$455 Million Price Tag if DHL Had Expanded in Northern Kentucky

It would have taken an investment of at least nearly a half-billion dollars from air cargo carrier DHL to expand the operation at the Cincinnati/Northern Kentucky International Airport and keep the hub here, area economic development officials said Friday.

The $455 million investment in the local hub would have created 2,900 jobs, DHL told Kentucky economic development officials in a May 27 letter, said Dan Tobergte, executive vice president of the Tri-County Economic Development Corp., the agency that tried to keep DHL here.

DHL last week announced it was consolidating its hub operations in Wilmington, about 50 miles northeast of Cincinnati, and would close its Greater Cincinnati hub in September 2005. Ohio offered a $422 million package, including guaranteeing $300 million in low-interest bonds to be repaid by DHL.

More here.

India's Take on the New BCG Outsourcing Report

A report by an influential consulting firm is exhorting US companies to speed up ‘‘offshoring’’ operations to China and India, including high-powered functions such as research and development.

In blunt terms, the report by the Boston Consulting Group warns American firms that they risk extinction if they hesitate to shift facilities to countries with low costs. That is partly because the potential savings are so vast, but the report also cites a view among US executives that the quality of American workers is deteriorating.

"The largest competitive advantage will lie with those companies that move soonest," the report stated. ‘‘Companies that wait will be caught in a vicious cycle of uncompetitive costs, lost business, underutilised capacity, and the irreversible destruction of value."

Boston Consulting, which counts among its clients many of the biggest corporations in the United States, admonishes them that they have been too reluctant rather than too eager to outsource production to ‘‘LCC’s,’’ or low-cost countries. ‘‘Successful companies ask themselves, ’What must I keep at home?’ rather than ’What can I shift to LCC’s?’ ’’ the report stated. ‘‘Their question is not ‘Why outsource to LCC’s?’ but ‘Why not?’’’

So says India's economic development czars. What say America's ED chiefs?

More here.

Tucson Area Looks to Consolidate ED Efforts

A panel of top-ranking community leaders believes one entity needs to be in charge of the region's economic development efforts.

The panel has looked at how other bustling cities handle economic development.

And later this month the panel may have suggestions on how to revamp and coordinate Tucson's efforts to create jobs, assist business expansion and keep companies from leaving town.

Some may include what members have learned about Minneapolis, San Diego, Pittsburgh or Raleigh, N.C. Or not.

Broadly speaking, the Tucson Office of Economic Development handles business expansion and retention, Pima County focuses on work force development, the Greater Tucson Economic Council specializes on recruiting high-tech companies to Tucson, and the chamber does a bit of all these functions.

Stay tuned.

More here.

Interest Rates Rising, ED Impacts?

The Federal Reserve has raised interest rates for the first time in over four years. A steady stream of further rises in the cost of borrowing is now likely—unless America’s high-spending, heavily-indebted households suddenly retreat

In truth, the end of cheap money began almost three months ago, when Wednesday’s decision was first anticipated. The Fed had made clear that it would raise rates from emergency lows as soon as the recovery of American economic output translated into convincing gains in employment. The buoyant job figures for March, released on April 2nd, were the evidence that the markets knew the Fed was awaiting. Yields on Treasuries rose almost immediately, as traders priced in future rate-rises. Corporate-bond yields and mortgage rates, not to mention spreads on emerging-market debt, soon followed suit. As Ben Bernanke pointed out in a recent speech, “For practical purposes, therefore, monetary conditions tightened significantly the day of the March employment report.”

Much tightening remains to be done—real interest rates are still negative—but the Fed likes to move step-by-step. The last bout of rate-raising, which began in June 1999, took 11 months, and six steps. Mr Bernanke has likened the Fed’s “gradualist” approach to that of a golfer not quite sure of his putter. Each stroke is a bit of an experiment, revealing something about the club, as well as getting the ball closer to the hole. Better, then, to make a series of tentative, “lagged” putts, rather than risk sending the ball past the cup with one over-confident stroke. Certainly, the markets think Wednesday’s putt is the first of many. The Fed has four meetings left this year, and, according to the prices of futures contracts, it will probably raise rates at every one of them, bringing the Fed-funds rate up to 2.25% by the end of the year. By the end of 2005, rates could hit 4%.

How might this impact the resurgence of your area's economy? Might this rise impact business loans and therefore increase the demand for your low-interst rate ED funds? hum, now that's a thought.

More here.

2004 IT 100 List

Are you on to the IT 100? Catch it here. You can download it in PDF. Very interesting! Who said that IT was dead?

Young Professional Families On the Move

Soaring property values in California have made many homeowners there rich — and many real-estate agents in Austin delighted.

In an exodus that some demographers say could reshape the nation's landscape, young professional families are increasingly fleeing the exorbitant coast for Austin, Dallas, San Antonio, Atlanta, Denver or Charlotte, N.C.

They're selling cramped "starter homes" in California, some now worth $500,000 or more, and buying luxury homes, for cash, in the nation's interior.

The 2000 census tracked the movement of college graduates around the country and found the metro areas around Atlanta, Dallas, Denver and Phoenix were top magnets. (San Francisco, too, made the list, although demographers say it's attracting more single dot-com workers than young families.)

Although the Midwest has proved a less attractive draw, cities such as Minneapolis, Kansas City, Ann Arbor, Mich., and Madison, Wis., are also beginning to lure professional families from the coasts.

Demographer Joel Kotkin, a senior fellow at Pepperdine University's Davenport Institute for Public Policy, predicts the trend "may lead to a stabilization, or even a limited resurgence," of the long-declining Rust Belt.

More here.

Celebrity 100 List

This is the age of the Insta-Celebrity. Fame has never come so quickly and been prized so highly -- yet rarely has it been so expendable and evanescent. Last year Jennifer Lopez and Ben Affleck were the Hollywood power couple, gracing most major media outlets and placing fifth and seventh, respectively, on the Forbes Celebrity 100 list.

Why should economic developers pay attention to these celebs? Because each one of them is a major economic generator. How can your community tie into these stars' wealth?

Louisiana Phases Out Business Tax

Louisiana starts to make its tax code a little more business friendly today, with the beginning of a plan to phase out two of what Gov. Kathleen Blanco calls onerous business taxes.

The first phase of eliminating the state sales tax on manufacturing equipment, part of an economic development package passed this year by the Legislature, goes into effect with the beginning of the 2005 fiscal year, which runs from today through June 30, 2005.

The tax will be reduced by 5 percent, followed by a 19 percent reduction next year. The tax eventually will be eliminated in fiscal 2011.

The phase-out was pushed by Blanco and business interests, who said the tax puts Louisiana businesses at a competitive disadvantage in attracting and retaining industry.

More here.

U.S. Chamber Head Endorses Offshoring

US Chamber of Commerce President Thomas Donohue is promoting overseas outsourcing of jobs as a way to boost the economy and even increase employment - a stance that rankles the flagging technology industry.

Donohue, speaking to the Commonwealth Club of California, said he believes exporting high-paid tech jobs to low-cost countries such as India, China and Russia saves companies money that they may use to create new jobs for Americans.
CEOs from Wall Street to Silicon Valley have embraced the theory, and the pace of offshoring has shocked statisticians and economists.

Donohue acknowledged the pain for people who have lost jobs to offshoring - an estimated 250,000 a year, according to government estimates. But pockets of unemployment shouldn't lead to "anecdotal politics and policies,'' he said, and people affected by offshoring should ``stop whining."

"One job sent overseas, if it happens to be my job, is one too many," Donohue said. "But the benefits of offshoring jobs outweighs the cost."

My comment: "We'll see."

More here.

Washington State Bags New Biotech Deal

The state of Washington announced recently a sizeable economic development win that involved successfully attracting biotech company Berlex, Inc. to build its $60 million commercial drug plant in the state. It will be the largest commercial biotech drug plant in Washington, taking up 16 acres and housing 70 local employees when it opens its doors in 2007, growing to roughly 180 by 2009.

The site will be established in the southern part of Snohomish County which has built a reputation of luring biotech companies with cheap land and office space. The county currently holds about 25 percent of the state's total biotech jobs, which continues to diversify its industrial base once dominated by the cyclical aerospace business.

Berlex will use this facility for the production of its cancer treatment Leukine which will be increased in use because of its newly discovered indication against intestinal disorder Crohn's disease, currently entering Phase III clinical trials.

More here.

Training Makes Difference in Sunoco's Decision to Remain in Philly

Pennsylvania Community and Economic Development Secretary Dennis Yablonsky today announced that Sunoco Inc. will retain 3,772 jobs in Philadelphia as part of an economic-development project that will allow the company to conduct training over the next two years. Sunoco, a leading manufacturer and marketer of petroleum and petrochemical products, expects training to begin in 2005.

The Governor's Action Team, economic-development professionals who report directly to Governor Edward G. Rendell and also to Secretary Yablonsky, worked with Sunoco to secure funding for their training project. DCED has offered the company a financial package totaling $1 million that includes $300,000 in Customized Job Training and $700,000 in WEDnet training.

More here.

Excellent Example of an ED Performance Assessment

Worcester, MA offers an excellent model for conducting a community economic development performance assessment. I would commend this reading to you. It's only 20 pages. This is how we do it. Go here to download.

Dallas-Fort Worth Fortune 500 Rank

The Dallas-Fort Worth Metroplex is the sixth-ranked metropolitan area in the nation that Fortune 500 companies call home. Seventeen of the Fortune 500 currently have headquarters in D-FW.

Flanking Dallas-Fort Worth in the rankings are No. 5, Minneapolis-St. Paul-Bloomington, with18 headquarters, and No. 7, Detroit-Warren-Livonia, with16, an NTC survey found.

Not surprisingly, the New York-Northern New Jersey-Long Island area was the No. 1 headquarters site, with 71 headquarters. Houston-Baytown-Sugar Land -- the only other Texas metropolitan area in the top 10 -- came in third, with 20 headquarters.

The seventeen companies with D-FW headquarters are Exxon Mobil (No. 2 on the Fortune 500); J.C. Penney (No. 43); Electronic Data Systems (No. 87); AMR (No. 110); Kimberly-Clark (No. 141); Advance PCS -- now known as Caremark -- (No. 143); TXU (No. 177); Texas Instruments (No. 197); Burlington Northern Santa Fe (No. 210); Dean Foods (No. 218); Centex (No. 219); D.R. Horton (No. 241); Southwest Airlines (No. 310); RadioShack (No. 378); Triad Hospitals (No. 436); Affiliated Computer Services (No. 445) and Brinker International (No. 492).

More here.

Some Reflections on the Boeing Deal

A recent article describes lessons learned from the Boeing 7E& deal. Go here to read it. Of particular interest is the discussion about the inter-regional linkages and impacts from the Boeing deal across Washington state.

HP's Economic Development Partnership in Baltimore

HP and its Baltimore Digital Village partners recently marked the third anniversary of a community initiative designed to address critical social and economic needs through the innovative application of technology.

Since the Baltimore Digital Village was launched in 2001 with a $5 million HP grant to the East Baltimore Empowerment Zone, the program has enhanced education, spurred entrepreneurship and job creation, and strengthened community relations through a thriving "e-living" culture that integrates HP technology in schools, local businesses and the community at large.

"HP began this endeavor three years ago by listening to the community and together we developed an innovative and sustainable approach to address the community's needs through the use of HP technology," said Debra Dunn, senior vice president, Corporate Affairs and Global Citizenship, HP. "We are proud of the many achievements in education and economic development that have resulted from the collaboration between the Baltimore community and HP."

HP, Baltimore City Public School System, Empower Baltimore Management Corporation, Morgan University, Baltimore City Community College and other partners are celebrating the anniversary today at a community event at the Hippodrome in East Baltimore. Activities include a community tour of key Baltimore Digital Village programs, including The Door Community Technology Center and The Chance Center, presentations on project achievements by residents, and remarks by Dr. Bonnie Copeland of the Baltimore City Public School System as well as HP executives.

More here.

Singapore Giving India a Run for Its Money in Biomedical

Biotech may be a sunrise industry in India but it has an aggressive competitor in Singapore. The Asian counterpart has marched streets ahead by not just creating a conducive environment, but also by establishing the necessary infrastructure to "entice" research-oriented companies to flock to Singapore.

"A prime reason why Singapore is chosen over India is because they protect Intellectual Property Rights (IPR). Companies take their R&D and clinical trial operations to Singapore because they see clarity in regulation, besides other financial benefits," observes the corporate-chief who has a base in Singapore as well.

Only about two years ago, pharma multinationals such as Eli Lilly and Novartis established their R&D centres in Singapore to research tropical diseases. Lilly has a budget of $140 million over five years at it's Centre for Systems Biology in Singapore, where it looks to accelerate the drug delivery process for the parent company.

Besides companies, such as Pfizer, Schering Plough, Wyeth and Siemens that have operations in Singapore, local and international biotech companies looking at drug discovery are also making a beeline to the city. They include, ES Cell International (involved in human embryonic stem cell research), MerLion Pharmaceuticals (natural product-based drug discovery) and Via-Cell (cell therapy research), the EDB official said.

More here.

University of Louisville Partners with California Bio Company

Vacaville, CA-based Large Scale Biology Corp. and the University of Louisville in Kentucky have agreed to work on developing and evaluating new therapies that could prevent and treat diseases caused by human papilloma viruses or HPV, the two organizations said Monday.

Large Scale will design and produce vaccine and antibody products. University scientists will evaluate the products in animal models of various HPV diseases.

HPV is known to cause most cervical cancers, and many head and neck and other soft-tissue cancers. It responds to control by vaccine and antibody therapy, according to Large Scale.

A growing number of other diseases are linked to HPV, including skin and genital warts, and Large Scale believes there is a "significant market opportunity" for safe and effective new products.

The company is using its gene expression and biomanufacturing system to produce new vaccines. The latest version of its technology has produced hybrid vaccines consisting of HPV antigens fused to the plant viral coat protein.

The new vaccine designs are stable and can be produced with substantial manufacturing advantages over more conventional cell culture-based approaches, according to Large Scale.

Large Scale and the University of Louisville will jointly fund the project. The University of Louisville is a recipient of a grant agreement with the Kentucky Economic Development Finance Authority to develop a new initiative known as the Kentucky Cancer Experimental Therapeutics Program. Part of the statewide program will be used to support Large Scale's work. The company's commercial-scale biomanufacturing facility is in Owensboro, Ky.

More here.

China Overtakes U.S. in Foreign Direct Investment

China overtook the United States as a recipient of foreign direct investment in 2003 as companies broadened their strategies in emerging markets, according to a report published this week.

The Organization for Economic Cooperation and Development said the United States was the worst hit by falling inflows of foreign direct investment to its 30 industrialized member countries.

Investment into the United States declined to $40 billion last year from $72 billion in 2002 and $167 billion in 2001, while foreign direct investment in China dipped only slightly to $53 billion from $55 billion — leaving China as the world's biggest recipient of investment, excluding tax haven Luxembourg.

The OECD report on foreign investment trends said total investment flows from its members to developing countries surged six-fold to $192 billion in 2003 from $32 billion the previous year.

The Paris-based organization said the sharply increased flows reflected a broadening of companies' investment goals in emerging markets, beyond simply gaining access to cheaper labor and raw materials.

"There has been an increasing tendency for companies to invest in especially the largest developing countries as part of strategies to service local clients or to acquire a strategic position in markets that could become prosperous in the future," the OECD said.

Investment into OECD countries, meanwhile, fell 28% to $384 billion, confirming a downward trend identified last year by the OECD, which had forecast a dip of between 25% and 30% based on the first half of 2003.

"This indicates that, contrary to the expectations of many at the time, there was no significant pickup in activity in the second half of 2003," Monday's report said.

More here.

Arizona Workforce Report Available

Few would dispute that workforce development should serve businesses' needs and go hand in hand with economic development. Indeed, the Workforce Investment Act offered states an opportunity to reinvent employment programs by connecting them more closely to economic development efforts. How does Arizona govern this new system? Are there ways that governance could be improved so that services would better fit businesses, economic development, and residents?

On behalf of the Governor's Council on Workforce Policy, Morrison Institute prepared a study that:

--Describes the perceived strengths and weaknesses of Arizona's current governance of the Workforce Investment Act and related programs.

--Presents alternative governance models and programs that could better integrate workforce development with economic development.

--Makes recommendations about governance structures which would help Arizona achieve its workforce and economic development goals.

To read the final report of Can’t Stand Still: Issues and Ideas for Workforce Governance in Arizona, go here: http://www.asu.edu/copp/morrison/CantStandStill.pdf

Measuring Regional Knowledge Economies

While this report is assessing the knowledge economy in Britain it contains an interesting method of measuring and analyzing the local, regional and national knowledge economy. Authors: Mark Hepwort and Greg Spencer, Local Futures Goup. Download it here.

Global E-Readiness Report

A study carried out by computer multinational IBM and business journal The Economist found that Scandinavian countries and the UK are the world's most Internet-friendly nations. Denmark topped the list, ahead of the UK, Sweden, Norway, Finland and the US which fell to sixth position from third last year. Speaking to Reuters, Peter Korsten from IBM said Denmark had a very active policy to reduce the administrative burden on companies using e-government services, which explains why it now ranks ahead of last year's top-ranking nation, Sweden.

Download report here.

New Intel on Cluster Development

The Cluster Policies Whitebook partly serves as proceedings from the recent Gothenburg conference, and partly aims to structure the opportunities and challenges for policymaking raised by cluster developments. It provides a framework and approach to help bridge the gap between our general understanding of cluster policies and what could and should be done under specific circumstances. Part I structures the policy issues that arise in the development of clusters, much according to the lines above, whereas Part II presents some of the rich material developed for the Gothenburg event. It provides summaries from the miniforums and learning workshops held in Gothenburg.

The miniforums, fifteen in total, can be grouped into three different themes. The first theme centres around specific aspects or conditions which affect clusters, clustering potential and dynamics, the second theme can be described as focussing on specific challenges for policymakers with regard to clusters. The third set of miniforums can be categorised as placing the concept of clusters in a more theoretical framework. The learning workshops were aimed at providing insights and experiences from so-called mature cluster initiatives, defined as initiatives that have been in existence for at least five years. Thus, in each learning workshop a cluster initiative was first presented and then specific aspects of the initiative and the overall impact of the initiative, were analyzed or evaluated.

The printed edition of the Cluster Policies Whitebook will be available from mid June 2004. You can learn more about it at the dedicated webpage at the IKED website, www.iked.org/whitebook.

Nanotech Business Location Research

UCLA scholars have been studying the economics and sociology of high tech inventions to chart where the centers of the next wave of submicro (nanotechnology) innovation may be located.

Economist Michael Darby and sociologist Lynne Zucker have spent much of the last decade studying the rise of industries based on exotic new technologies. They have published widely on gene splicing and genetic engineering. Recently they have turned their attention to the promise of nanotechnology, the submicro world of machines made of a handful of atoms.

One of their conclusions was: "Where commercial opportunity is built on fast-advancing academic science it is generally more economical to establish commercial laboratories and even manufacturing facilities near the universities than to try to move the scientists and their network to an existing firm location." The two strongest factors Darby and Zucker discovered in predicting strong science bases in a given region are the number of top scientists at nearby universities and the existence of a large pool of highly skilled workers, this last measured by local wage scales. "Firms enter nanotechnology," they write, "near where top scientists are making breakthrough discoveries and where skill levels in the work force are high."

More here.

California Concerned About Biomed Manufacturing Losses

In 25 years, through economic downturns and increased competition, California's biomedical industry grew to become the biggest in the world, providing 230,000 jobs, according to a new industry report.

Now, as the industry matures into the manufacturing stage, the state is leaking those high-tech, high-paying jobs to states and countries that are practically throwing money at companies to relocate, according to the report, commissioned by the California Healthcare Institute.

More here.

Lay out a strategic plan for improvement that nets measurable results (Reprint from Indy Star)

By Jim Pearson
President, Suros Surgical Systems
June 27, 2004

Being an entrepreneur in Indiana is much like being an entrepreneur anywhere -- challenging and with ample opportunity to make a difference. Suros Surgical Systems is doing just that by offering professional challenges to the local work force and making noticeable differences in medical technology advances, improved patient care and the image of Indiana as a life science leader.

While the state's BioCrossroads initiative has made significant progress during the past two years, hardly a week goes by that we don't hear about yet another exodus of business or industry. Clearly, our state's business and legislative leaders have a long road ahead in anchoring our position as a national model for life sciences success. Hoosier handicaps yet to be conquered are well documented:

"Brain drain" of key talent; Midwest conservatism; lack of identified opportunity to create business; limited regional venture capital; limited success stories to serve as inspiration and real-life examples for entrepreneurs; a disproportionate number of advisory groups versus results-oriented, day-to-day workers; no comprehensive statewide plan to increase professional opportunities.

The obvious first step for growing business ventures in a state challenged by stagnating opportunity: Face the facts. Indiana's handicaps have been used as a crutch to limp through years of moderate success in entrepreneurial opportunities. At a time when entrepreneurial companies are creating nearly two-thirds of all new jobs in the country, economic benefit to Indiana has been absent.

Now we have a choice -- fold the tent and return to a state driven by dwindling manufacturing jobs, or lay out a strategic plan for improvement that nets measurable results over short- and long-term business cycles. Ironically, identifying our shortcomings will inevitably improve our strategic position.

How do we improve the existing entrepreneurial environment in Indiana? Measure against pre-set statewide goals at six-month intervals. Criteria include job creation; revenue growth and return on investment; in-state production contracts and raw material purchases; hiring in-state MBA and undergraduate students; state-backed incentives such as the 21st Century Fund; individual key metrics tied to measurable results.

Avenues for continued improvement:

• An outline from key leaders of what success looks like in 12-, 36- and 60-month intervals with progress measurement at six-month interludes. Great growth will never occur until we concur on the definition of success.

• An alignment of financial and human resources with appropriate business opportunities that are adequately backed by state incentives. We can start by identifying specific business stages that align organizations with appropriate solutions -- a business development mentoring of sorts. I envision five stages:

1. Companies with ideas, but no money, product, management team or manufacturing.

2. Companies with a working prototype or product but limited funds, management and manufacturing ability.

3. Companies with market promise and some success but that need a management team, infusion of capital and manufacturing support to prepare for growth.

4. Companies expanding their staff and product pipeline. They require qualified employee options, capital and production facilities.

5. Mature companies with a successful business model, seeking creative ideas, new product possibilities and personnel who integrate with corporate culture. Positioned to identify merger and acquisition targets to promote growth.

Until we define what success looks like and agree on a road map to attain it, we will struggle to understand why programs and marketing initiatives are not retaining and attracting promising new business. And we will tread water in gaining access to a global network of venture capitalists.

We should look to other cities for working examples of success. (In life sciences, San Diego and Minneapolis have proven results). We should not be creating the wheel, but recreating it. While it is motivating to think we can do better than other national examples, it is also arrogant and a waste of time -- critical if we want to take immediate advantage of the valuable talent in our own backyard.

In the end, being an entrepreneur in Indiana, much like anywhere else, is about overcoming obstacles and producing daily results. We must not let obstacles become excuses for why it can't be done in the Midwest. The success of Suros offers tangible evidence that "bio-entrepreneurship" works in Indiana, despite the obstacles. If you find it easier to lean on the embedded stereotype that Indiana is fighting to change, I recommend moving to Mississippi, Alabama or Louisiana. Because Indiana is going to grow and succeed -- at least that's how one entrepreneur sees it.

Pearson is president and CEO of Suros Surgical Systems in Indianapolis, a medical device manufacturer that uses minimally invasive methods of tissue excision and biopsy within multiple surgical specialties.

Tracking the Scripps Biotech Center Development

For those interested in the anatomy of megadeals, you will find the multi-part series on how Florida did the Scripps Research Center to be of interest. Go here.