Economic Development Futures Journal

Saturday, January 17, 2004

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Washington State Opens New Trade Offices

Washington State is preparing to open new overseas trade offices in China and Mexico, after several years of cutbacks in the export-promotion outposts. The new China office, likely in Beijing or in Guangzhou Province near Hong Kong, will supplement the Shanghai office established in the late '90s. The Mexico office will be in Mexico City, where the state at one time had a contracted representative, but never a full trade office.

Go here to read more.

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India Seeks Compact Car Production Niche

India, increasingly seen as a global technology outsourcing centre, is taking rapid strides towards becoming the world's manufacturing hub for compact cars.

India, Asia's third largest economy, has emerged as a large car market in recent years. The country of over one billion people, where only six out of every 1,000 people currently own cars as compared to nearly 500 in developed economies, is expected to see an explosive growth over the next few years. Small cars account for nearly 60 per cent of the domestic 600,000 cars a year market.

Go here to read more.

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Akron Searches for New Marketing Slogan

A recent Akron Beacon Journal article describes Akron's struggle to find a new slogan to replace its worn out "The Rubber Capital of the World" tag line. Many feel the new slogan should relate to polymers, which is the technology base underlying rubber, plastics and a large part of the chemical industry. Some feel it's simply a waste of time for the community to go through the exercise.

Many cities have taken it on the chin in the past for spending too time trying to arrive at a cutesy slogan for their community. I would avoid that. A better approach is to articulate what the city stands for. What is its overall value proposition to the people and businesses that call Akron home. Something like this might work: "Akron: Inventive Past, New Designs for the Future" might make some sense.

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Incentives Number One in Site Survey

While many may not want to hear this news, state and local economic development incentives received the top ranking as the most important corporate site selection factor.

True, it is usually a combination of factors that influence where companies locate facilities, but this is the first time that I can remember incentives taking the top billing.

Go here to download the Area Development Magazine survey.

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China #4 Vehicle Producer

In 2003, China turned out 4.44 million vehicles and sold out 4.37 million, an increase of 36.6 percent and 34.5 percent respectively over the previous year. Among them, there were 2.01 million cars with 1.97 million. of them sold, up 84.4 percent and 80.7 percent respectively. China has outrun France to become the world's fourth large auto manufacturer.

Go here to read more.

Friday, January 16, 2004

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Denver Convention Center Cost Over-Runs

Has there ever been a convention center built that didn't cost more than projected? I guess I don't understand why the cost over-runs are so severe in most of these projects.

Denver is just about done with its new facility, but sure enough, it will cost $40 million more than it was estimated in 1999. That is 15% above the original price tag. We seem to think that is acceptable. It's not. Go here to read more.

Maybe the development industry (construction companies, architects, planners, the trades, real estate developers, others) needs to work on a strategy to get competitive. Yes, there are unforeseen events that delay these projects, including labor strikes, material shortages, building mistakes, and many other sources of risk and uncertainty. And it is also true that public authorities at times really do not know what they want, which extends the timeframe and increases costs.

All this argues for a new approach to ensuring that major public facilities come in "on time and on budget." Everybody needs to do a better job in the department!

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NY City Expects Bank Merger Will Create Job Losses for City

Big bank mergers almost always result in layoffs, and the deal announced Wednesday between J.P. Morgan Chase and Bank One Corp. will be no exception.

Executives from the companies said that at least 10,000 jobs will be eliminated, including an undetermined number from the New York area. J.P. Morgan Chase, headquartered in Manhattan, employs about 23,000 people in New York City and 5,400 on Long Island, out of a total work force of 93,000. Bank One, based in Chicago, employs 71,200 people. Most of Bank One's operations are in the Midwest and South. A spokeswoman said they had yet to determine how many jobs might be eliminated at J.P. Morgan Chase operations at Park Avenue headquarters, One and Two Chase Plaza downtown, the MetroTech banking and technology services office in Brooklyn.

Go here to read more.

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EDA to Hold Regional Forum

EDA has been conducting a series of regional forums on economic development. A recent one in Millinocket, Maine was successful. The next is scheduled for Elkins, WV. Go here to read more.

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Arizona Considers Raiding Office in Silicon Valley

AZ Gov. Janet Napolitano wants to open an office in Silicon Valley to help recruit high-tech businesses to the Valley of the Sun. Her 2005 budget proposal calls for $200,000 to fund a two-person office in the world's technology center to sell businesses on the idea of moving here.

But that's not the farthest Napolitano's administration would reach. She has also opened a Washington, D.C., office to lobby for more federal money and the preservation of the state's military bases. And she wants to counter some of the Grand Canyon marketing done by Las Vegas with $2.6 million more in tourism dollars to remind people that Arizona, not Nevada, is the Grand Canyon State.

Opening national and international offices is a good idea if: 1) there is a clear strategy to guide them; 2) you open the offices in the right places; and 3) you can afford to keep them open. Otherwise, don't do it. Many states have botched their out-of-state office plans by placing political hacks in the jobs and not making them performance-based.

Go here to read more.

Thursday, January 15, 2004

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India Plans to Grab Automotive R&D Functions

Hello Cleveland, Detroit, Dayton, Central Indiana, North Carolina, South Carolina, and Alabama. Think the technology-based parts of your regional automotive industry cluster are secure in the face of globalization? Think again!

The Indian automotive industry must focus on R&D to make more original equipment manufacturers around the world to want to use India as a platform for outsourcing as well as a global R&D hub, said Deputy Prime Minister L K Advani while inaugurating the 7th Auto Expo 2004 in New Delhi.

Advani urged the Indian auto-component industry to partner not only Indian auto manufacturers but global OEMs as well. He said that the global rush towards lower costs component outsourcing provides Indian with a window of opportunity like never before. The Confederation of Indian Industry, the Auto Component Manufacturers Association, and the Society of Indian Auto Manufacturers are jointly inaugurating the Auto Expo.

Go here to read more.

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Calgary Sees Growth

Here is an interesting article that talks about growth trends in Calgary and the region's emergence as a growth leader in Western Canada. Go here to read more.

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Medtronic Joins Other Companies Seeking Cheaper Places to Do Business

Medtronic Inc., Sonoma County's largest medical manufacturing company, announced Wednesday it is moving much of the remaining production of its artery-clearing devices -- and hundreds of jobs -- to cheaper operations in Mexico and Ireland. The decision virtually ends the decade-long rise and fall of large-scale stent manufacturing in the county, leaving the company with about a fourth of its one-time work force of 3,000.

Research and development of vascular devices, such as the company's drug-coated stent, will be expanded in Santa Rosa, but assembly line production of devices for commercial sale will end by July 2005, officials of the Minneapolis-based company said.

Go here to read more.

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There Might Be Someone Like This in Your Community

Click here to read a fascinating interview with a fellow named Craig Watson, who runs Opti-Pay, which is a technology development company that helps streamline payment processing.

Watson is a strong proponent of CivicNet, the currently stymied proposed broadband network that would link every school and government agency in Chicago and expand access in underserved neighborhoods.

There is probably a Craig Watson in your midst. Find him or her and help that person realize their vision.


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"Finish" Your Workforce

One out of every ten members in the Confederation of Unions for Academic Professionals in Finland (AKAVA) is considering to apply for a job abroad. According to a questionnaire study commissioned by AKAVA, 1.6 per cent of all respondents know for certain that they will move abroad within the next twelve months, whereas 9.8 per cent of the respondents consider moving. About 3 per cent of the members polled said they plan to move abroad for further education. The under-30-year-old professionals working in the technical field are the most eager to move abroad. Of all AKAVA members who work in technical professions, nearly one in five have considered moving. Of the members having a licenciate or doctoral degree, about 17 per cent have thought about a career abroad.

Go here to read more.

Wednesday, January 14, 2004

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Relationship Management: The Other Side Of Networking

Networking is a vital ingredient to both personal and business success. Every day of our lives we participate in one type of network or another of our own creation or by someone else. Fellow blogger George Nemeth has been a big advocate of networking bloggers (those who operate weblogs or online web journals) and using the Web, through virtual social networking groups like Ryze, to form new and work within existing networks. Valdis Krebs, the architect of some power social network mapping software, has been using his tools to help companies build markets and other things by understanding and building stronger social networks.

Economic developers use networking as a strategy to make in-roads with businesses and other resources they need to do their jobs. Regional, state, national and international associations exist to facilitate this networking.

There is another side to networking, which has been getting much attention in the business world, called "relationship management." I find that networking is usually not an end in itself, rather it is a step toward extending existing and forming new relationships that coincide with our interests, abilities, goals, and activities. I ran across a wonderful article on relationship management as a formal business strategy. Here is a clip from it:

"Alliances, partnerships, and relationships of all kinds in the business environment, whether with external parties such as suppliers or distributors, or internally with the groups and divisions of the same company, require a repeatable process and discipline to be successful. Partnering concepts are easy to think about, and alliances are even easy to create. But their value only becomes clear upon the implementation of the relationship. And sadly, that is where many companies fail. We have found that those companies who are the best in class in the area of alliance management are those for whom alliance competency is a corporate capability and a business process seen as critical to the company's success." Source: Relationship Management as a Corporate Capability by Larraine Segil

Segil reminds us that it requires follow through and skill to create effective, lasting, and productive relationships. I agree with her assessment, having spent many years as a consultant trying to help organizations develop, reinvent, and strengthen themselves. Relationship management is a new core competency that economic development and other organizations should work at developing. In short, it all begins, and ends, with how we relate to people.

I would be interested in your thoughts on this subject.

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Minneapolis-St. Paul Demographic Profile

Some people ask me "What makes a city great?" I say "people." For an indication of this, read this summary profile of the Minneapolis-St. Paul metro area.

* Despite downtown growth, population in the Twin Cities metro area is decentralizing. Population in Minneapolis and St. Paul increased modestly in the 1990s, thanks in part to strong growth in the cities' downtown areas. At the same time, the growth of the Twin Cities' outer suburbs so far outpaced growth in the remainder of the metro that today fewer than one in four metropolitan residents lives in the central cities. Meanwhile, as people have moved farther out, so have jobs. A majority of all commutes in the region now begin and end in the suburbs, with more workers driving alone.

* Racial and ethnic diversity is on the rise in Minneapolis-St. Paul, thanks to the cities' "re-emergence" as an immigrant gateway. While the cities of Minneapolis and St. Paul remain majority white, their black, Hispanic, and Asian population shares increased markedly in the 1990s. Driving this trend was a 127-percent increase in Minneapolis-St. Paul's foreign-born population during the decade?the fifth-largest such rise among the 23 Living Cities. Arrivals from areas as varied as Laos, Mexico, and Somalia have made Minneapolis-St. Paul's immigrant community one of the most diverse in the U.S. Because more than 60 percent of the cities' foreign-born population arrived in the country in the last ten years, the Twin Cities face unique challenges in connecting these newcomers to the economic, political, and educational mainstream.

* Residents of Minneapolis-St. Paul are young and mobile. Baby Boomers aged 35 to 54 are by far the nation's largest age cohorts, but people in their 20s make up Minneapolis-St. Paul's largest age groups. As a reflection of their age profile, few of the cities' households contain married couples; most are people living alone or with other nonrelatives. Significantly, the Minneapolis-St. Paul population is constantly churning. Nearly one-third of all residents lived in a different city five years ago (second only to Denver among the Living Cities), and in many downtown neighborhoods, 60 to 80 percent of households had moved within the past decade. These dynamics indicate Minneapolis-St. Paul's status as a university center, its emergence as an immigrant gateway, and the metro area's robust job market for young professionals.

* The Twin Cities' workforce is highly educated, although wide attainment gaps between whites and minority groups persist. Among the 23 Living Cities, Minneapolis-St. Paul ranks third in the share of adults who hold at least a bachelor's degree. These high levels of worker education are reflected in the cities' large share of adults in the labor force (70 percent) and low unemployment rate (4.7 percent in 2002, lowest among the 23 cities). Still, racial and ethnic minorities lag far behind their white counterparts in educational attainment. Just 15 percent of blacks and 13 percent of Hispanics hold bachelor's degrees, compared to 42 percent of whites.

* Despite generally rising incomes, some groups struggled in Minneapolis-St. Paul during the 1990s. To be sure, the standard of living in Minneapolis-St. Paul went up in the 1990s. However, the gains were not shared equally among all groups. Median household income rose 9 percent over the decade (after adjusting for inflation), more than double the rate of increase nationally. As a result, incomes in the Twin Cities metro are among the highest in the Midwest. Yet median household income among Minneapolis-St. Paul blacks trails that among whites by over $17,000, mirroring the educational gap between the groups. Nearly one-third of the cities' Asian population lives below the poverty line, the highest rate among the 23 Living Cities. In fact, the lack of growth in the cities' middle class during the 1990s may highlight a shortage of minority families moving up the income ladder.

* Minneapolis-St. Paul maintains a mix of homeowners and renters. A little over one-half of households in Minneapolis-St. Paul own their own homes?about average for the largest cities in the U.S. Yet group differences emerged here too. The proportion of the cities' Asian residents who are homeowners more than doubled over the decade, while over the same period black and Hispanic homeownership rates remained only half those of whites. Rents were a similarly mixed story. Prices in Minneapolis-St. Paul are relatively affordable, and in line with those in other Midwestern cities including Indianapolis and Kansas City. Still, affordability remains an issue for the nearly 40 percent of Minneapolis-St. Paul renters who pay more than 30 percent of income on rent.

Go here to download the full report.

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Foreign Direct Investment Outlook

Here is a useful outlook for foreign direct investment (FDI).

Overall foreign direct investment (FDI) had remained flat in the past two years but was expected to pick up again next year, boosted by an improving global economy, according to the UN. Global FDI totalled $653 billion last year and $651 billion for 2002. The figures represented a sharp drop from $1.4 trillion in 2000 and $824 billion in 2001.

The UN Conference on Trade and Development, which monitors FDI around the world, said the decline was caused by the continuing low value of projects and fewer cross-border mergers and acquisitions. These are considered to have been the key driver in global FDI since the 1980s. Developed countries - the US in particular - were the largest recipients of FDI in 2003, with $467 billion of the total of $653 billion. Flows to the European Union, notably to France and Germany, declined last year.

The UN said FDI outlooks for 2004 were promising because of the expected strength of the global economic recovery. The UN said the rebound was because of investment projects in natural resources and the environment. FDI flows to the Asia-Pacific region increased marginally, from $95 billion in 2002 to $99 billion in 2003. China received $57 billion last year, followed by South Korea, Thailand, Vietnam and oil-rich Azerbaijan. Latin American and the Caribbean countries were negatively affected. FDI declined in those countries from $56 billion in 2002 to $42 billion in 2003. FDI in Argentina, Brazil and Mexico experienced a significant decline. Investment in central and eastern Europe was little changed. The region received $29 billion in 2002 and $30 billion last year.

Go here to read more.

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Pittsburgh on the Hunt for a New Airline

Corporate and economic development officials have forged a partnership to attract new airline service to Pittsburgh, now that the region might lose US Airways. The Regional Air Service Partnership is spearheaded by the Allegheny Conference on Community Development. Go here to read more.

Tuesday, January 13, 2004

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Outsourcing Update: Limits to What India Can Offer

Here is a story you will want to read.

Last year, after reading about Indian call centers in a magazine, Web.com CEO Will Pemble decided to "offshore" his Internet hosting company's customer service. This November, plagued by cultural misunderstandings and lost customers, Pemble brought all of Web.com's calls back from India to Brookfield, Conn. In the end, Pemble concluded, it was costing his company more to send work to India than to do it in one of the highest-cost states of the Union. Dell made a similarβ€”if much more widely publicizedβ€”decision in November, routing calls from some high-end business customers back to Texas from its Indian call center in Bangalore.

None of this means that the great migration of service jobs to India and other low-cost overseas locations (see Where Your Job Is Going) is about to come to a halt. It is an indication, though, that there are limits to offshoring. The most obvious have to do with politics and public opinion: Corporations are having to tread more gingerly on the outsourcing front for fear of backlash from elected officials and customers. If the U.S. economy keeps strengthening, that backlash should fizzle. But CEOs are being forced to realize that while their shareholders may think it's swell that customer calls can be routed seamlessly to people in India making $2,000 a year, many customers are less pleased.

Go here to read more.

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Top Women Business Leaders

Want to make in-roads with the top women business leaders across America? First, you need to know who they are. Go here to get the list.

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Well-Managed Companies Should Be on Your Targeting List

With all the bad things that have happened to US corporate management in the past 3-4 years, it makes sense that "management quality and effectiveness" be one your business targeting criteria to pick those firms your area would like to lure. Check out the Forbes list of best managed companies for some insights. Go here.

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How Will the Federal Government's Biometric Contract Impact Your Area Firms?

On Jan. 22, bids are due for a U.S. government contract that could be worth up to $20 billion over five to ten years. Three consortiums are competing for the chance to build out the Department of Homeland Security's U.S. Visitor and Immigrant Status Indicator Technology (U.S. VISIT), which officially launched on Jan. 5. Go here to get filled in on the details.

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Business Valuation Calculator

Working on estimating the value of a business for a financing deal? Go here to use this cool online calculator that helps you do it.

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Development Finance Update: Off-Balance Sheet Financing

If your area is using some form of off-balance sheet financing as an incentive to firms, you will want to read this article.

This month the Securities and Exchange Commission and the Financial Accounting Standards Board are handing down new rules and guidance aimed at improving the transparency of financial statements β€” in particular, off-balance-sheet transactions

After evolving over the last quarter-century into one of the most popular corporate finance tools in the United States β€” taking such forms as securitizations, synthetic leases, and unconsolidated entities β€” it seems that off-balance-sheet financing is being deconstructed in a hurry.

The Securities and Exchange Commission and the Financial Accounting Standards Board have handed down new rules and guidance aimed at improving the transparency of financial statements. The SEC is rewriting its guidance on MD&A disclosure, introducing Regulation G, and rewriting its rules governing Form 8-K. FASB is trained on consolidation of variable interest entities, or VIEs (formerly known as special-purpose entities, or SPEs) and on loan guarantees.

Go here to read more.

Monday, January 12, 2004

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NC Biotech Center: Biomanufacturing in the Cards

Things appear to be looking up for biotech in North Carolina. Catch the latest in this article.

What an incredible year it's been," says Dr. Leslie M. Alexandre, president and chief executive officer of the North Carolina Biotechnology Center. "Certainly for biomanufacturing in North Carolina, it was a homerun year," Alexandre told Local Tech Wire in an exclusive interview. Dr. Alexandre talked about the substantial progress the Center and other supporters of promoting biotech economic development made in the state in 2003. "It was a year filled with accomplishments," Dr. Alexandre says.

First, this summer, the Golden Leaf Foundation pledged $60 million to support a biotech job training program with additional money from industry and private investors.

Then, the legislature approved the Bond Authority that would help companies buy land and build biomanufacturing plants in return for a guaranteed level of investment and job creation.

Merck then validated both moves to some extent when it committed to building a $300 million plant in Durham to become the first recipient of Bond Authority.

Go here to read more.

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Perspectives on Biotech and Who Wins

"Everybody thinks they're going to be the next biotech hot spot," says Doug Darr, 48, vice president and chief scientific officer of the Pittsburgh Life Sciences Greenhouse (PLSG).

Darr, who served as VP of business and technology development at the NC Biotech Center for eight years, left that position citing strategic-thinking differences with the Center's new CEO, Leslie Alexandre, in 2002. He joined the PLSG a few months ago.

The Internet site Genome Web recently quoted Darr about Florida's efforts to make Palm Beach one of those biotech hot spots by spending $570 million in taxpayer funds to help establish a Scripps Research Institute nearby.

"Florida will recoup its investment," he said, "But will it be the next biotech hot spot? I doubt it." Instead, Darr compares the Florida effort to establishing of the National Institute of Environmental Health Sciences in the RTP in the early 1970s.

Go here to read more.

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Significant Job Cuts at Earthlink

EarthLink says it will cut some 1,300 jobs for the second time in almost a year as part of a cost-cutting plan to restructure its contact center operations.

Under the plan, EarthLink will close its contact center operations in Harrisburg, PA, and three sites in California: San Jose, Roseville and Pasadena, which was affected last year. The ISP also will reduce contact center operations in Atlanta, where it’s headquartered, by the end of the first quarter of 2004.

In January of 2003, EarthLink announced similar layoffs, also totaling 1,300, or 25 percent of its workforce at the time, that were estimated to save the company $20 million. Most jobs affected were at call and technical support centers in Dallas, Sacramento, Seattle, and Pasadena, all of which were shut down. A call center in Phoenix also had recently closed.

Go here to read more.

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The Outsourcing Push

Here is the advice that companies are getting about outsourcing. You should know how strong the push is in this direction.

"Outsourcing is a topic for discussion in virtually every Boardroom in corporate America, particularly in the technology and call center/customer service communities. Like it or not, outsourcing services are an economic weapon that many of the best companies in the U.S. are using to become more efficient and cost effective than their competitors. As always, faster, better and cheaper usually wins in the marketplace, and outsourcing abroad is helping many companies to achieve this goal. In 2004, technology companies of all sizes should consider outsourcing as a potential part of their business model."

Go here to read more.

Sunday, January 11, 2004

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Choices Define City Greatness

I ran across a fascinating article about Melbourne, Australia. It says that a city's choices define its greatness. How true that really is. The article talks about the importance of culture, arts, architecture, planning and other aspects of city life. We need to think more about the choces we make about our nation's cities. Many are evaporating before our very eyes. Read the article and let me know what you think. It certainly dovetails with my earlier post about Cleveland's future. Go here to read more.

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Weirton Steel Update

The Ohio Valley's Weirton Steel is surviving, but continues to face its share of challenges. The domestic steel industry has been reshaped by foreign competition in just five years, with most small integrated mills shutting down and some being consumed by the three major players - U.S. Steel in Pittsburgh, International Steel Group in Cleveland and Nucor in Charlotte, N.C. Where does this leave Weirton? In all likelihood, it becomes an acquisition of one the Big Three steelmakers.

Go here to read more. The article provides a really interesting history of the company.

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Slow Job Growth Continues

Everybody was hoping Santa would bring more jobs this year to America. The latest jobs report says he decided to give more jobs to India, China and other places benefitting from the outsourcing wave. The analysts and all concerned were more hopeful about job creation than what actually occurred--only 1,000 net new jobs last month. Go here to read more.

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Wisconsin Not Keeping Up With Minnesota

A recent article talks about how Wisconsin is not keeping up with its neighbor Minnesota in the economic development arena. It's interesting to look at the rivalry. Sounds a lot like Ohio and Michigan.

As the economy continues to pick up and new business investment projects increase in number, rivalry among the states will increase. Watch for it. It's already take shape. Watch those new marketing campaigns fly.

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Where is Hong Kong and China Headed?

I knew that eventually it would come down to this. It was simply a matter of time before the US decided to become more vocal about how Hong Kong is governed and what happens to the former citadel of free markets. The Chinese Government does not like what we have to say. Go here to read more.

Things are becoming more volatile in China. The banks have major problems, the public infrastructure cannot support the crushing weight of the nation's rapid development, China is not holding to its commitments to the WTO, SARS and other health problems are growing, competition for skilled labor and other development resources is escalating. Did you know that direct investment by US firms has actually dropped by 24% to $3.7 billion through November 2003 because of China's lack of performance relative to the WTO's requirements.

I said this some time ago. Watch the China situation VERY carefully. This is not a good time to increase your business outsourcing to China. Trust me. The huge ball of string is rapidly coming unravelled. Some of what you see is political inter-play and that will always be there. A more deep-seated problem is the fact that China's growth is NOT sustainable.