as a whole.

Dr. GERALD L. GORDON (Economic Development Authority, Fairfax County): We are now a community in which 40 percent of the children have at least one parent who was not born in the United States. People tell us that it's mighty, mighty important to have communities that are diverse and have their children raised in communities that are diverse.

KARSON: According to the U.S. Commerce Department, foreign investments have been steadily rising since 2003, increasing nearly 70 percent last year. That may be good news for the U.S. economy, but not necessarily for some domestic firms, which could end up losing business to their foreign competitors.

For NPR, I'm Danielle Karson.

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