A Good Problem to Have

How's this for a looming problem? Washingtonpost.com reports that Fairfax County, VA will create far more jobs by 2030 than residents to fill them. It's a problem, no doubt, that probably isn't as wonderful as it sounds--too much of a good thing (jobs included) can wreak havoc in unforeseen ways. The ideal is to match job growth to demographic growth.

All told however, this is the better problem than its inverse.

A Marriage of Arts and Finance

The $1 billion investment in new art that the Seattle Art Museum (SAM) will be unveiling this week was not just an act of charity. It was mainly due to Washington Mutual's need to expand its downtown headquarters.

Five years ago, the financial institution got to build its 42-floor, 1.3 million-square-foot office tower in a prime downtown Seattle location. By pairing the office building with the museum, WaMu received special city zoning changes to boost the size of its office tower. The museum is occupying only the first four floors, and temporary leasing back floors 5 through 12 to the bank.

That means that the architect had to design a space that would serve office workers first and later, art. To accomodate its 5,000 local employees, the bank is renting the additional eight floors of space from SAM for up to 25 years with no annual rent increases. The rent payments from the bank will cover the museum's mortgage of the additional space.

Sources: The Seattle Times, The Oregonian

Reminder: Tread Lightly Over Australian Land

The Sydney Morning Herald called this battle "David vs. Goliath." The Swiss mining company, Xstrata, was denied permissions to expand its zinc mining territory into aboriginal Australian land. The enormous mining company, which employs around 43,000 people worldwide, was planning a $92 million (US) expansion (which included diverting a RIVER by 5.5 kilometres) in Northern Australia. The Northern Land Council, which represents Aboriginal people in that area, mounted a legal challenge on behalf of the original owners, and won. The court found that the company had not followed the correct legal process.

More than 80% of the value of minerals extracted in the Northern Territory of Australia comes from mining on Aboriginal-owned land. The land is very resource-rich, and the rights are covered by the Land Rights Act and the Native Title Act, whereas Aboriginal communities can make agreements with companies regarding land use.

To refresh your Australian history, Aboriginal people are considered to have lived in Australia for at least 60,000 years, while European settlement began just over 200 years ago (in Northern Australia, colonisation began about 150 years ago. The traditional, Aboriginal landowners (similar to the struggles of the Native American people) found themselves excluded from or unable to control the land that they had owned and lived on, which led to the formation of an Aboriginal rights movement.

This morning, the local ABC affiliate in Australia reported:

In the first decade of the 21st Century the scourges of leprosy, rheumatic heart disease and tuberculosis still strike many Aborigines and Torres Strait Islanders. Years after medicine and preventive care largely wiped them out in white populations in Australia.
A report to the World Health Organization has found that Aboriginal health lags a full century behind that of other Australians.
The report by researchers at the University of New South Wales suggests that symbolism is important, even in health care.
It says acknowledging past wrongs done to Aboriginal people would help improve their health.

With such a history, and the present reality, those wishing to do business in Australia are advised to consult with the traditional, as well as government, entities. And tread lightly.

-
Sources: The Australion, The Sydney Morning Herald, Reuters, Xstrata Corporate, The Northern Land Council, The ABC Message Stick

Incentives! What are they good for?

Financial incentives make sense from an economist's point of view--you offer money, more people are likely to respond to whatever it is you're offering. It works sure enough in business development: a town has an empty building thanks to the demise of a local manufacturer; it offers 10 years of reduced property taxes for any new business taking the property (and putting people to work in the process). The result? More companies take a harder look at the deal than would have otherwise. Right? Right??

Well, it turns out it's more complicated than that, though I probably don't have to tell you that. You can offer me free land in (city and state name removed) to publish Business Facilities and I wouldn't take it (not that the decision is mine to make, but that's another story). I mean, where would I find qualified editors, marketers, and salespeople? Free land is no good if the rest of the business climate is no good, and businesses know that very often, those places with the strongest innate attractions for business are those least likely to dish out generous incentives--these places know they don't have to. As one economic development consultant put it to a group of executives last year at LiveXchange, "Remember, economic developers are not in the business of giving you the best possible incentives--their job is to give you the least amount of money while still getting you to commit."

So you'd think companies would be skeptical when viewing a location willing to throw in everything and the kitchen sink before even meeting (kind of like those 0% APR offers I get in the mail that jack up to usurious rates after six months--there's always a catch, right?) In fact, most companies I have ever interviewed are far more concerned with long term business fundamentals like the availability of labor and cost of shipping than with tax and other incentives. They will sometimes also admit that the incentives were icing on the cake, though they are not always a deal-clincher. I've spoken to some executives who freely say there was no real chance that they were going to relocate or expand elsewhere, but there was money on the table and the economic developers, as part of a good retention strategy, helped them to claim it and even make them aware of it in the first place. Even this makes sense--this effective subsidy of a local company could give them a leg up over competition, enabling them to grow faster, create more jobs sooner, etc., thus fulfilling the mission of the economic developers.

So is there debate over such granting of incentives? Is this a rhetorical question? Some call it corporate welfare. Personally, I think that's oversimplifying things. It always made sense to me that to create a level playing field, you make up for your faults. Is your product inferior? Charge less. (You make less profit, but you get to stay in business.) In the case of locations, it's too insulting to say "inferior product;" it's more like a combination of atoning for past sins of the development views of our grandparents' generation in our local community, combined with a location's God-given blessings or curses (landlocked versus riverside, tundra versus temperate, etc.). But I'm not so close-minded as to be unwilling to seriously consider arguments that incentives don't work, and are thus a wasteful use of taxpayer dollars. You really should read this article by Jack P. McHugh of the Mackinac Center for Public Policy, a "a nonpartisan research and educational institute devoted to improving the quality of life for all Michigan citizens by promoting sound solutions to state and local policy questions." Entitled, "
Targeted Tax Breaks: 'How's That Working for You?'," Mr. McHugh provides some very convincing arguments as to why Michigan's major tax incentive program isn't working. (Actually, the argument between him and state economic developers won't be over why it's not working, but over whether it's working.)

This isn't the only argument out there, of course, just a nice succinct one. (If you want a full-length argument, try "The Great American Jobs Scam: Corporate Tax Dodging and the Myth of Job Creation" by Greg LeRoy.) What do you think? Please send us citations to other arguments, for or against--or give us your own opinion--in our comments section below, which doesn't require registration by the way.

My own opinion? Well, I said I was open minded, and I'm still weighing the evidence on both sides. There are undoubtedly deals that have been lost to competition because the incentives did not equal those of a rival state or county--this I know for a fact. And I'm sure that incentives are given to companies that didn't really need them, and that did not pay off for taxpayers. But on the whole, do incentives benefit taxpayers? Sure, Michigan has not seen the 10-year job net job creation numbers it would have liked...but would it have been worse without the efforts of the Michigan Economic Development Corporation? I may not be in a position to argue since I don't have my own "rigorous econometric analysis" in hand as those folks at the Mackinac Center do. It's also tough because I've read studies that support incentive use that are written by equally authoritative institutions.

As a follow-up, I'm going to ask the Michigan Economic Development Corporation if they would like to post a response to the Mackinac Center article here on this blog. Stay tuned--it should be interesting.

Out of many, one. . .solution

This week, the Jamaica Chamber of Commerce met to discuss an important question: How do we create jobs in Jamaica?

According the Statistical Institute of Jamaica, the unemployment rate in 2006 hovered around 10 percent.

JCC President Mike Myers told the Caribbean Business Report radio show:

"Jamaica must think outside the box. We need to pick industries where we can compete globally. Then we need to offer incentives, that is, give tax breaks.

In a fascinating interview, the Jamaica Observer spoke with an anonymous retired manufacturer:

The government should embark on a program whereby manufacturers get free land in exchange for building factories and then declare no general consumption tax on Jamaican-made products. That would put idle land to use and give Jamaican products a 16.5 per cent advantage. This would give us a competitive edge and wean the population off foreign goods. Look at it this way, if foreign and Jamaican goods are the same price, people won't buy the local goods, but once Jamaican goods are cheaper people will buy.

The high cost of manufacturing in Jamaica, coupled with the lack of incentives, has not allowed Jamaica to compete globally with industrial countries. Developing solar energy, hydroelectricity, and agriculture would be a good start if Jamaica is ready to emerge as a global force. The Cotonou Agreement (part of the ACP agreementÐyou can view more about that in the last few paragraphs of an earlier post here) that Jamaica signed in 2000 means that the country has a much wider trading scope.

Sources: The Jamaica Observer, The Jamaica Chamber of Commerce, European Commission, The Statistical Institute of Jamaica

Manufacture this, punk!

U.S. Steel, Alcoa, Goodyear, and other manufacturing companies have joined with the United Steelworkers labor union to form the Alliance for American Manufacturing (AAM), aiming to preserve and promote manufacturing in the United States.

The alliance, which announced its formation yesterday, asserts that the decline of manufacturing undercuts America's long-term competitiveness, its research capabilities and its ability to produce sophisticated weapons needed for national security. The alliance aims to be partly a policy research organization, tackling subjects like international trade practices, inadequate enforcement of trading regulations by the U.S. government, health policy, and renewable energy.

In a Marketplace report last night, the executive director of the AAM, Scott Paul, quoted Ben Frankin's famous proclamation at the beginning of the American Revolution, "We must all hang together, or most assuredly we will hang separately."

Paul says the U.S. has lost more than three million manufacturing jobs in six years. He blames China -- and says the alliance will target what it calls Beijing's unfair trade practices. The group will also try to convince 20-somethings that manufacturing is hip.

Their new blog, "Manufacture This," will be the voice of the AAM.
And check out their bios!

Scott Paul--AAM Executive Director
"I'm a patriotic liberal who thinks good jobs are worth fighting for."

Horace Cooper--AAM Deputy Director
"Some might say conservative or even right-wing. I refer to it as just 'telling the truth.' "

Jonathan Swain--AAM Communications Director
"A voice of reason and common sense from the Midwest."

AWESOME. Looks like this group has all of their bases covered.

On a side note, it's interesting that Goodyear should join with United Steelworkers, considering the union's strike last year, which reduced the company's sales by about $200 million.

Anyway, speaking of hip, did you know that we have a new myspace page? We are trying just as hard as these manufacturers to show that facility management and site selection is, well, cool.
And check me out:

Pearl Gabel--BF Associate Editor
"I'm patriotic but skeptical, liberal but conservative, and a speaker of truth and gossip hailing from the Mideast. Some might say 'she's just being silly.' I say, 'I'm just keeping it real.' "

Sources: International Herald Tribune, The Dickonson Herald, National Public Radio, Manufacture This

Now your computer can forecast your expansion for you!

Aperture Technologies has launched a data center management system called "Vista Capacity Management," that measures resource consumption and can forecast future infrastructure needs. The program let managers gain insight into and predict the consumption of power, cooling, space and other physical resources, according to Aperture's CEO Bill Clifford. "Our USP is the workflow engine where stuff is tracked from start to finish," he said.

For example, a user will be able to predict that the facility will run out of space or cooling capacity within two years, and that action - such building a new facilty- needs to be taken.

As a side note, SearchDataCenter.com just published an article earlier this month called "Data center facilities managers are from Venus, IT pros are from Mars," (best title EVER) about the miscommunication within centers.

Ok, now that I have lifted that weight off your shoulders, here's a couple expansion highlights:

¥ Peak 10 Inc., a data center and managed services company, is expanding its Raleigh, NC data center by 42,000 square feet, brining it to a total size of 70,000--the largest in the region.

¥ ViaWest announced that it has acquired a 10,000-square-foot data center in Salt Lake City, UT, nearly doubling its service capacity in Utah, and has added Vehix.com to its growing portfolio of Salt Lake City customers.

Have tips for me? Post a comment or email pgabel@groupc.com .
Sources: TechJournal South, Computer World, Aperture, TMCnet, Search Data Center

Big Box Building Bust

Oshkosh, Wisconsin is dealing with a problem that many mid-sized towns and cities have been facing lately: What do we do with vacant big box stores?

Retail Forward, a market research firm in Columbus, Ohio has examined the impact of super-centers and found that for every super-center that opens, two neighborhood center close. Since many neighborhood shopping centers are anchored by supercenter, if the supercentercloses, neighboring businesses that rely on foot traffic are also threatened. Communities can be left with vacant shopping centers, creating blight and driving down property values.

On Sunday, The Northwestestern reported on a particular Oshkosh buildingÐa former Wal-Mart that was vacated in 2003, and has stood abandoned ever since.
One of the problems with these big boxes is that they are environmentally generally have to be razed, or undergo extensive construction, in order to be reused by business, industry, or manufacturing.

An ABC affiliate in Maine reported yesterday on its swell of vacant buildings:

Big box stores continue to pop up around Maine. There are plans for three new buildings along Stillwater Avenue in Bangor alone. But when a store moves to a bigger building across town, the community is left trying to fill the vacant building left behind.

A MFA graduate of Rensselaer Polytechnic Institute (Troy, NY) published her thesis on recycling the big box store. She discovered a former Wal-Mart that was converted into the Central Kentucky Comprehensive Medical Center (with $4 million of renovation) and a former Kmart (40,000 square feet) that was converted into The Head Start Resource Center in Hastings, Nebraska. A Kmart in Charlotte turned into a charter school. Go-carts motor through a Texas building that used to be a Wal-Mart.

List prices for abandoned box stores tend to be "negotiable." For example, a 72,000-square-foot former Wal-Mart in Roane, Tennessee and a 111,400-square-foot former Wal-Mart in Scottsbluff, NE both have no listing prices. The Greenville News reported that leasing big-box space costs about $6 per square foot, while it's about $22 per square foot in a mall.

Perhaps governments and economic development organizations can encourage buyers with more incentives and small business loans. Or perhaps the builders of WalMarts, Kmarts, Lowes, and other big box stores should consider creating a more re-usable space.

Sources: The Northwestern, WCSH Portland, Rensselaer Alumni Magazine, Roane Alliance, Twin Cities Development Corporation, Greenville Online

Where there is sea, there are pirates

If you transport your merchandise via the high seas, I have good news for you. The dangerous waters are getting a little bit less dangerous. Attacks by pirates are apparently at their lowest rate since 1998.
Still, there were 41 pirate attacks from January through March (down from 61 last year). General guidance on how to deal with a piracy can be found on the International Chamber of Shipping web site. Indonesia and Nigeria are apparently still the most dangerous waters. Merchants beware.

Sources: BBC, The International Maritime Bureau, International Chamber of Shipping

Good News for Manufacturing

¥ According to a Commerce Department report today, US-made manufactured goods climbed 3.4% in March, and businesses are continuing to grow and expand. In a Bloomberg News article today, Adam York, an economist at Wachovia Corporation, was quoted as saying, "It's still too early to say manufacturing is completely on the mend, but this is a positive.''

¥ Alabama has announced a US$64.5m expansion of its facility in Lincoln, Alabama.

¥ Last week, the Chrysler Group announced that it will invest $700 million investment in Marysville, Michigan and create 1,000 jobs (see last week's blog).The Marysville factory is part of $1.78 billion of new investments that Chrysler announced for Michigan. "It's the biggest thing that's ever happened in our county," said Doug Alexander, executive director of the EDA of St. Clair County.

¥ Wyeth Laboratories, based in New Jersey, and the Irish government unveiled a joint$32.5 million plan today to strengthen the drugmaker's R&D operations in Ireland. Wyeth will expand its current 27,000-square-foot laboratory in West Dublin to more than 90,000 square feet.

¥ Roche Pharmaceuticals announced today that it will invest $60 million in a new multi-purpose production facility in Florence, SC.

Sources: Forbes via AP, Automotive World, The Voice, Bloomberg, International Herald Tribune, The Carolina Newswire,

Dangerous Business, Part 2

Yesterday, Businessweek published an article called "Why Taming the China Dragon Is Tricky." "China's $2.6 trillion economy, which blew away market expectations and clocked 11.1% growth in the first quarter, is rushing along like some blisteringly fast, runaway maglev train," writes Brian Bremner.

The world has never seen such a sudden and sustained rise of an economy that was so desperately poor just three decades ago. China has averaged 9.6% growth rates for 30 years and is now the fourth-biggest economy in the worldÑand likely will overtake Germany as No. 3 in the next year or so. It's the third-biggest trading nation: Two-way trade between China and the rest of the world hit $1.76 trillion last year.

And article in Asia Times today reads:

It is now setting the tempo for the global economic orchestra. The transformation is still in the early stages. China will soon move into higher-value-added sectors, such as automobiles, aerospace and pharmaceuticals. A larger swatch of the population has to be incorporated into the new economy. That means that sunny skies lie ahead for most emerging-market countries as they help feed the ravenous needs of the new rising superpower.

This hype might sound familiar. However, the investment that China is taking in other countries is new. Is it possible that instead of outsourcing to China, China's about to outsource to you? Perhaps she already is.

China's relationship with Africa may be helping several countries run up substantial debt burdens, Business Day South Africa reported today. The Chinese Exim Bank, the export credit agency, has, according to media reports, agreed to finance a dam and hydroelectric plant in Mozambique and a credit line in Angola. The interest in oil rights is surely one of the motivating factors (see yesterday's blog). President Kibaki of Kenya and Mr. Jia Quinglin, chairman of the National Committee of the Chinese People's Political Consultative Conference, signed an economic agreement that would allow china to pay 2.1 billion shillings, or almost $31 million, to build a road. Of course, this is not to mention China's investment in Sudan, which exports around 60% of its oil to China and whose conflicted Darfur region continues to struggle with a deadly civil war.

"Our goal is to help Africa develop processing and manufacturing industries to create more jobs and revenues, thus facilitating local economic and social development and improving people's life," Jia told more than 400 officials and entrepreneurs attending the opening ceremony of the China-Kenya Economic and Commercial Cooperation Forum.

Such investment will help Africa if it earns a good return. But it was failed export credit borrowing that made up much of the crushing weight of African debt written off over the past decade by rich countries in what some call a debt-relief scheme.

Sources: Kenyan Broadcasting Corporation, Asia Times, Xinhua Online, BusinessWeek, Business Day,

Dangerous Business

This morning, at least 74 employees of China Petroleum and Chemical Corporation were killed by a rebel group. Before today, I did not know much about the Chinese investment in African oil.
China has spent billions of dollars up front to get preferential, long-term oil contracts with African countries. These deals typically ensure exploration and development rights as well as oil supply. They are made government to government, or national oil company to national oil company.
At the beginning of this month, African finance ministers met in Addis Ababa, the capital of Ethiopia, to assess the African economic situation. Africa's growth performance in 2006, as in previous years, was underpinned by improvement in macroeconomic management in many countries, and strong global demand for key African export commodities, especially crude oil.
In last week's blog, I noted that trade between Africa and China has grown 40% over the last year--and is still growing. The United States has also taken note.
In January of 2006, in his State of the Union address, President Bush said he wanted to reduce America's dependence on Middle East crude by 75 percent by 2025. Oil-rich areas in Africa would seem like a logical investment. In February, the US announced its intention of establishing more of a central command in Africa, called AFRICOM, to begin fully in October 2008. Troops already deployed in North Africa were involved in anti-terrorism efforts following September 11, 2001. Forbes reported, via the Associated Press, that "Officials also have said that Africa is strategically more important because of its oil production and increased efforts by China to gain influence on the continent." Hyperdynamics Corporation and Shell oil are two examples of American companies in Africa. In 1996, ExxonMobil discovered between 800 million and 1 billion barrels of oil in the Doba basin of southern Chad. The expansion highlighted the one of the major issues with Western development--while 98% of Chadians had no access to electricity, the twenty-five-mile-wide ExxonMobil facility lit up the night sky for miles around.

Armed militants in Nigeria kidnapped nine Chinese oil workers in January, and two more in March. Also in March in Nigeria, five Chinese telecommunications workers were abducted.
This morning in Ethiopia, the oil workers were attacked by members of the separatist group, the Ogaden National Liberation Front, or ONLF, reportedly because they felt that the company was exploiting the region's natural resources. In 1977, Somalia lost that particular region to Ethiopia. Thirty years later, the ONLF continues to wage a low-level war of independence on behalf of that region
Africa needs development. China and the US need resources. Now how do the superpowers help to empower these incredibly unstable parts of the continent without turning it into a cluster of indebted, and even more violent, countries?

Sources: BBC, Forbes, Business Week, InTheseTimes, Reuters, The Globe and Mail, The International Herald Tribune

Microsoft, Everyone's Favorite Economic Developer

I'm still not sure how I feel about Microsoft's announcement yesterday that it intends to play a major role in economic development for the five billion people on the other side of the digital divide. (See the press release on Microsoft's site and the homepage for the program, called Unlimited Potential.)

The initiative is broken into three parts: general education, job skills training, and offering technologies accessible to businesses in the developing world. Well, those are my words for it...in PR speak it's "Transforming Education," "Fostering Local Innovation/Enabling Jobs and Opportunities," and "The Road to Sustained Opportunity."

Now don't get me wrong--the Gatester is a very generous fellow and I have no bone to pick with Microsoft. It's just that I wish sometimes that the public relations departments of companies would stop trying to sell us lines we don't believe. When I read the press release, I see the following:

1. Transforming Education = certifying teachers in the third world to understand how to use Microsoft products. Generous, yes (I presume the training is free), but also convenient considering there are billions of Chinese, Indians, etc. who will be fluent in Microsoft and less so with other products that can land them jobs. MS is selling a decent bundle of stripped down software at little cost ($3) to governments who provide PCs to their students. Furthermore, these kids will grow up knowing MS products best, meaning their governments may be more likely to purchase MS solutions, businesses will prefer MS products, and so forth. It would be unfair to make it sound like handing out free samples of crack cocaine, but you have to admit that the benefits are aimed at both community and company. Not that I would expect the company to teach rival software, but one can't deny that it would have a greater economic development impact.
2. Fostering Local Innovation/Earning Jobs & Opportunities = "providing local software communities with a comprehensive set of programs and services to expand work-force skills, create jobs, strengthen innovation and improve competitiveness. In partnership with local governments, educational institutions and businesses, MicrosoftÕs resource investments provide software development assistance, business skills training, employment training, employment programs for students, and market incubation for the local startup community." (quoting the release there). This is a great thing--worker training--but is it going to be a kind of extension of point #1 for the post-school (or unschooled) set? Teaching the existing labor force in developing countries how to become employable and start businesses is super, and MS surely has more resources to throw at the problem than local governments. But I do wonder what exactly the "comprehensive set of programs" is, for example. Lotus Notes? OpenOffice? Maybe I'm overly skeptical--I would be scared to teach competing programs if I owned a software business. But then again, I'm not Microsoft.
   
3. The Road to Sustained Opportunity = finding ways to make MS software tap into markets it hasn't been able to serve adequately (i.e., poor people). "...Microsoft announced it has created new business groups that will be led by seasoned Microsoft executives Orlando Ayala and Will Poole to bring together development and marketing efforts to help create tailored solutions that are relevant, accessible and affordable for emerging segments." <--from the release. I think that makes it pretty clear that this is as much a business opportunity as a way to uplift people. For example, somewhere else on the Unlimited Potential site there was a mention of allowing people to use their cell phones to complete transactions, like processing a credit card or keeping accounts. This makes sense because in much of the developing world, cell phone technology is miles ahead of landline (the "leapfrog" effect), meaning almost no one has access to a regular phone, modem, or standard computer network interface, but almost everyone has access to a cell phone.

I suppose what gets me is that there's really nothing wrong with Microsoft, or any other company for that matter, trying to exploit and create new markets while trying to help people. Sure, they could help them more by being product-neutral, but no one expects a company to shoot itself in the foot like that. I'm all for putting out a press release that says something to the effect of: "Here are some new business opportunities for us. By helping ourselves in this way, we're going to help others, and that makes us feel good." But it's as if public relations folks are too afraid of being anything other than hyperbolic.

I respect Microsoft for what it's really doing, not for what it says its doing. I'm sure at an organization as large as MS, there are employees inside who wish the PR department would play it straight, too (reminds me of a recent story from Wired that outlines the healthy conflict at the company between the PR dept. and those who would rather tell it as it is).

New Chrysler plants will lose jobs

Yesterday, the Chrysler Group said that they will spend $1.43 billion to build an engine plant and an axle plant in southern Michigan. The plants would make parts for Chrysler and Mercedes vehicles, even as the American and German companies prepare for a separation.
Instead of more jobs, however, the new plants are expected to employ about 1,815 fewer workers than the ones they will replace.
DaimlerChrysler, Chrysler's parent company, lost nearly $1.5 billion in 2006. Sources say that DaimlerChrysler could wrap up a sale of Chrysler as early as next month.

Sources: The New York Times, The Toronto Star, MSN Money, Reuters

In India, this one expansion means 15,000 jobs

India's largest IT services firm, Tata Consultancy Services (TCS) announced plans today to invest Rs.4 billion, or over $95 million, to develop a facility on the outskirst of Hyderabad, Andhra Pradesh, India. The facility, which is expected to be completed by 2013, will employ 15,000 people. This will take the total number of TCS employees to 89,000 in 47 countries.

TCS, whichis based in Mumbai, also expects to increase its staff in China by 5,000 over the next four years.

TCS hit a milestone this week, crossing US$4 billion in revenues for the first time. TCS's customers include IBM, Bank of China, Qantas Airlines. TCS was the first Indian software company to open an overseas office in New York.

Sources: India eNews, India PR Wire, The Financial Times, Economic Times India, The Telegraph, Business Week, Tata Consultancy Services

The Wolverine State flexes its muscles

The Michigan Economic Development Corporation announced that nine new expansion and community redevelopment projects will create a total of 1,790 direct jobs throughout the state. Yesterday's article in the Detroit News lists the companies, investments, and site selection alternatives that these companies had.
The companies include:

$ World Alliance Financial Corporation will invest $835,000 in a headquarters in Troy, MI, which will create 350 jobs.
$ The Keihin Corporation, a Japanese auto parts manufacturer, will built a $22 million facility in Capac, MI, creating 260 direct jobs.
$ Cayman Chemical Co. Inc., a biochemical manufacturer, will invest $9.7 million in a 40,000-square-foot expansion in Pittsfield Township, MI, creating 208 jobs.
$ IAV Automotive Engineering Inc. will invest $18.2 million to relocate its engineering operation to Northville Township, MI, adding 107 jobs.
$ Seissenschmidt Corporation, a German auto supplier, will invest $1.3 million to locate its North American headquarters in Oscoda Township, creating 85 jobs.

Minnesota JOBZ on the Chopping Block

So, it seems that Minnesota's shining star in the way of economic development programs--JOBZ--is under the gun in the Legislature according to an article in the Star Tribune last week.

The JOBZ program was created with the intent of stimulating economic development in areas of Minnesota that are struggling with job creation by giving companies state tax breaks. Interestingly enough, the senator behind the campaign to end JOBZ, DFLer (Democratic-Farmer-Labor party) Tom Bakk of Cook, MN, was behind the creation of the program in 2003.

According to a few companies who were interviewed in the article in the Star Tribune, one of the main problems with the program is that it requires a certain wage be paid to workers constructing any building using state money. (This requirement is intended to prevent a contractor from using cheap outside labor to undercut the local job market.)

An editorial piece in the Star Tribune ran the next day in defense of the JOBZ program.

So, is JOBZ really worth its weight? For now, that's up to the Legislature to decide.

For the most recent annual JOBZ program report, view the PDF here.

BLACK HAWK UP

DynaBil Industries has announced plans for a $10 million, 50,000-square-foot expansion to its 65,000-square-foot manufacturing facility in Coxsackie, NY. The project is expected to add 137 people over the next five years. DynaBil is eligible for $6 million in tax credits, incentives, and other benefits over the next 10 years, according to the Greene County Department of Planning and Economic Development.

DynaBil, a manufacturer of precision sheetmetal assemblies and components, supplies parts for the Sikorsky Blackhawk helicopter and Boeing's 787 Dreamliner, as well as parts for Lockheed Martin, Bombardier, Bell Canada, Israel Aircraft Industries, and Spirit Aerosystems.

The continuing U.S. involvement in the Middle East has continued demand for the Blackhawk, which is used by the military in Iraq and Afghanistan. "We've been at it for 30 years now and it is the best cycle I've ever seen," DynaBil President Hugh Quigley said.

The company makes more than 100 parts for the UH-60 Blackhawk helicopter. The Army, with 1,500 of the aircraft in its fleet, put 240,000 flight hours on its Iraq-based helicopters in 2005. The number of flight hours increased to 334,000 in 2006, and is expected to hit 400,000 hours in 2007.

See, keeping track of these types of business expansions is really like keeping track of this war. I also posted earlier on Spartan Chassis and GE Aviation, who both make parts for military vehicles and planes.

AT&T & Indiana

There was news today that AT&T is planning to open a $22 million, 75,000-square-foot call center in Evansville to handle customer care for its wireless business-to-business organization. Although a location for the new call center has not yet been determined, it will generate about 565 new jobs for the Evansville area.

As a side note, the Indianapolis Business Journal published an article on Friday called "Indiana turns up schmoozing efforts" (great title). Peter Schnitzler wrote:

Economic development officials say networking is the first step in a process that, when successful, leads to industrial plant expansions and company headquarters relocation. Travel, food, gifts and entertainment, they argue, are a necessary cost of attracting jobs to Indiana. From Feb. 1, 2005, to Feb. 28, 2007, IndianaÕs price tag for greasing the wheels of progress was $1.06 million.

Nathan Feltman, the Indiana Secretary of Commerce, said, "We're starting to hear that Indiana is getting aggressive."

Was AT&T schmoozed, I wonder?

Click to learn the importance of data management in creating availability solutions including clarification of availability terminology.

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Africa will learn from China, work with EU

It was Jane Goodall and her work with chimps that first got me obsessed with Tanzania. Now it's the economy. Actually, both are going hand in hand, now that Green Mountain Coffee Company, based in Vermont, revealed its new coffee today. It's called Gombe Reserve: In Cooperation with the Jane Goodall Institute. The coffee is grown by members of the Kalinzi Cooperative, a group of 2,700 small-scale farmers who live near Gombe National Park in Tanzania, which is the site of Goodall's groundbreaking research on chimp behavior.

But I am really thinking about what's in the news today about Ghana, Uganda, Mozambique, and Tanzania taking economic lessons from China., Reuters reported that trade between Africa and China has grown 40% over the last year--and is still growing.

East Africa Business Week reported that the European Commission delegation in Tanzania has confirmed that the EU will remove the remaining quota and tariff limitations on access to the EU market for all African, Caribbean and Pacific (ACP) regions. The Economic Partnership Agreements aim at integrating the ACP into the world trading economy and increasing the quantity and diversity of their trade. These partnership agreements are meant to encourage regional integration, the growth of regional markets and creation of regional supply chains.

Critics of the trade agreements blame the EU for pressuring Tanzania and other countries to liberalise their trade markets far beyond what has been under discussion at the World Trade Organiation (WTO). One report, by a Christian organization, says that the trade talks have been grossly unbalanced and unfairly tied to future aid.

During the talks this weekend, President J. A. Kufuor of Ghana stressed that this new partnership between Africa and the European countries must be based on mutual respect and benefit. Today, Ghana's largest daily news reported the President as saying that

. . .any relationship that rendered Africans as beggars would not augur well for a globalized world in which the focus was on partnership rather than master-servant relations.

GE Aviation to expand its jet engine manufacturing

The Rutland Herald reported today that GE will break ground next month on a $4.5 million, 27,000-square-foot addition to its facility in Rutland Town, VT. GE Aviation handed its Rutland operation the assignment of making parts for the company's latest commercial aircraft jet engine. The company will also invest millions more on machinery and equipment to make the new blades. The GE plant has undergone several expansions over the years and is now 289,2933 square feet and has about 1,200 employees.
The spokesperson for GE said that with military orders on decline, the order has come along "just at the right time."

Speaking of a decline in military spending, the San Diego Business Journal just published an article on the 800 area-manufacturing jobs lost in the past year. The article sites a study by the San Diego Chamber of Commerce that says:

. . .manufacturing benefits the most from the business created by defense spending. Defense-related manufacturing supports more than 19,800 jobs and $4.5 billion in economic output. The professional, scientific and technical services sector was second, with military spending generating $2.4 billion, and more than 19,000 jobs for those sectors.

I was blogging about this last week, as presently we are seeing some US manufacturers struggling and some benefiting from this stage of the Iraq conflict.

Monday Economic Outlook: The Good, The Bad, and the Okay

Today Bloomberg News reported that retail sales in the U.S. rose in March by the most in three months, enabling the economy to expand in the face of downturns in manufacturing and housing. The International Herald Tribune also reported on a talk that Alan Greenspan, the former U.S. Federal Reserve Board chairman, gave in Tokyo today via satellite from Washington. Greenspan said economic growth outside the United States was creating demand for services from companies like Microsoft. Even Reuters reported that this weekend at a meeting with the IMF, U.S. Treasury Secretary Henry Paulson said that the U.S. economic prospects were good for this year. He said:

"We are committed to keeping the U.S. economy open to trade and investment, which underpins our economic strength, and to opposing protectionism whenever and wherever it arises. . .While economic activity slowed below potential in late 2006, we expect GDP growth to rebound to 3 percent by the end of this year."

However, Modern Plastics Worldwide published an article on Friday that warned of a slowdown in 2007 for the economy at large, with manufacturing expected to grow as little as 3%. Economist Bob Shrouds cited a "lagged impacts" of high oil and gas prices, rising interest rates, an income slowdown, and a tepid housing market, among other indicators. Tony Deligio writes:

In manufacturing in general, and plastics specifically, Shrouds sees industry lagging behind the economy at large, dipping from 4.7% in real terms in 2006, to 1.5% in 2007, after climbing from 3.9% in 2005. For China, manufacturing is growing at 16%-17% annually. After growing at a strong rate of 5% in 2006, the U.S. production of plastic products fell to 1% in 2006, but is expected to rebound somewhat in 2007 to 2.3%.

The Iranian Press TV also reported that a Swedish Economist had predicted imbalances in the U.S. economy will result in a bust this year. I believe "recession" was the word he used.

Since it is Monday, though, I'll leave you off with some positive economic predictions. Smart Money's article says that financial officials from the Group of Seven maintained an upbeat view of the global economy. "Although risks remain, the global economy is having its strongest sustained expansion in more than 30 years and is becoming more balanced," the ministers said.

Weekend Expansions Update

$ Quatro Composites is expected to complete their new Orange City, Iowa, plant expansion by August 2007. Quatro is also moving its Poway, California-based offices to a larger facility in May to accommodate staff and R&D growth.

$ Cobasys, a battery manufacturer, confirmed the addition of 18,860 square feet to its headquarters in Orion, Michigan, to be completed by July. Cobasys is the only North American manufacturer supplying NiMH battery systems for hybrid vehicles, including the Saturn Vue Green Line and the Chevrolet Malibu hybrid.

$ VienTek, a joint venture between Mitsubishi Power Systems Americas and TPI Composites, launched plans to triple the capacity of their wind blade manufacturing operation in Juarez, Mexico. The expansion, to be completed in October, will include two plants with a total of 500,592 square feet of manufacturing space and 800 employees.

$ Air Arabia, the first low-cost airline in the Middle East and North Africa, announced today that it will construct a hotel at Sharjah Airport in Dubai. The 300-room hotel will cost $350 million AED, or over $95 million US dollars.

$ Bell Equipment, a South Africa-based earthmoving equipment manufacturer, is currently embarking on a $40 South African Rand, or about $5.5 million US dollar, upgrade of its Cape Town manufacturing and customer support facilities. The project is due to an expansion of the construction sector in Cape Town and the growth of diamond operations on the west cost of the country.

What's up with Tanzania?

Fin24, a South African business news site, published an article today that sums up how the World Bank works. With all the buzz about the Wolfowitz scandal lately, it's nice to see a concise, clear explanation of the WB's inner workings, including a "Controversial Baggage" section.

The scandal aside, Wolfowitz, at a press round-table yesterday, said that India is an inspiration for Africa. At Business Facilities, we have been following U.S. manufacturing and communications companies as they expand to India due to its low cost and skilled workforce. Could developing countries in Africa be next?

For example, recently I came across an advertisement for doing business in Tanzania. Hakaya Kikwete has been president of this sub-Saharan country since 2005, and has watched the economy grow and the debt diminish. However the rate of poverty is still high.

Even so, the WB named Tanzania one of the 10 most improved countries. The Tanzania Chamber of Commerce launches their ad campaign this week.

Expansion News and Views: From Lights to Fights

aHoward Industries announced yesterday that they will be expanding their Laurel, MS manufacturing facility by 550,000 square feet. Employees design and manufacture power transformers, which can weigh as much as 300,000 pounds and cost up to $1.5 million. Howard also manufactures indoor and outdoor lighting supplies, among many other products.
Governor Haley Barbour compared the Howard expansion to the recent Toyota expansion in Blue Springs, MS (which is covered in April's Business Facilities Magazine). "Good things."

aSpeaking of Toyota, Toyota Boshoku America announced this week that they will locate its North American office in the CirclePort Business Park in Erlanger, Kentucky. Toyota Boshoku will occupy 23,000 square feet of Class A office space in the Dolwick Business Center, 11 miles south of Cincinnati.They will also receive $2.1 million in tax incentives. Toyota Boshuku, based in Japan, produces automobile interiors.

aAnd speaking of cars, Spartan Chassis, Inc., a subsidiary of Spartan Motors, Inc. announced this week that they purchased two manufacturing facilities near its headquarters in Charlotte, MI. The facilities, totaling 80,000 square-feet, will manufacture components for Mine Resistant Ambush Protected (MRAP) vehicles. Spartan will spend around $8 million to get this facility up and running this year. The MRAP vehicles are designed to protect their occupants from a combination of mines, rocket-propelled grenades, or RPGs, and improvised explosive devices, or IEDs, through their V-shaped hull, raised chassis and improved armor. According to U.S. government reports, roadside bombs and IEDs account for 70 percent of U.S. deaths and injuries in Iraq.

With U.S. troops tours of duty recently extended in Iraq, and a questionable time frame for the end of the war over there, the Pentagon is spending over $400 billion this year on the war. This might benefit some manufacturers, which we can watch through their physical expansions. If the market is there, no matter how controversial, somebody will fill it.

The biggest New York technology park gets even bigger

Biomed Realty Trust--the huge real estate investment trust that provides real estate to biotechnology, pharmaceutical, and other companies and government agencies dealing in the life science industry--broke ground for a major expansion at their Westchester County, New York technology park, the Landmark at Eastview.

Biomed, which is headquartered in San Diego, already can call the Landmark at Eastview the largest privately-owned, multi-tenant technology park in New York State. The new $145 million space, much of which will be leased by Regeneron Pharmaceuticals Inc., includes three buildings totaling 360,000 square feet, expected to be completed next summer.

For its involvement with New York E.D., Regeneron has received a $4 million grant from Empire State Development Corporation, $3.5 million in property tax abatements, and $1.5 million in sales tax abatements from the Westchester County Industrial Development Agency.

Now that's incentive.

Blogging on Blogging

The editors at Business Facilities like to keep you up to date on the latest economic development, corporate expansion, relocation, and site selection news and views. We sort through all of the online fluff so that you don't have to, and bring you our picks.

Do you know of a site that we don't? Send your tips to pgabel@groupc.com

aThe National Association of Manufacturers has some great news and advice on relocating and expanding manufacturing facilties.

In one recent post, Bill Canis writes about Joe Loughrey, the CEO of Cummins, a maker of diesel engines. Mr. Loughrey was asked to speak at the Rocky Mount, NC chamber of commerce (where he is planning to invest $22 million in a plant expansion this year) about his company grappling with globalization, competiveness, and lack skilled workers. He said,

Let me stress that for North Carolina and Rocky Mount--as well as other communities where Cummins does business--the big issue is finding enough skilled labor...employees who are prepared to use statistical methods, operate higher technology equipment, work well with colleagues and are eager to learn new, more efficient ways of getting their jobs done. Solving this problem is absolutely necessary to being and remaining a world-class manufacturer....and if we can't find it here, we and others will have to look elsewhere.

Yup. We know all about looking elsewhere.

aI can't stop reading the Private Sector Development Blog, an Economic Development blog written by members of the World Bank (the content is the individual's opinions, of course, and not the WB's).
This blog's mission is to "gather together news, resources and ideas about the role of private enterprise in fighting poverty."

You can search by regions or by topic. Thinking about doing business in Poland? Thinking of expanding your company into a post-conflict area? Among the writers of this blog are lead economists and managers at the World Bank, the oh-so-controversial international economic development organization. Love it or hate it, the global E.D. information here is from the experts.

UK has no capacity to spare

In last Sunday's London Telegraph, the economics editor tackles the contradictions of a healthy, growing economy--the demand is getting higher, but we don't have room to feed it. Yikes! He writes

Corporate investment used to be about buying big machines or taking on more staff - both of which would increase the ability of firms to deliver, helping to lower inflation as the economy continued to grow.

But business investment is now a lot more about restructuring, deal-making and speculating - boosting the bottom line not by increasing scale, but by cutting costs. Typified by the emergence of private equity, this new wave of corporate expansion represents, in many ways, an economic contraction.

While great news for shareholders and company executives, this latest wave of business investment has often brought bad news for the "down-sized" workers.

So Much Growth, So Little Spare Capacity (telegraph.co.uk)

Pink Slip Confetti at Citigroup

It seems that Citigroup, the largest financial institution in the U.S., will be cutting 17,000 jobs! Oh goodness. But that's not all the news. They've expressed their interests in "moving an additional 9,500 jobs to lower-cost locations worldwide, with about two-thirds going through attrition." (Reuters)
The New York Times reported that "about 9,500 jobs will be moved to locations overseas or around the United States where the cost of doing business is lower, from more expensive locations like London, Hong Kong, and New York, where the companyÕs headquarters are based."
From a corporate real estate perspective, this will be interesting to watch. And maybe a little bit painful. Those pink slips that are going to be passed out this week---that's gonna hurt.

Citigroup to lay of 17,000 in Overhaul (NYT)
Citigroup to slash 17,000 jobs (Reuters)

Defending Incentives

This is an interesting op-ed piece published in The News and Observer, a newspaper serving readers in Raleigh, Durham, Cary, and Chapel Hill, NC. The writer—an assistant professor in city and regional planning at UNC-Chapel Hill—argues that the financial incentives the state has given to two companies, Dell and Google, to locate in North Carolina, may be worth the cost despite those projects not meeting job creation expectations. It's a tough call; it's not uncommon for a state or community to give up revenue or even spend money outright on industrial recruitment without making up the difference in an increased tax base, higher average earnings for residents, etc. (It makes me wonder why communities don't structure all their incentives to be applicable only if the company meets certain job and investment targets, such that the community cannot lost money.)

What the writer argues, however, is that these incentives provide incentive not just for the company to locate in the area, but also to economic developers to make sure their business environment is set up to make it easy for these companies to succeed. By setting high expectations for job growth after a corporate expansion or relocation, the economic developers have a duty then to improve themselves. The expectations are often based on what can be expected from an expansion in the industry (in the case of Dell, computer manufacturing). If the average computer manufacturing expansion of a size similar to Dell's in North Carolina can be expected to create X jobs, but North Carolina's results came in after several years at 0.75X, then there needs to be an investigation of why North Carolina's results were below average in that case. The law of averages says some projects will create more jobs, some will create less; the article's author says that setting expectations to be at least average is healthy, and missing the target is a chance for authorities to figure out if there is something they could have done better.

In my opinion, there could be something to this, but of course it's possible that even in a perfect business environment, where North Carolina executed flawlessly, Dell or Google might have faced adverse market conditions or other unpredictable circumstances. Still, it will be interesting to analyze the situation again in five or 10 years and see whether the seed planted by Dell or Google eventually does pay off, even if the state takes a loss in the short term. I'm sure the people with jobs at these companies in North Carolina are at least grateful the state sacrificed some revenue to keep them employed.

The News and Observer - "Don't Write off Incentives Yet"

Real Estate Bloggers

The corporate and home real estate industry has finally taken its mask off. Well, at least in California.

Transparent Real Estate could turn out to be the key to uncovering the hidden lives of real estate agents. Along the left hand side is a list of real estate blogs, with such titles as Mortgages Undressed, Real Estate Undressed, Infectious Greed, and The Real Estate Blog Lab.

Patrick Kitano, the author of the site and a co-founder of a real estate consulting group, writes his news and views of the local California, national, and global markets.

Just a warning though. It's addictive. Once you go blog, it's tough to go back.