Cuts proposed in Maryland's foreign offices

February 25, 1991|By Michelle Singletary | Michelle Singletary,Evening Sun Staff

The General Assembly's Department of Fiscal Services wants to slash the Maryland International Division's budget by 22 percent. That includes closing its Hong Kong office, which could mean a savings to the state of $488,000.

The Maryland International Division, which is budgeted under the state Department of Economic and Employment Development, is responsible for operating four overseas trade and investment offices, located in Tokyo, Brussels, Hong Kong and Taipei, the capital of Taiwan.

The proposed budget cuts were presented to the General Assembly last week. In addition the cuts include deleting four positions from the division for a savings of $96,000, reduce grants to the World Trade Center Institute and Sister States Program by $182,000 and cut other operating costs by $257,000.

The proposed cuts total just over $1 million, or 22 percent of the agency's $4.8 million budget request.

The department is also suggesting that all of the state's Far East investment and trade activities be moved to Tokyo, creating one Asian office.

"In a year when resources are so tight at home, here in Maryland one has to wonder, do we really need such a presence abroad?" said Rich Madaleno, administrative analyst for Fiscal Services, who prepared the recommendations.

The recommendations, particularly the one to close the Hong Kong office, have angered Gov. William Donald Schaefer.

"The proposal to cut the budget of the International Division is short-sighted. Maryland is a leader in world trade -- easily the most promising areas of the nation's economy," Schaefer said in a statement relayed by Paul Shurick, his press secretary.

"Other states are beginning to realize this and are stepping up their efforts to sell products overseas and to attract foreign investment. If Maryland was to stop or even slow down its efforts, we would quickly lose foreign markets and foreign investments to other states. We've had incredible success selling Maryland products overseas and opening new businesses in Maryland. The Maryland International Division pays for itself," the governor said.

J. Randall Evans, secretary of DEED, conceded that "our efforts in international business are not popular politically right now. But it is essential to keep up our international efforts, especially in a recession."

Sen. Julian L. Lapides, D-City, is skeptical. "No one wants to hurt the port or hurt international trade, but we have to make sure the [overseas offices] are not more glitter than substance," he said.

Each of the four overseas outposts operates either as a trade or investment office. A trade office assists Maryland companies doing business overseas. The investment offices are staffed with specialists that try to convince foreign firms to invest in Maryland. The Brussels office serves as both a trade and investment center.

In its own belt-tightening move, the division has made plans to close the Taipei office and transfer the director to Hong Kong by June.

Already the Maryland Port Administration has closed it trade office in Hong Kong and Tokyo in a cost saving measure. The port has contracted out its trade efforts for the Far East to a private firm. It still has representatives in London and Brussels, according to Eric Feldmann, director of the International Division.

In its 1990 Maryland International Business Report, the state boasted that there are 610 affiliates of foreign companies in Maryland with investments totaling $3.5 billion.

Those foreign affiliate companies -- those with 10 percent or more foreign ownership -- directly employ about 56,500 workers in the state.

According to division's 1989 year-end report, direct foreign investment, including land holdings and stock ownership, was an estimated $3.5 billion -- up from $2.6 billion in 1984 and $1.4 billion in 1979.

The foreign companies generate about $96 million a year in state and local taxes, the report says.

Evans said trade is one of DEED's top priorities. He said the Hong Kong office is instrumental in the effort to increase exports from Maryland. Hong Kong has the world's second largest port container facility and third largest financial center, he told legislators.

"If we lose the Hong Kong office, we lose a foothold for trade in Asia," Evans said. "There is real value in having a trade office in an Asian country other than in Tokyo."

When China takes over Hong Kong in 1997, Evans said the state may consider moving its Far East trade and investments representatives to Singapore.

Evans said Japan's sensitive relations with other Asian nations would make it difficult to handle all Far East business from Tokyo.

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