Archive for October, 2003

Deploying your investment attractiveness?

October 25, 2003

With the collapse of whole branches of manufacturing industry and even final assembly stages(screwdriver factories), competition strategies have shifted to higher added-value industries making intensive use of skilled labour and R&D, where the relative cost of labour is less decisive.

With this restructuring, factors such as the scientific & technological environment, economic intelligence, professional training, staff/manager productivity, supply of high-skill services and fast communication and telecommunication infrastructure have become important elements in regional strategies.

At the same time, more attention is being paid to the endogenous development potential of local and regional industries. Activities that are now standard for development agencies include
§         
stimulating the spirit of enterprise and assisting business start-ups.
§          university- and laboratory-based incubation of innovative SMEs.
§          transferring technology and supporting innovation.
§          seeking new markets for local firms.
§          consolidating their capital base and facilitating access to bank loans, business advisory services.
§          organising and facilitating enterprise networks.
§          creating science and technology parks. 

New spheres of action. 

As a result, the traditional separation between exogenous and endogenous development has gradually lost its significance. Several reasons:
§          A region’s attractiveness to mobile investment is increasingly determined by its overall factor supply, including the dynamism and collective organisation of its actors. “A region’s competitiveness comes from the effectiveness with which it deploys its attractiveness” (OECD conference on Territorial Development, Paris, January 2003).
§          To ensure that an incoming business establishes roots in an area and has an impact on the local economy, the area must provide it with reliable suppliers, research partnerships, etc.
§          Mobile investment now seldom establishes itself in “greenfields” (creating businesses ex nihilo); increasingly, it works by buying out or investing in existing businesses. 

Source: Extract from LEED/CDC conference paper, ‘Which development agencies for decentralisation?‘ Paris, 17 June 2003.    

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NZ Polytechnic hits the ground running

October 25, 2003

 A grant from Industry NZ will help Whitireia Polytechnic in Porirua build more ICT capability in the Wellington region, support graduates to become productive employees more quickly, and encourage them to consider entrepreneurial options. 

The Polytechnic’s innovative Development Lab, at Innovation Greenhouse Porirua incubator, supports practical industry projects by third year Bachelor of IT students in the School of Computing. These projects (400 hours per student) focus on applications for business and have included mobility solutions, .NET applications and web services. 

The Polytechnic is a member of the Wellington ICT Cluster. Companies can apply to have a student or team of students work on a real project, supervised by a Whitireia lecturer. The companies gain the help of students with up to date knowledge and skills.  Students benefit via the opportunity to put theory into practice, and being on the cutting edge of new developments.  The polytechnic benefits through the closer association with businesses and a better appreciation of their needs. 

Several other tertiary institutions have similar applied degrees with industry projects – however this is the first with links to both cluster companies and an incubator. Whitireia, Porirua City Council and Business Porirua work jointly in Innovation Greenhouse Porirua, which supports local businesses in their fledging stage.

The grant will provide mentoring and other programs to help “grow” graduates who can hit the ground running.  It will also help them consider opportunities from their project work to create new businesses. 

Contact: Trish Brimblecombe, Head of  School of Computing, Whitireia Polytechnic, Porirua City NZPhone: +64 4 237 3103 Ext 3818 Email:  t.brimblecombe@whitireia.ac.nz

Northern Territory – food, marine, bio-discovery

October 25, 2003

OK you people in remote regions – you have a contact in the Deep North. 

“The economy of the Northern Territory is made up of a number of sub regional economies which link together.

In addition we have a small number of larger employers such as the Alcan refinery at Gove and the defence force presence. Clearly our economy depends on the effective stimulation and growth of our sub regional economies. The stark reality of this – while NT contains 16% of the Australian land mass, it is home to a small population. Basically a lot of people spread over an incredibly diverse, wide area of land.

Except for temperature, we’re not all that dissimilar to Alaska.  We have functioning and emerging clusters. Our studies show the definite existence of an emerging food industry cluster, marine services group, and a manufacturing “clump”.

Discussions with the University et al indicate there is sufficient activity to suggest we are in the early stages of spawning a bio prospecting / bio discovery group. Early days, but we will follow this was a great deal of interest.  

We’re aware that clusters often result from the emergence of a particular economic imperative. Sometimes this is a positive imperative – whereby firms need to cluster together to take advantage of larger business opportunity, or as seems to be more common, clusters emerge in the face of economic downturn and financial pressure. That is, we had best find a way to work together or we will go broke. 

The start of the LNG plant has seen a substantial drain of skilled labour away from existing enterprises. Needless to say a number of companies have complained loudly about the rates of pay being offered to attract suitable workers. The issue now will be whether these impacted existing businesses will find a way to take advantage of this new opportunity by working collaboratively with similarly impacted groups i.e. clustering, to access larger opportunities in which they previously may not have participated. 

We’ve also begun to examine the make-up of the professional services sector. If you believe the statistics, the sector is at least 5 times larger than the NT manufacturing sector. Given the obvious visible presence of manufacturing, especially the industrial areas around Darwin, this is quite extraordinary. The levels of collaboration and cooperation between the stakeholders has yet to be identified and will in itself make an interesting study. I will keep you posted. Take care.’  

Murray Hird (Director, Industry Development – NT Government) murray.hird@nt.gov.au 

Northern Milan – best practice

October 25, 2003

Development agencies tend not to live up to their slick brochures. However we have heard about this agency from a number of sources. This snapshot is courtesy of LEED, the OECD group. 

The Northern Milan Development Agency (ASNM) is often cited as a benchmark for Europe.

It is a semi-public company – among its shareholders are municipalities, the province of Milan, the chamber of commerce, a venture capital firm created by the region (FinLombardia), the State financial company SVI Lombardia, and a large panel of firms (Falck, ABB, Edilmarelli etc.).

It has roughly 1 million euros in capital, of which 68% is publicly owned, 22% is owned by mixed bodies and 10% by private companies. 

Its main activities are:
§          Reindustrialisation – 4 industrial districts, 2 incubators (40 start-ups), urban regeneration.
§          Technology/Innovation – teletraining centre, multimedia cluster.
§          Environment – Agenda 21, sustainable mobility, environmental clean-ups.
§          SME services – info point, financial services, tutoring & training etc.
§          Networking – at local, national and international levels.
§          Local strategies – links into communications, energy plans.
§          Communication/Marketing – events, communications, with local and international agencies, international competition for urban park.

‘Metro areas have luxury of anonymity’ says Colorado practitioner

October 25, 2003

John C. Shepard (aicp), Larimer County Advance Planning, Fort Collins, Colorado has a take on risk aversity in rural areas. Says it’s not an original view…but we think it’s topical! (jshepard@mcn.net). 

I read your June cluster newsletter via Econ-dev newslist and was intrigued by your take on Montana.

I moved back to Colorado from Montana just over a year ago, and have long felt there are substantial similarities in development patterns between Australia & our Great Plains regions. One thing to remember, with about 900,000 people, the entire state is more like one community with a VERY long Main Street.

In a small town you’re more likely to know who can get what done – it’s the up-side of economies of scope. The down-side is economies of scale.

As your write-up states, clusters depend on creating community – it’s always going to be more difficult to wire the Outback (unless satellite ever really takes off) – and on taking risks.

In a metro area, you have the luxury of anonymity so if your project flops, you’re out cash but you can move on. On Main Street everybody knows your name, and when your deal goes down, your grandkids are going to hear about it.

Everyday life seems to require so much natural risk that very few people are willing to step out of the comfort zone to make a grab at the brass ring. Anyway, I’ve been lurking on the list for a while and you helped inspire me to wake up. That and maybe some extra-good Costa Rican coffee this morning.

10 features define relationships…a view from Canada

October 25, 2003

Dear Editor, 

In one of your 2003 newsletters, Stuart Rosenfeld mentioned that relationships define clusters more so than scale.

My work as a management consultant has identified ten important features/indicators of relationships that promote economic development through business clusters:

1. networks of firms.

2. linkage of firms & infrastructure.

3. Learning through knowledge exchanges.

4. Skills building by stage of business development.

5. Intellectual property definition followed by commercialization.

6. Forward & backward linkages to expand dimensions of clusters.

7. Business incubators to nurture start-ups using third generation “ball diamond” model.

8. Follow-on business incubators to provide continued support in more complex environments.

9. Waves of successive entrepreneurial growth & spin-offs of new firms from existing firms.

10. Development of specialized social & institutional infrastructure to support firm growth and expertise. 

Some combination of these features and indicators can be found and/or applied in many business cluster environments around the globe. Best wishes to all in OZ and globally. 

Philippe Roy, CMC, Management Consultant  email marymcnamararoy@sympatico.ca

Innovation issues in China

October 25, 2003

Our friend Sergio Miranda-da-Cruz, UNIDO Chief Representative for China, Mongolia, DPRK and ROK has forwarded a paper he presented recently.

It explains a UNIDO project that assesses the  sustainability of China’s substantial economic growth over the last 20 years. Salient points follow.   

  • The Chinese government has two strategic priorities – the continuous opening of the economy, and the reduction of social and economic disparities. To generate the required employment, GDP must now grow by at least 7.0% annually. The driving force will be the tertiary sector – UNIDO analysis shows that in 2015 China will have around 310 million workers in the tertiary sector (120 million currently).
  • The most important areas of S&T are aerospace, biotechnology, environment/energy, fine chemistry, fine mechanics, information technology, new materials, nutraceuticals (application of biotech & chemistry to health), medical instrumentation, microelectronics, robotics and software.
  • China has made progress in key parameters for successful innovation i.e. strong government leadership, strong research base, protection of Intellectual Property Rights, entrepreneurial culture attraction of key people, access to capital, access to infrastructure network and clusters. However, urgent need to define strategic models for incorporating the knowledge into the productive system. 
  • “Healthy” interventions are needed by the government to make innovation more systematic and dynamic – otherwise GDP growth will not reach the planned 7.0% over the next 20 years.
  • Since the UN Conference in Rio, China has enacted 8 environment protection laws, 9 NRM laws, 30+ administrative rules. Challenges are now in desertification, water management, hazardous wastes.
  • Fragmented solutions must be avoided – a macro ‘Integrated Environmental Information and Management System’ is recommended, plus a combination of multilateral and bilateral Official Development Assistance and fast, solid integration with the international business community.

Sergio was based in Beijing, but is now back at UNIDO headquarters in Vienna. You can find him via Google?  

Treaty of Waitangi – fascinating use of collaborative techniques

October 25, 2003

A long-standing reader, Claire Johnstone in NZ, has reported in. Are you grappling with similar issues? 

“I have has set up my own consultancy company, specialising in public and private sector work, and specifically in economic development.

Currently I am working on a project with Crown Forest Rental which is an organisation that helps Maori tribes research and achieve settlement in regard to Treaty of Waitangi claims.

To reach a settlement, my team and I need to help a cluster of five tribes agree to work together and to agree that they represent their people, and have the mandate to negotiate with the crown.

At stake is a NZ $500 million settlement covering seven forests in the central north island. If successful this will be the biggest settlement New Zealand has ever seen. Fascinating stuff this one, as it is using a new fast track method to get an early settlement”. 

Please contact Claire in Wellington at sra@paradise.net.au or on cell phone 0274 300 499.

Understand market, players and intervention’ says OECD

October 25, 2003

The public sector must continue to explore smarter ways of engaging private sector investment – and this specially applies at the local government level where finances are limited.

This is the message of a just-released excellent OECD study, author Jonathan Potter, that also identifies the critical success factors for public-private investments. Outlined below are its key recommendations (with my comments):
§          Understand the market, the players and the intervention. There is a need to think creatively about the strengths and weaknesses of different sectors, the limits of private sector involvement, and to communicate the market opportunities and the nature of potential returns.  §          Show political will, commitment and vision – otherwise private sector won’t be convinced. §          Create partnerships. The private sector needs to be involved from the beginning, rather than being presented with a fait accompli. (Amazing how often this advice is ignored).
§          Concentrate on pre-investment to get things up and running. (Key role for local government)
§          Show professionalism, risk-taking, entrepreneurship and work to commercial timetables.  §          Understand what cities, localities and regions own and what their assets are in order to catalyse private sector investment. Public authorities often have under-used assets such as land and buildings. Have a champion or strong leadership.
§          Join up public sector departments to prevent a project being blocked or reduced in its impact, strong partnerships are required within the public sector. (Hard to achieve – Ministers and Departments need to be cajoled to collaborate).
§          Evaluate efficiency and effectiveness of initiatives. This also facilitates public sector leverage. Evaluation should also include the wide range of social returns
§          People need to know what others are doing in the field in order to coordinate resources. (Absolutely – conferences are valuable. Local Government Focus is also a great source of market intelligence) 

Source: ‘Private Finance & Economic Development – city and regional investment’ (Local Economic and Employment Development, OECD 2003). Purchase at www.SourceOECD.org 

Wind energy – government role is critical

October 25, 2003

 The world wind turbine market grew at 40% per year during the 1990s, and is forecast to maintain strong growth (in the 20-25% range) in the current decade.

While a key driver is now the Kyoto Protocol, its gestation period began in the late 1980s when the UN and other multilateral agencies began pushing for the development of environmentally-friendly forms of energy. Government policy has thus been a critical factor in the windpower industry’s growth – and will continue to be.  

There are 40 wind turbine manufacturers worldwide, and Denmark accounts for half of world production. Australia has the potential to develop a world-class wind energy industry – but it will require intelligent alliances with foreign manufacturers, while dealing with the dark side of wind energy developments.

 

For example, Mr. Tim Le Roy, spokesperson for the Tarwin Lower (Vic.) Coastal Guardians claims ‘Australia is swarming with foreign windmill salesmen and ‘green shoe’ developers quick to grab a big share of a $2 billion consumer-funded renewable energy honey pot called the mandatory renewable energy target’ (MRET). He claims wind energy industry is inefficient, expensive and totally reliant on subsidies.  

Le Roy’s views are countered by wind energy experts who argue that the MRET is environmentally and economically logical. They have also indicated that investment opportunities exist for local government. In Europe, local councils and private investors are funding wind turbines in their localities, and generated revenue streams as a result e.g. Baywind Energy Cooperative in Cumbria UK has been approached by Danish group, Green Globe (source: Yorkshire Forward).

 

We have identified a federal government program to lower investment costs in wind energy projects.   Contact: Rod Brown at apd@orac.net.au. Full article – Local Government Focus, August 2003 edition.