Santee, S.C. — First came BMW, the German car maker that stamped the Palmetto State on the nation's foreign-investment consciousness in 1994. Five years later, refrigerator maker Haier opened a mid-state factory that led to a wave of Communist Chinese investment.

South Carolina is poised again to distinguish itself as a foreign investor's best Southern friend. The government of Dubai, the Middle Eastern emirate awash in cash, has bought 1,322 acres of sod farm abutting I-95 that it plans to transform into a massive truck-and-train distribution hub.

Job-hungry Orangeburg County, one of the nation's poorest, dreams of 10,000 jobs and billions of dollars invested by world-spanning companies keen to tap the burgeoning East Coast market. Of greater significance, financially speaking, is the type of investment promised by the sheiks who rule Dubai.

Jafza International manufacturing, warehouse and distribution project is considered the first major investment by a so-called sovereign wealth fund in the Southeastern United States. The funds are controlled directly by foreign government officials or state-sanctioned corporations that act somewhat independently of a country's rulers.

Two-dozen governments, most newly rich from the sale of raw materials (Kuwait) or manufactured goods (China), have created sovereign funds to diversify investment portfolios. Their size is redrawing the global financial map.

The funds, worth an estimated $3 trillion, are expected to quadruple in value by 2015, according to Morgan Stanley. By comparison, the United States' gross domestic product — the value of everything produced in this country — registered $13.8 trillion last year.

So far, the funds have proven a financial godsend for many U.S. companies. Billions of fund dollars have bailed out Citigroup, Merrill Lynch and other financial institutions cratered by the housing and credit crises.

Unlike a purely profit-driven hedge fund or pension fund, though, the funds ring alarm bells in Washington, Brussels and Geneva. The world's financial referees worry that not-so-friendly governments might use their new wealth to take over — or scuttle — banking, energy or telecommunications industries. One country's spare cash could be another's Trojan horse.

The United States, Japan and the European Union also fear that their decades-long financial hegemony is threatened by developing countries. Global politics, though, matter little in job-hungry South Carolina.

"Very few people say anything negative about Jafza," said Santee Mayor Silas Seabrooks. "The way the economy is going, we need some help. You can't stop someone from coming into your town. It's free enterprise. My philosophy is if you can't beat 'em, join 'em."

Kuwait led the way in 1953

Governments, including the United States and Great Britain, have long used their treasuries in pursuit of foreign markets and strategic advantages. The first modern sovereign wealth fund, though, was created by Kuwait in 1953.

Flush with cash from Gulf oil receipts, Kuwait has invested heavily in insurance, phosphates, Mercedes-Benz and, recently, Citigroup. The Kuwait Investment Authority remains one of the world's richest funds, with $250 billion in assets, according to the Sovereign Wealth Fund Institute, a California nonprofit that tracks the industry.

Nations that export oil and gas, such as Saudi Arabia or Norway, and others with robust trade surpluses, such as China, already hold enough cash reserves to cover domestic spending needs. Left-over foreign exchange reserves — dollars, euros, yen, gold — are translated into stocks, bonds and real estate overseas. Debtor nations like the United States depend upon foreign investment.

Unlike a country's central bank, sovereign funds typically seek higher, riskier returns over the long haul. In 1990, the funds accounted for only $500 billion. But they've grown, on average, 24 percent each of the last three years, according to Global Insight, the financial forecasting service.

"SWF's will become absolutely massive in size in the not-too-distant future, and will have powerful implications for the financial markets," wrote Stephen Jen, a Morgan Stanley managing director. "There is a distinct risk that foreign funds turning from creditors to owners will trigger reactions from the recipient countries that will undermine globalization."

They already have. In 2005, a Chinese government-backed fund tried to buy Unocal, the California oil and gas company. Political uproar over foreign control of a major U.S. energy company scuttled the deal.

Dubai World, the parent company of Jafza, succumbed to the same national security fears in 2006 when its attempt to manage six major U.S. ports was thwarted by politicians, even after the Bush administration gave its blessing.

"Most Americans are scratching their heads wondering, 'Why this company, from this region, now?' " said U.S. Sen. Lindsey Graham, a South Carolina Republican.

Yet safety concerns didn't keep Dubai International Capital LLC, a sister company to Jafza, from acquiring nine U.S. factories two years ago, including one in Rincon, Ga., that supplies the military with parts for the Abrams tank. U.S. Rep. John Barrow (D-Ga.), whose district includes the Doncasters Group factory, opposed the deal, saying, "We don't want to outsource our military industrial complex one piece at a time."

Dubai creates global network

Dubai, one of the seven United Arab Emirates, has parlayed oil and trading riches into a global network of real estate, industrial, transportation, health care, tourism and financial services investments. Its sovereign fund, the Investment Corporation of Dubai, controls portions of a German aluminum company, a Dutch defense contractor, a British hotel chain and Sony.

Dubai bought Loehmann's, a high-end retailer, for $300 million from an Atlanta-based private equity firm in 2006. Its fund also owns the Queen Elizabeth 2, the luxury ocean liner that will be turned into a floating hotel.

One subsidiary, Dubai World, has plowed roughly half of its many billions of invested dollars — the fund discloses few financial details — into North America, according to the Wealth Fund Institute. Jafza officials, who've set up shop in Charleston, didn't return repeated calls for comment. But South Carolina officials defended the fund's objectives.

"Of course there is skepticism," said Gregg Robinson, executive director of the Orangeburg County Development Commission. "We're currently in a war. When people think of the Middle East, they associate everything with Iraq. But when you sit down with people in the community and explain [Dubai's] business profile and intent, everybody understands it's a positive development for the state and the country."

Jafza announced last October plans to build a $600 million-$800 million warehouse, distribution and light-manufacturing park about an hour's drive from the port of Charleston. The free-trade zone, where importers and exporters avoid taxes, will take 20 years to complete, according to Jafza, and could bring thousands of jobs.

Dubai plans to circle the globe with FTZ distribution centers. The Jebel Ali Free Zone in Dubai, for example, sprawls over 35,000 acres and counts 6,500 companies as tenants.

Port traffic through Charleston and Savannah grows by double digits annually. And, with the Panama Canal in the midst of a $5 billion upgrade, East Coast ports — and nearby distribution centers — will likely see huge increases in business.

One in five South Carolinians employed in manufacturing works for a foreign-owned company, according to the S.C. Department of Commerce, a staggering percentage second only to Hawaii. Orangeburg County — with a 10 percent unemployment rate and one of the nation's highest poverty rates — needs Jafza's jobs.

"There's not a whole lot to offer people on the eastern part of the county except for fishing, hunting and golf," Mayor Seabrooks said. "From what I know, Jafza's the best thing since sliced bread."

Are there ulterior motives?

Few find fault with Dubai's investment in Santee. When sovereign funds invest in banks and strategic industries, though, Congress, the International Monetary Fund and the European Union worry. The fears go well beyond a future enemy controlling a port or a defense contractor.

Say, for example, a secretive Saudi fund buys a majority interest in a major U.S. bank. Would the bank make loans to Saudi princes who have no intention of repaying, fund critics wonder. Would China buy a North Carolina furniture maker solely to gain control of its brand names and then shutter the company, costing hundreds of jobs?

"The potential downside to the United States comes from the risk that a government may have ulterior motives other than just making money," said Ted Truman, a senior fellow at the Petersen Institute for International Economics. "U.S. citizens have a right to know what these people are up to."

Sovereign funds engender fear of the unknown: few provide details of assets, liabilities and strategic aims. Transparency is limited, accountability murky.

Since 1988, the president has had the authority to quash foreign acquisitions that pose a security threat. But the 2006 Dubai ports imbroglio prompted Congress to strengthen funds' oversight. Last month, the Committee on Foreign Investment in the United States, a secretive panel of U.S. intelligence, Defense and Treasury department officials, announced more rigorous screening to ensure acquisitions don't "impair" national security or give foreigners control over "critical infrastructure."

A month earlier, sovereign funds in Abu Dhabi and Singapore disavowed using their funds for "geopolitical goals" and promised greater transparency. Others, though, balk at U.S. and European demands for greater accountability.

"If somebody comes with regulations that make it difficult for someone from certain geographical locations to invest in Europe or the West, people will take their investment somewhere else," Sultan Ahmed bin Sulayem, chairman of Dubai World, told the BBC.

TOP 10 SOVEREIGN WEALTH FUNDS

Country, Fund Name, Assets, Year Began

• UAE (Abu Dhabi), Abu Dhabi Investment Council, $875 bil., 1976

• Norway, Government Pension Fund/Global, $380 bil., 1990

• Singapore, Government of Singapore Investment Corp., $330 bil., 1981

• Saudi Arabia, Various funds, $300 bil., N/A

• Kuwait, Kuwait Investment Authority, $250 bil., 1953

• China, China Investment Corp., $200 bil., 2007

• China, SAFE Investment Co., N/A, 1997

• China/Hong Kong, Hong Kong Monetary Authority Investment Portfolio, $163 bil., 1998

• Singapore, Temasek Holdings, $159 bil., 1974

• Australia, Australian Future Fund, $61 bil., 2004

Source: Sovereign Wealth Fund Institute