SARS and Its Implications for Economic Development

Fear is a destructive force in our world. People are afraid of the SARS virus. It is causing many people to avoid Toronto and other places across the world hardest hit by the virus. This is a very unfortunate situation indeed, especially at a time when every place on the planet needs an economic revival. SARS has caused most of us to be more cautious about where we go in the world. Asia is suffering the biggest impact in this regard.

Toronto has impressed me in many ways over the years. It is clearly a "world-class" city. How the city manages SARS will test the city's world-class image and abilities. If Toronto uses its world-class talents, it will survive this situation, and it will teach the rest of the world how to manage during a time of crisis. New York City taught us that in how it responded to 9/11. Oklahoma City managed its Federal Building bombing. Cities have coped with many types of crisis over the years and they have learned how to manage comeback victories. We must not lose our confidence and will.

What can we learn about how we managed AIDS and other diseases that will help us better manage SARS? We know that the medical experts must do what they can to understand and manage this disease--that is a foregone conclusion. Containment of the disease is easier said and done, especially in the highly connected world we live in today. Limiting exposure to SARS is logical. The question is how much limitation is needed. We need knowledge and understanding at a time like this. It is a disservice to all to "play with the facts." Times of crisis argue also for "common-sense"--that mysterious human ability that helps most of us do the right thing during difficult times.

SARS, like terrorism, war, and other external events, is having an impact on economic development activity in many places. Earlier ED Futures articles have addressed this issue. External events are having a much greater impact on economic development now, and they will be larger influences in the future. As we look forward, these issues suggest that we will need a new broader perspective of the world and more powerful planning and analysis tools to understand and respond to the risks posed by larger world events.

Our current model of economic development is very insular and fragmented. As economic developers, we shun the complexity of world society in favor of a simplified thinking and work model that is based on the simple idea of taking care of the homefront. Friends, this is not enough. In today's globally-connected world, it is no longer possible to run and hide from the world's complexity. The model of economic development must change. I have been arguing for sometime that we need more national and global partnerships to help local economies advance in our world today. The fragmented, isolated and disconnected model of practice that we have now is not going to work in the future.

Learn from SARS, terrorism, the War in Iraq, and the other leading influences that are defining the shape of our lives on a daily basis. This is evolution at work. Economic development must evolve to survive.

Western Kentucky University: Sets Higher Aspirations

Western Kentucky University (WKU) is a strong regional university, serving a region of Kentucky that very much needs higher education. WKU wants to become "world-class" and it wants to do some things that its big sister, the University of Kentucky, does. As you can imagine, this situation has raised some brows in the Commonwealth of Kentucky.

I have a suggestion on how to handle this situation. WKU and any other higher education institution in the state should have the right and some help in attaining higher standards. They should be allowed to move up the food chain, provided that they do not duplicate services offered by other institutions.

The Kentucky situation is a case where the seeds of a revolution are being planted in the "middle" of the higher education food chain. UK is at the top as the flagship research institution, the regional universities fall in the middle and the community colleges make up the foundation of the pyramid. Handled properly, the quest for quality and improvement could lead to positive changes for the entire Kentucky higher education system.

This could be an opportunity for innovation.

Article link.

Texas ED Update: From the Frying Pan Into the Fire

My Texas friends have seen lots of maneuvers over the years to create an effective state capacity for economic development. The truth is that most Texans have such a strong sense of local control, they basically do not believe in state government. The latest news about the Lone Star state once again changing its state ED formula comes as no surprise to most who know Texas politics.

The Texas Senate has approved SB 275, abolishing the Texas Department of Economic Development and its nine-member board. The bill aims to create a streamlined economic development operation in the governor's office. SB 275, introduced by Sen. Jane Nelson, R-Lewisville, now moves to the Texas House for consideration. The bill is designed to save taxpayers an estimated $2.8 million over the biennium, help the state more efficiently, assist companies doing business in Texas and pursue companies interested in relocating to Texas.

This is what I call "jumping from the frying pan into the fire" when it comes to politicizing economic development.

Other states and some cities and counties have moved in this direction, arguing that the Chief Elected Officer should run the show to ensure that things get done. As I reflect on past examples that I can think of, most are short-lived and eventually give way to other models.

My recommendation to Texans is to create a new public-private partnership organization that is jointly funded by both sectors and provides shared leadership for economic development.

I want to know what the Texas ED Council and the Texas Marketing Team have to say about all this.

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Why Not Us? Tennessee Wants to Know

One of the toughest questions to ask is: "Why didn't I get the deal?" That is exactly the question that Tennessee's economic development leaders are asking. Overall, Tennessee has not done that badly in economic development. The Volunteer State has been very successful in the automotive, music/entertainment, tourism and a variety of other industries.

There is always room for improvement, which is why Tennessee's new development chief is planning to look into the business investment deals the state lost. The state keeps hearing about the dozens of companies that quietly choose to locate elsewhere. Matt Kisber, the state's new commissioner of economic and community development, has asked the University of Tennessee to survey about 100 companies to find out why they didn't move to Tennessee or why Tennessee companies chose to expand operations elsewhere.

Article link.

University Research Can Make a Difference in the Arizona Economy

Where can university research help most in bolstering economic development in Arizona? For Arizona to generate high-paying jobs, it will have to focus its universities on six key strengths, from electronics and optics to chemistry and space sciences, and track their progress for the long term. That's the conclusion of two new reports on the economic potential of science and technology research at Arizona's universities. The Ohio-based Battelle Memorial Institute and the Morrison Institute for Public Policy at Arizona State University.

The reports say that Arizona can become a leader in these areas:

• Communications. Arizona's strengths in electronics and optics, computer modeling and simulation, chemistry and materials, and space sciences could yield advances in communications and in microsatellites.

• Information technology. Research in electronics, computer modeling and chemistry areas can give Arizona an edge in the software and materials that will be needed for "anywhere, anytime" use of the Internet.

• Bioengineering. This field taps nearly all the core competencies, plus Arizona's strength in biosciences, and could develop the use of optics in medicine, implantable devices and neural engineering.

• Sustainable systems. This is everything from environmentally friendly factories to new construction materials that don't require a lot of energy to make and are biodegradable. Although in the early stages, Arizona could use its strengths in ecological sciences and agriculture and plant sciences to create and lead this market.

Article link.

Arizona Science and Technology Council website.

South Carolina Creates New Venture Fund

The South Carolina legislature voted to create a new venture investment fund to spark the creation of more technology-based companies capable of producing high-paying jobs across the state. The new bill establishes a fund at the state Commerce Department that could borrow as much as $100 million. The fund would be administered by a board of seven people appointed by the speaker of the House, the Senate president pro tem and the governor.

The board would invest the money in venture capital companies that in turn would invest in startup businesses. If the investments make money, the banks will be paid back and no tax credits will be used. If the investments lose money, the banks can deduct losses from their state taxes.

Similar funds exist in Oklahoma, Arkansas and Iowa.

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Singapore: A Lesson in Foreign Competition for U.S. Business Investment

Exactly how aggressive are our countries in luring U.S. business investment? For some insight into this issue, take a look at the infrastructure of people and activities that Singapore has installed across the United States. Go here to access the Singapore Economic Development Board's office network in the US and other countries.

I spent some time studying the Singapore Economic Development Board (EDB) website. It is very impressive. I have been monitoring knowledge economy development strategies across the world. The EDB tells me clearly that Singapore is a rapidly emerging player in the knowledge economy, as is China, Korea and many other Asian nations. And yes, SARS has created a setback for many Asian countries at the moment, but don't count on that as a reason why you shouldn't take these formidable foes very seriously.

This is a wake-up call for all American states, regions and communities that think they do not have to work quite so hard at economic development. While many states are arguing whether to keep their existing incentive programs, places like Singapore are adding new programs on a regular basis. It is well worth your time studying the economic development network that has been built across the world. It not only tells us that we need to work harder, but much smarter.

St. Petersburg, Florida Launches New ED Site

The City of St. Petersburg’s Economic Development Department has launched its new website, “St. Petersburg Shines.” The site is one of the better ones that I've seen lately for the following reasons:

* It contains lots of useful and current factual information and data about the economic and business environments.
* It is well organized and easy to navigate.
* It offers a nice balance of text, pictures and multimedia content.
* It offers some interactivity to those viewing the site.
* It is grounded in a realistic marketing theme.

Check it out here.

High Tech Tax Incentives Debated in Washington State

Are state tax breaks for high tech companies working? Should these benefits be extended to companies for longer time periods? Can the state afford to continue to provide them? These are the questions being asked in Washington state about its economic development incentives. Like in most states, the economic development debate in Washington state has grown sharply partisan.

Republicans want to make tax breaks for high-tech and biotech companies permanent despite a debate about their effectiveness and scant evidence the programs have done what the Legislature had hoped: produce jobs for Washington residents. The Republican-led Senate voted last week to renew the high-tech and bio-tech tax exemptions for another 10 years, rather than wait for a new study that could provide more details on how the programs have worked. The programs are set to expire next year.

Do I know something about these issues? Having evaluated the costs and benefits of Ohio's incentive programs in 1999, I would say the issues raised in Washington state strongly resemble those in Ohio and other states. As state finances tighten, increased pressure will be placed on economic development programs. What's the solution? First, concentrate on doing the best deals possible. Second, implement a performance monitoring and assessment program to measure the impacts of your incentives on an ongoing basis. Third, develop an equitable and targeted policy to guide the use of your incentives.

This is a must read article for those of you struggling with these issues. Article link.

Tucson's New Marketing Focus Eyes Hispanic Businesses

Beginning with a launch this month of a revamped Web site to a scheduled launch in May of a new marketing campaign to attract more Hispanic business owners to the area, the Greater Tucson Economic Council (GTEC) has a busy schedule for the next several months.

The start date for the Hispanic Marketing Campaign, a collaboration between GTEC and the Tucson Hispanic Chamber of Commerce, is May 31. The campaign will involve targeted marketing to at least 50 companies from the top 500 Hispanic-owned businesses in the nation.

While GTEC has sustained some budget cuts this year, the organization is ready to step up its targeted marketing efforts this year.Tucson economic development officials remain optimistic that business investment will come back as the economy continues to improve. In addition to its new focus on Hispanic businesses, GTEC has a target industry program that includes companies in the optics/photonics, life sciences, electronics and a number of other areas.

Article link.

GTEC website.

Kentucky Has Lowest Electric Power Rates

New state-by-state rankings by the U.S. Energy Information Administration have once again placed Kentucky dead last. State officials and industries couldn't be happier. An annual report on electric rates show that Kentucky again "takes the prize" for the lowest prices in the nation, said Rodney Dunn, electric power industry specialist for the administration.

Although the average rate per kilowatt-hour has edged up a tenth of a cent over the past year, to 4.3 cents, it remains the envy of the rest of the country, especially among businesses and industry, said attorney David Boehm, a spokesman for Kentucky Industrial Utility Customers, a statewide industry group.

Energy Information Administration website.

New Hawaii Economic Partnership Launched

City, state and federal officials have joined with the private sector to form a new economic development partnership to help businesses that are looking into relocating to Hawaii or opening new business operations. The Hawaii Economic Partnership will includes the state's Department of Business, Economic Development and Tourism, Honolulu's Office of Economic Development, the Chamber of Commerce of Hawaii, Enterprise Honolulu, and the Honolulu office of the SBA.

Article link.

Is Richard Florida Headed to Toronto?

Recent reports by the Toronto Star and Pittsburgh Post-Gazette indicate that the University of Toronto is trying to lure Richard Florida away from Pittsburgh. Florida has publicly said that he was considering several cities other than Pittsburgh as a location for his proposed "Center For Creativity and Innovation," a $25 million research center. Rod Frantz, president of the Richard Florida Creativity Group, said Monday that the Star article said that no deal had been finalized.

"The University of Toronto is one of many universities that have expressed an interest in having Richard," Frantz said. "But if you read the article closely, it doesn't say that he's definitely going there."

Venture Capital Returns Suffer

Venture capitalists saw a drop in their returns for the eighth straight quarter, with back-to-back losses of 20 percent or more the past two years, according to an industry report released Monday.

With initial public offerings hitting lows, along with little movement in the mergers-and-acquisitions markets, returns to investors have been suffering in the short term, the report says.

Thomson Venture Economics and the National Venture Capital Association have been tracking fund returns since 1980. The past two years have been the worst on record since the study began. The decline looks particularly bad after returns flew so high during the dot-com era.

Returns in 2002 showed a loss of 23.3 percent, a slight improvement over the year before, when losses stood at 27.8 percent.

That's in sharp contrast to 1999, when returns soared to an average of 166 percent above the amount that the venture capitalist invested.

Venture Economics website.

U.N. Gobal Entrepreneurship Summit

The Kauffman Foundation will hold its first Entrepreneurial Advantages of Nations summit on April 29th with the United Nations. The summit will communicate the findings of Kaufman's most recent global entrepreneurship survey and it will explore new strategies to spark greater entrepreneurship in developed and developing nations across the world.

The Kauffman Foundation, based in Kansas City, has been a long-time advocate of entrepreneurship.

Kauffman Foundation website link.

Dayton Working on Plans for New Mezzanine Financing Fund

The National Center for Industrial Competitiveness (NCIC), a Dayton area venture capital firm, is working to launch a $45 million fund that officials say would fill a void in local corporate financing.

The NCIC CapitalFund II SBIC (Small Business Investment Company) would target companies that need what's called mezzanine funding, which gives entrepreneurs high-interest loans and gives investors the option to buy a small piece of ownership, said Frank Winslow, president and chief executive officer of NCIC.

The returns for mezzanine investors, in the 15 to 20 percent range, are less than their more-popular venture capital cousins, 30 percent to 50 percent and up, because the risk is less with more established companies that would take mezzanine loans. Many believe that the more conservative fund should be attractive to investors--many of whom still may be stinging after investing in overvalued tech companies the late 1990s.

Good move Dayton!

Article link.

Cato Institute: Markets Not Government Sparked Ireland's Economic Growth

According to the Libertarian-based Cato Institute, markets had more to do with Ireland's economic recovery over the past decade than government assistance. Cato researchers say that "the country's astounding 10-year economic history has led some to dub Ireland the Celtic Tiger. Understanding the causes of Ireland's success can help Ireland avoid policy mistakes during its current slower growth that would undermine its future potential." What does this mean? It means that Cato and other conservative policy wonks believe that the private sector should lead future economic development efforts and government should focus on making national, state and local business climates more hospitable for economic growth.

Many outside observers attribute Ireland's success in improving its standard of living over the last 15 years to subsidies from the EU. Cato officials disagree and say instead that "agricultural subsidies are one component of EU transfers and are an example of how well-meaning transfers can get in the way of economic development. The subsidies boost rural incomes, but they retard economic adjustment by keeping rural populations artificially high. Some of these workers could produce more valuable products by moving to the cities. As long as people are subsidized to stay in particular professions, Ireland will not fully exploit its comparative advantage in the international division of labor. This depresses incomes and slows growth."

Have you noticed the debate that is gaining steam about whether the market or government should play the major role in economic development? The Bush Administration pretty much rejected the non-government organization (NGO) model for rebuilding Iraq. Administration officials instead say they will rely on the private marketplace to accomplish this job. Michigan and other states are debating whether the private or public sectors should lead future economic development efforts.

I take these as early signs of the path that economic development may follow in the future, especially if the conservatives have their way. Could this be an omen of what lies ahead for state and regional economic development in America in the post-war era? It's certainly something to think about.

Article link.

Photomask Research Consortium Considers Austin

The photomask industry is considering a research and development group similar to Sematech and Austin, Texas has a good chance at landing the deal.

The major U.S. players in the photomask industry are trying to create a research and development consortium similar to International Sematech, which was established by chip manufacturers to promote research collaboration among the major computer chip makers. What does the photomask industry do? The industry makes equipment that allows light to pass through quartz or glass creating a pattern on a silicon wafer. That pattern can then be etched into the silicon. The process is repeated, depending on how many layers are on a wafer.

Two large U.S. companies discussing the consortium formation have major operations in the Austin area. DuPont Photomasks Inc. is based in Round Rock and Photronics Inc. employs about 120 people at its research and development and manufacturing facility in North Austin.

Other details about the project have not been released yet.

Article link.

New Structural Biology Lab Slated for San Diego

San Diego will be adding to its dynamic and growing life sciences base. Privately-held Structural GenomiX, Inc. (SGX) today announced the formation of a research and technology collaboration with Eli Lilly and Company (LLY). Within the research collaboration, SGX will apply its proprietary gene-to-structure technology to key Lilly drug targets to determine their 3-dimensional structures.

Structural GenomiX, Inc. (SGX) is a structure guided drug discovery company accelerating the discovery of novel therapeutics to treat human diseases. SGX technologies include advanced bioinformatics, automated molecular biology and protein engineering, high-throughput crystallization, streamlined structure determination, high-throughput compound docking and medicinal chemistry. SGX technology drives the lead optimization process through iterative determination of co-crystal structures that reveal, in atomic detail, how small molecules interact with drug targets.

SGX has established unparalleled capacity in this area by building a world-class facility for the collection of macromolecular X-ray diffraction data at the Advanced Photon Source (APS), located at the U.S. Department of Energy's Argonne National Laboratory. SGX has multiple internal drug discovery programs focusing in the therapeutic areas of oncology and inflammation. The company is based in San Diego, California. For more information, please visit the company's website at www.stromix.com.

Chase for the Boeing 7E7 Plant Gathers Momentum

What community would not want the new highly coveted Boeing 7E7 passenger jet manufacturing plant, which is expected to provide over 4,000 well-paying jobs and many other eocnomic benefits to the winner?

Mesa, Arizona says it wants the deal and has a lot to offer Boeing, should the company decide it wants to build the plant in the Greater Phoenix area. Boeing currently has over 4,000 jobs already located in its mostly defense-related Mesa facility.

The company is scheduled to release details of its site selection parameters and requirements in the coming weeks. Production of the 7E7 is scheduled to begin in 2004, with the first airplanes in service by 2008. You can count on the fact that competition will be intense for the deal, and pressure to provide a big fat incentive package will be great.

Boeing website.

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