Singapore steals a march – Novartis announces US$700m investment

CANBERRA: 28 December 2007.

The Singapore Government has reaffirmed Swiss pharmaceutical giant Novartis’ biggest ever investment.

It involves a cell-culture production facility in Singapore to support its growing pipeline of biopharmaceuticals. It is due for completion by 2012.

The plant, to be located near Novartis’ existing operation producing drugs from chemically synthesised substances, will support both clinical and commercial production of potential new products including monoclonal antibodies to treat rheumatoid arthritis, oncology, asthma, spinal chord injury etc. At full capacity, it will employ 300 workers and produce drugs using mammalian cell culture technology. The investment is part of the Novartis Biologics unit, which brings together key elements for fast, high-quality R&D activities in biological medicines manufactured via laboratory-created processes involving living cells. Biologics now accounts for 25 per cent of the Group’s clinical research pipeline.Says Thibaud Stoll, Head of Global Biopharmaceutical Operations, Novartis“We have six facilities at the moment in biopharmaceutical operations – five in Europe and one in California. This new one will expand our operations in Asia and also in biopharmaceuticals.”

The investment follows Novartis’ new tablet facility in Tuas, Singapore (US$180 million), which will manufacture existing Novartis pharmaceutical brands, such as Diovan® – the world’s most prescribed high blood pressure medicine – and new products like Tekturna®/Rasilez®, the first of a new type of high blood pressure medicine. By 2011, the 28,500 sq. m. plant will be manufacturing around 3.3 billion tablets with 160 staff and lean-manufacturing practices.

About Novartis

Novartis was rated No. 1 among pharmaceutical companies worldwide in Fortune’s 2007 ranking of “Most Admired Companies”. Headquartered in Basel, Switzerland, Novartis’ presence in Singapore began in 1971, with the opening of Ciba-Geigy. Following the merger in 1996 between Ciba-Geigy and Sandoz, Novartis was created, with the company establishing its Asia-Pacific head office in Singapore.

Its other local operations include the Novartis Institute for Tropical Diseases (NITD), which holds the mandate for discovering and developing therapies for neglected diseases, including dengue and tuberculosis, and a production facility for the CIBA Vision Business Unit, part of Novartis’ consumer health business platform that also includes over-the-counter medicines and animal health products.

In Singapore, Novartis employs over 800 people, across pharmaceuticals, consumer health and vaccines and diagnostics. Activities include marketing, R&D, manufacturing and regional management.

Why Singapore?

The Singapore Government views these latest investments as a clear signal of the tremendous growth potential for Singapore’s biologics and pharmaceutical manufacturing industry.

In 2006, Singapore’s biomedical sciences output grew 30% to US$15.9 billion. It now boasts 25 pharmaceutical and biologics manufacturing facilities, with other heavyweights GlaxoSmithKline, Genentech, Abbott and Lonza all taking advantage of the region’s business benefits.

The Singaporeans claim it has a reputation as the most competitive and trusted site for pharmaceutical bulk activities and secondary manufacturing, and is now aggressively pursuing investments in biologics. In less than two years, Singapore has attracted five biologics investments totaling over US$1.5 billion.They see Novartis’ investments in Singapore as a significant endorsement of the island state as a value-adding partner to world-class pharmaceutical companies.

Says Lim Hng Kiang, Minister for Trade and Industry:

“The biotechnology facility will be the first biologics manufacturing investment in Singapore by a pharmaceutical company and our fifth commercial scale biologics plant to date…it further reinforces Singapore’s position as a leading location for world-class biopharmaceuticals manufacturing.”

There are 4,000 people employed in the local pharmaceutical/biologics sector, with 2,000 more required over the next three years. Lim says the government has been working closely with companies like Novartis to further augment its pool of skilled manpower to support this industry. A program to develop skilled pharmaceutical workers without prior experience in the industry will be launched soon.

According to Novartis, Singapore was picked as the ideal location for its new facilities after a thorough selection process. Says Tom Van Laar, Head of Global Operations, Novartis Pharma AG, “Singapore is attractive because of its increasingly strong biomedical cluster and proximity to growth markets in Asia. In addition, a solid educational system and favourable socio-economic conditions assure access to local and international talent.”

Australia’s view

The Singapore investment has been greeted with muted dismay by Australian industry analysts.

Novartis Australia is headquartered in North Ryde, in the biotech corridor in northern Sydney, where there is talk about action to create a true cluster to match that of Singapore.

Total employment across Australia is around 500, and Novartis’ annual R&D spend is reportedly around $27 million.

It was envisaged that Novartis would view Australia as its Asia Pacific node and keen to be part of recent talk about Australia becoming a global centre for clinical trials.

As officials are keen to explain, Australia has a much superior R&D base in biotechnology, with a strong history of Nobel Prize winners etc. Singapore is also viewed as an economy with a population smaller than that of Victoria, and artificially sustained by government subsidies.   

However the real problem appears to be that the talk about Australia becoming a global centre for clinical trials has not progressed into any tangible policy or initiatives. Australia’s reluctance to play the subsidy game, as well as its current labour shortages, were thought to have been the other main factors in favour of Singapore.

‘Clusters take time – a minimum of 10 years’ says Porter

A highlight of the TCI Cairns conference back in 2002 was an interview with Professor Michael Porter, arranged by Emiliano Duch who has ongoing contact as a result of his Ph.D work under Porter. His views are still most relevant today, especially those regarding the concentration of buyer power wthin supermarkets. His key points were:

§          Need to let clusters define themselves – do not make the definition too rigid.
§          Clusters are broader than networks.
§          There is no systematic process for evaluating policy outcomes. But there are criteria that can provide a guide viz. number of companies created, export performance, GDP growth, and simply asking people whether things are getting better or worse.
§          Clusters take time – a minimum of 10 years.
§          Multilateral agencies have an important role as communicators and motivators – we need micro-reform, and cluster development is a key part of this. The IMF and World Bank can support and fund cluster projects.
§          At the national level, governments need to set policy frameworks that allow clusters to flourish e.g. R&D funding should be rewarded on excellence – not on the basis of every region or state having an R&D facility. The structuring of intervention is a key issue.
§          The rise of buyer power (e.g. supermarket chains) can cause significant challenges for SMEs because supply chains and distribution channels are critically important in certain industries –  strategies to counteract the concentration of purchasing power include product differentiation, branding, cost reduction.

The pursuit of these strategies can create new roles for clusters.

   

Cluster agendas for rural communities

Ron Peterson in the US drew our attention to “A Governor’s Guide to Cluster-Based Economic Development” prepared back in 2003. It is not only relevant to the USA, but to any economy with a signficant rural base. It certainly rings true to Australian circumstances. It should still be available at www.nga.org/center/divisions.

Extract follows: 

The divide separating rural America from its urban and suburban counterparts defines the challenges facing rural communities.

They are isolated from robust markets, impeding access to markets and making it difficult to move people and goods. Rural areas also have fewer cultural amenities, making it harder to attract new residents and businesses…in turn hinders the development of new amenities. Policy options are helping states overcome these challenges. They include:

§          Adapt cluster-based strategies to rural communities – State support can help them thrive. Connecticut, North Carolina and Ohio have encouraged the development of industry networks to provide a channel for businesses to work together.

§          Promote entrepreneurship outside the agriculture sector – Kansas and Nebraska are developing the local ability to identify and encourage entrepreneurs. Minnesota uses an online network etc. to connect entrepreneurs. Kentucky and Wisconsin are addressing access to capital.

§          Reinvigoration through diversification and value-added agriculture strategies – farmers have recognized they can earn more by growing different crops or raising non-traditional species of livestock. Others are processing their crops into finished products. Kentucky, North & South Dakota, Iowa stress the role of financial incentives and entrepreneurs.  

Rural economic development policies must build on the inherent strengths of rural America – abundant natural resources, close-knit communities, strong local business networks and a largely untapped tradition of entrepreneurial creativity.

Contact: Paul Kalomiris or webmaster@nga.org

Creative Kiwis

Back in 2003, Howard Frederick (NZ Centre for Innovation & Entrpreneurship) reported on the Knowledge Wave conference. It  highlighted some very interesting issues that continue to be relevant to all small economies, and touchs on factors that underpin the competitive spirit of the Kiwis. Go to www.entrepreneur.ac.nz for further information, but our quick grab was as follows.

Adman/Professor Kevin Roberts of Saatchis and NZEdge fame inspired the dinner audience with his vision of Creative New Zealand. The media could help NZ become economically literate, but in Roberts’ content analysis of front page newspaper articles, the leading category was sport, then politics, then crime, human interest, accidents and animals. Economy came in last.

He drew a roar with: “When armies are mobilising in the northern hemisphere, when NYC is under threat of cyanide attacks, the NZ Herald led with “Dog Bite Kills Woman“. On the Kiwi diaspora, “we have about the largest off-shore population on the planet…let’s turn them into a productive, integrated, networked and loved part of the New Zealand life”.

Carnegie Mellon’s Richard Florida – the new geography of economic development. “What are the system conditions that make one region more attractive to talent and capital?

It’s the exciting diverse and cultural environment that knowledge workers crave…regions need to promote the three T’s of economic development – technology, talent and tolerance.

People want more out of life than just an income.

Place is far more important than every before. Innovative and creative people are packing themselves into places to realise productive advantages. Place is the single most important organising unit of our time.”  (Florida’s book NZ$80 or US$19.75 on Amazon!] 

Historian James Belich made attendees look hard into the mirror – referring to kiwis’ cultural over-production, for punching above their weight in art and war, sport and science, but then there’s that “nasty little Kiwi curse that accompanies the blessings of our history”.

We have a collective mean streak, our propensity to spasms of narrow-mindedness, vitriol, intolerance, and polarised debate. Our Kiwi totalitarianism leads to a siege mentality against criticism. We are reluctant to celebrate achievement. We often celebrate the mediocre. We can be querulous back biting bastards.” Ouch!

Blue Mountains (NSW) – leveraging off World Heritage listing

 

The Greater Blue Mountains is one of 690 sites on the World Heritage List.

It is part of Australian romantic folklore – 200 years ago, explorers Blaxland, Wentworth & Lawson fought their way through the impenetrable mountain barrier and attacks by the natives, searching for productive land for free settlers and emancipated convicts from Sydney town. 

The area has spectacular landscapes and there are significant environmental protection measures in place to protect it. With the assistance of the GROW Employment Council and Blue Mountains City Council, a potentially very significant development agenda was launched in 2002 by the federal MP, Mr. Kerry Bartlett. The brainchild of Council’s Paul Heath, and Jane Pretty (of JP Sustainable Solutions), it had a four-pronged approach:

§          The Blue Mountains Connection – a framework for stimulating economic activity – allowing businesses to link vertically down the supply chain, and horizontally with complementary products/services and infrastructure

§          The Blue Mountains Advantage – involves environmental benchmarking, certification etc.

§          Development of a Blue Mountains brand and marketing strategy

§          Development of agendas to realise a World Heritage Research Institute – to provide a focus for strategic partnerships and research and teaching capacity etc.

The agenda is smart because it leverages off the region’s competitive advantages – the industry emphasis is on horticulture, hospitality, cultural tourism, nature tourism, creative industries. There are synergies with places like Daylesford (Vic.), Cairns (Daintree Forest), Wellington NZ, Peterborough UK and countless other localities world-wide.

In the intervening five years, there has been a massive convergence of environmental agendas and concepts – environmental footprints, climate change, wastewater management, water conservation, weeds management etc. etc. There are also a myriad of agencies running these agendas with varying degrees of success. Their resources are usually sparse, usually a mix of voluntary effort and a small grant from time to time. This is the norm with environmental initiatives.

But the Blue Mountains Advantage was remarkable for its breadth and vision. We figure it’s a platform for some serious collaboration between the three levels of government and companies in the environmental and creative industries field. We were in Katoomba recently, a small town in the midst of the Blue Mountains – it struck us that in the last 15 years it has blossomed into a very pretty and confident place with a myriad of small businesses. The questions are how did Katoomba kick on, and what is its place in the wider Blue Mountains agenda? 

We therefore propose to delve more deeply. If you have an equivalent to the Blue Mountains Advantage – anywhere in the world – we want to hear from you!

Harvard pointers on global innovators

Corporate R&D labs used to be the key for companies to create competitive advantage.

But now innovation is moving across the globe.

That’s why Harvard Business School professor, Alan MacCormack, believes that a real source of competitive advantage is skill in managing innovation partnerships.

Innovation is increasingly driven through collaborative teams due to product complexity, availability of a low-cost but highly skilled labor pool, and advances in development tools.

Collaboration adds to the top and bottom lines by shortening development lead times, increasing capacity, and facilitating access to skills, capabilities, and IP that a firm does not possess internally.

Many efforts at innovation collaboration fail because they begin with the goal of lowering costs.

Successful collaboration programs develop a strategy aligned to their business needs. They also organize for effective collaboration and invest in building collaborative capabilities.

Previously many companies secured competitive advantage by investing in internal R&D.

But today “not invented here” is becoming a badge of honor…and a source of competitive advantage.  

To design the 787 “Dreamliner” (initial flight in 2008) Boeing lashed together 50 partners in 130 locations. These firms aren’t just manufacturing partners – they design the components they make. “Boeing’s source of competitive advantage is shifting – its unique assets and the way it orchestrates, manages, and coordinates its network of hundreds of global partners.” 

Go to Innovation through Global Collaboration: A New Source of Competitive Advantage. Source: Harvard Business School, via Superfactory.

Lego – exemplar for Denmark

Last year Danish toymaker Lego announced plans to outsource most of its manufacturing to Eastern Europe and Mexico – only 300 blue-collar jobs remain at Lego’s HQ in the town of Billund. 

Union leaders at Lego said “It was the best way to keep as many workers’ places in Denmark as possible…we want to make sure that they make money and we make money.”  

In Denmark, 76% of respondents in a recent poll said globalization was a good thing. And why shouldn’t they? Living standards in Denmark are among the highest in the world. Per capita income trails that of the U.S. but is distributed far more equally. Unemployment is just 3.1%. The country exports more goods and services than it imports.

And while only two Danish corporations (shipper A.P. Moller-Maersk and the Danske Bank) are big enough to make the FORTUNE Global 500 list, Denmark has more than its share of smallish, nimble, outward-looking firms well positioned in growth areas ranging from alternative energy to health care to high-end furniture. 

According to the latest rankings from the World Economic Forum (WEF), Denmark is the world’s third most competitive economy. It also has the second highest tax burden in the capitalist world, a generous welfare state, a heavily unionized workforce and at least five paid weeks off every year. It’s all part of a trade-off, the Danes say. Corporate taxes are low, and capital gains are taxed at a much lower rate than ordinary income. There are few restrictions on trade.  

Employment Minister Claus Hjort Fredriksen says ‘the model we have found here – free education, free health care, a good financial situation if you lose your job, together with a flexible labor market and the size of Danish companies – somehow has struck something that is the answer to the challenges of globalization.” 

Denmark is now a darling of European social democrats and the country has been overrun lately with visiting journalists, academics and politicians looking for insights. Another thing is its size and homogeneity – 5.4 million people, of whom all but 478,000 are of Danish ancestry – are crucial to how the economy works.  

It’s basically a clan – and informality, disputation and disrespect for authority are core Danish traits. There are a few clear goals and lots of leeway to achieve them. 

Source: IEDC 

Queensland’s 12 investment hubs!!

Last month we sketched some ideas on how Queensland’s investment attraction agenda might focus around 10 hubs.

We received some excellent feedback, including the following: 

Gavin Finch, Mayor of Rockhampton City Council, writes: ‘I am quite surprised to not see one of Queensland’s fastest growing centres mentioned in your overview. Tourism is one of the biggest economic drivers for the Capricorn Coast and Rockhampton International Airport has 600,000 people movements per year, Land and Industrial Development has huge growth and Rockhampton is in the top 10 growth areas in Australia, Stanwell Power station supplies to some 30% of Qld, the largest military training base in Australia, two of the biggest meat producers in Australia. This is just a short summary!’   

Glen Graham, City Development Officer, Mt Isa City Council writes: ‘I was disappointed that you overlooked Mount Isa as a stand alone hub. You must come out and see what is happening here…the city is bursting at the seams. Exploration geologists are everywhere and the Northern Economic triangle strategy identifies priority infrastructure requirements and plans to concentrate on these over the next 5 years.’

Postscript: OK, OK! How could anyone disagree with such good arguments and passion. And we have held our assessment of NSW investment hubs over until next month.

Thinkers in Residence – for small towns!!

Charles Landry, the UK planning expert, made a real impact in Adelaide a couple of years back with his suggestions on urban land form, industry development, governance systems etc.

He basically told the local folk to loosen up and get a bit WILD. He was a breathe of fresh air.

The drawback of being a first-mover like the Adelaide folk is that someone will pinch your ideas.

So, here we are with a proposal to extend the Thinker in Residence concept to small towns.

Why small towns? Well, I think they get a raw deal.

I never warmed to the views expounded by an academic friend in Warrnambool (western Victoria) that small towns should be allowed to wither. You certainly can’t prop up places with no competitive advantage (e.g. old mining towns), but the ‘sense of place’ gets buried in the present rationalist economic climate.   

Small towns can deliver great lifestyles and a sense of community, and their residents are more environmentally aware than their city cousins. But small towns don’t have much clout. They don’t have huge numbers of advocates, at least in an organised sense. Local government has to scrounge around for grants towards water infrastructure, roads funding, arts and community events. 

So our proposal is for a group of 10 local councils or development agencies to form a loose network, chip in $10k each and leverage at least the same amount from a certain federal program. We then employ  a team of international experts to split up and work in small towns as Thinkers in Residence.

Each participating council or development agency would identify its priority issue. The Thinkers would then workshop and debate with council staff, councillors and townsfolk the key issue e.g. investment attraction, infrastructure alignment, education, entrepreneurship, environmental management, water technology, social welfare, re-invention strategies, local government finance etc.

We might be able to have some of the Thinkers deliver their findings, ideas etc. at the annual conferences of ALGA or SEGRA.

We recently put this proposal out to Cockatoo members for consideration – the feedback suggests that trying to coordinate 10 councils in one submission could be difficult. The alternative option is for agencies in Australia to make funding submissions on an individual basis. 

If you are interested, please email us ASAP at apd@orac.net.au

We are THE experts in international networking
– for more information, contact us at apd@orac.net.au or ring 61-2-62317261

Regional Partnerships Program – the smoking gun

The release of the Auditor-General’s highly critical evaluation of the Regional Partnership Program (RPP) one week before the 2007 election did great damage to the Howard Government.

It concluded that the program was not meeting an ‘acceptable level of public administration’. The Rudd Opposition said it was sheer pork barreling because most of the grants went to government-held seats.  

Then the fun began. Minister Vaile questioned the ethics of the Auditor-General for releasing the report during the caretaker period, and threatened retribution. The media had a field day, but really didn’t delve deeply enough to understand the root cause of the problem.

to my mind, the real issue is the federal government’s role in regional development policy. Does it back off, or does it improve the delivery of economic and social problems to regional Australia? Fortunately incoming PM Rudd has signaled the latter. 

I’d therefore like to provide a quick walk through the recent history of regional programs, to help us map out some future scenarios.  

Growth Centres Program (Whitlam/Uren era) 

This was the Whitlam government’s foray into regional development. We are talking 1972-75, and Tom Uren was the responsible Minister. He set out to boost the development of regional cities by focusing on infrastructure and investment attraction. Places like Albury-Wodonga, Bathurst-Orange and Monarto (some paddocks in the Murraylands, SA) were suddenly in the spotlight. Town planners came from everywhere to be part of this bold experiment, but to the traditionalists, planning was akin to Communism, and the flakiness of the Monarto concept was the death knell. 

With the demise of the Whitlam Government, the incoming Liberal/Country Party took the view that regional development and local government was the province of state governments, and things went very quiet.   

The Regional Development Program (Keating/Howe) 

This program begat the Regional Development Program (RDP). It drew no major criticism, at least in respect of maladministration.

We are talking 1992-93.  Its birth was a rocky one. It had to overcome concerns within the dry parts of the bureaucracy that the federal government had no role in the regions, and would raise undue expectations in the Bush.

But Brian Howe was Deputy PM and wanted a regional program to balance his recently-won Better Cities Program ($500 million) within his new Department of Housing & Regional Development (DHARD). The Kelty Report added further impetus, as did backbench support from MPs in regional seats – Barry Cunningham (Macmillan) and Gavan O’Connor (Corio) spring to mind.   

The problem was that the DHARD bureaucrats had to formulate a program that wouldn’t bring back the ghost of Monarto. Enter Alan Evans who had been chief of staff to Treasurer Dawkins and is now the NRMA President. He had an innate feel of how to structure a watertight program. Steve Garlick, my fellow branch head, had a great knowledge of regional strategies and local government. Murray Geddes, with an absolute encyclopedic knowledge of regional Australia, was also in the frame.  

To cut a long story short, we devised a program whereby a ‘regional development strategy’ had to be signed off by a regional economic development organisation (REDO) in each of 45 regions. Every initiative for federal support had to be consistent with the strategy and signed off by the REDO. We approached the troika (Treasury, Finance, PM’s Department) with this idea, and asked for $500 million on the basis that the Better Cities Program had received this amount. I was basically told to bugger off. My Departmental Head, Andrew Podger, then handed out some Bex tablets to his counterparts in the troika.  

Anyway we finished up with $150 million – we figured this was better than nothing, and we introduced the idea of cocktail funding to leverage funds from other parties.

Cocktails are now, and will continue to be, a common feature of federal regional programs. Local and state government officials – please note that YOU are expected to put something on the table. 

The salient point about this era was that, to the best of my knowledge, Deputy PM Howe never once rejected a recommendation of the Department. His minder, Kay Meadows (later Mayor of Yarra Yarra) had a facilitative role, but there was no heavying of DHARD bureaucrats, except calls to hurry up.   

When the Howard Government assumed power in 1996, the RDP was killed off. This was a bolt of lightning to us, as well as the new Minister, John Sharpe. We were stitched up by the Department of Finance, which was looking for savings to fund election promises. It seized on a view that the RDP had been duplicating state expenditure. This was nonsense, but a certain SA Government official had been garnering support from other states and handing out the guns.  

The Regional Partnerships Program (Sharpe/Anderson/Vaile) 

For the next 5-6 years we had a grab bag of small programs – Regional Solutions, Sustainable Regions, Dairy RAP etc.

The RPP replaced these in 2003, with some new funding and some the leftovers. It came with around $75 million per year. Its aims were fine – funding community infrastructure projects, helping communities with adjustment difficulties, improving access to services, supporting planning exercises etc.  

However there were three problems.

First, the funding was a pittance in terms of the needs of regional Australia. Federal spending cutbacks were opening up deep schisms around this time.

Secondly, the criteria were too open-ended.

Thirdly, the Area Consultative Committees were losing interest and getting cranky at the delays in funding decisions and lack of interest from senior Ministers. 

Senate report 

Things then began to smell – funds to dredge Tumby Creek (near Gosford), funds for the Atherton Hotel (with overtones of bikini babes), funds for cheese factories that are in direct competition with others.

So the Senate Enquiry was launched. I actually made a submission to it, pointing out its lack of strategic focus. Anyway, the Senators concluded that the program should continue, with more checks and balances.

The Senate Committee did however observe that it was ‘deeply concerned by the intervention by ministerial offices in the department’s assessment processes.’  Then the Auditor-General came in and blew the RPP out of the water.   

The lessons? 

1. There is an undoubted need for governments to fund strategically-significant regional projects, especially where there are clear community benefits. The RPP was under-funded. 

2. Politicians of all persuasions cannot help themselves. Once you waver from the Department’s advice, you are a sitting duck.  

3. The only solution is to REMOVE Ministers and their staffs from the process. It’s simply not worth the slurs and innuendo. Brian Howe understood that.  

We are THE experts in international networking
– for more information, contact us at apd@orac.net.au or ring 61-2-62317261