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Thursday, May 31, 2007

The Biggest Piece of Coal in China


The Xinjiang Province, a huge, sparsely populated region in Northwest China, began hosting China's largest coal chemical project this month. Xinwen Mining Group, based in the Sandong Province, has invested $327 million (2.6 billion yuan) in the facility, which will have estimated annual sales of $183 million, or 10 million tons a coal.

This large plant is a needed response to small, dangerous, and sometimes illegal mines are scattered throughout the region, 80 of which were closed this year. China, the world's largest coal producer and consumer, saw 4,746 deaths in coal mine accidents last year--an average of 13 deaths per day. The hope is that larger projects will have tighter regulations on mines.

Xinjiang, sometimes referred to as East or Chinese Turkestan, is home to majority of Muslim Turkic groups. Historically, Xinjiang, like its neighbor Tibet, has fought to separate itself from China. Since the fifties, however, a Chinese propoganda movement known as "Go West" has encouraged Chinese people from the East to settle in the region and transform the frontier. Human rights advocates have historically scorned China for is work prisons (Laogai) and involvement of the World Bank in Xinjiang.

In addition to the new mine, he Xinwen Mining Group plans to invest more than $3.8 billion for coal chemical development in the Yili Rive Valley of Xinjiang.

Sources: China Daily, Industrial Info Resources, Times of India, Tibet Environmental Watch, Interfax China

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Tuesday, May 29, 2007

Economic Development: Not All Roses

As this article in The Seattle Times shows, incentive programs are not all roses and chocolate, or whatever the cliché I'm looking for is. A basic incentive in Washington called the Job Development Fund gives communities grants to attract companies (and thus, jobs). The grant might be used to widen a roadway for example--something the company would normally need to pay for (or convince the city to pay for). The communities naturally are eager for the jobs, but apparently what's happened is that there is a fundamental misunderstanding about what constitutes the "good paying" jobs that the Job Development Fund is supposed to promote. When state leaders see retail establishments (a Cabela's sporting-goods store in Lacey, WA, and a Costco store in Covington, WA), they wonder how much the jobs being created there could possibly be paying, and whether the state needs to be chipping in money to create what are presumably mostly low-wage jobs. The Cabela's store for example, will create a nice 233 jobs--at nine dollars an hour. The state would probably not have a problem with 115 jobs at $18/hour.

According to the article,

The board winnowed the proposals using a formula that scored projects on such criteria as how much tax revenue they'd generate for the state and local governments, and how many jobs they'd create. A dozen finalists were identified in 2006. The Legislature reviewed the list and approved the spending last month.

The formula, created by CERB and its staff, put more emphasis on "return on the state's investment" than on creating family-wage jobs.

It weighted family-wage jobs at 7 percent. Tax revenues, including sales and property taxes, were weighted at 12 percent. The overall "return on the state's investment" -- which included private investment and expected tax revenue -- was weighted at 30 percent.

"I came to find out that, despite its title, which is job-development fund, they weight tax more heavily than jobs," Gregoire said. "I think that's reverse in terms of priority."

In addition, CERB Chairman Tom Trulove, an economics professor at Eastern Washington University, said his board didn't have the staff to adequately scrutinize the projects. "You just had to accept that the project proponents were telling the truth, and accept their numbers, and go with the basis of what you saw," he said.

Trulove said he believes the projects are worthwhile, but "if we were to do this again, we certainly would give a lot more weighting to jobs."

At least in Washington they're only criticizing an incentive; in Arkansas, it's the whole program feeling the heat (or at least the state's policies toward business attraction). Being in the competitive Southeast (competitive in the sense that the incentives flow pretty freely for quality projects), Arkansas--it would seem--needs to spend more to compete, as this AP article (courtesy of the local Fox affiliate) reports. The Toyota and ThyssenKrupp recent announcements were the latest sharp sticks in the eye for Arkansas. However, while I'm not prepared to issue a sweeping verdict of Arkansas' business climate, I hope that the answer is not for them to buy themselves a few big projects without working on the fundamentals. Among those I would include making sure the state's vocational training is up to par with the best systems in the country (look at North Dakota, perhaps), that education is funded better than the other states in the region, and that the taxes on business are broad based, fair, and simple.

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Hula Hoops

Harry Eager, a staff writer for the Maui News, asked an interesting question last week: "Is development of commercial space to dicey, pricey?" In the limited, in-demand space on Maui, the question fits (with not much space leftover).

In his review of a survey done by Colliers Monroe Friedlander, a commercial real estate broker, manager, and consultant, he states that labor shortages and delays in permits and government supervision process is heightening the risk of developing. A senior manager at the agency estimates that construction costs for a low-rise commercial building, the most popular on the island, are about $300 per square foot, not counting land.

MSN reported that increasing housing and energy costs in the Hawaiian islands are expected to drive local prices up 4.5% in 2007. Construction authorizations dropped in the first quarter of this year, however construction jobs increased due to development of existing permits.

Marty Kenny, the Collier's Maui broker, compared the commercial market in Maui to that of Manhattan, suggesting that mixed-use developments were the most viable option for the island. The mixed-use model (with retail on street level, and offices and/or residential space on the upper floors) would serve the 140,000 residents, and upwards of 40,000 tourists who visit Maui each day during the busy season.

Maui is the second largest island in Hawaii, at 727 square miles. Its main industries are tourism, agriculture (sugarcane and pineapple), and the high tech industry. The development of Maui's land, which is known for natural beauty and, is controversial. Between 1970 and 2005, the population of Maui has more than tripled, causing a strain on the island's infrastructure.

Sources: The Maui News, MSN Money

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Friday, May 25, 2007

Site Selectors Rate Access-to-Market as Top Factor


I had this press release sent to me this week (saved here in RTF format--it should open with any word processor) from CoreNet Global, the membership organization for corporate real estate managers. Apparently the organization conducted a study telling us that from the perspective of the end-user (industry-speak for the company or organization that actually looks for a site to expand to), what matters most to the site selection process is the site's "access to market." In other words, how easy is it for the product or service produced at the site to be delivered to the company's customers.

(I suppose it's obvious in the case of physical goods what access to market means, but it also can apply to, say, a company that delivers computer services to clients. In that case, the access to market isn't measured by roads and train tracks, but through fiber optics and other digital infrastructure.)

The study says that economic developers--those who work to attract companies to their areas--underestimate the importance of their access to market and overestimate the importance of traditional costs like wages, construction, training, etc. Economic developers also overestimate how much corporations care about "cultural, sports and other lifestyle amenities," although these are not insignificant to companies, either.

The importance of innovation in the site selection decision is apparently something that is not shared equally by corporations and economic developers--the press release cites a "30% gap," although I'm not sure what that means, or which side is overestimating the importance of innovation. Not sure how they define innovation, either--I guess I'll have to read the study.

Finally, the big trend is that "location decisions are increasingly linked to portfolios that are managed on a holistic level as part of the now-prominent corporate integrated portfolio management model." (Say that 10 times, fast.) The study says economic developers must adopt a portfolio perspective to understand how corporations make decisions. I guess in real marketing terms, this means that economic developers should promote the aspects of their location that make it a good fit within a company's real estate portfolio. That will be quite a learning challenge for the economic development community as a whole.

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Expansion News and Views: From Iowa to Namibia

- Snap-On Tools broke ground yesterday on a $12 million facility in Algona, Iowa. The investment will add 51,000 square feet to an existing plant, and create 30 new jobs. The state and the Kossuth-Palo Alto County EDC awarded the company $2.8 million for the expansion, and the city offered a $300,000, 10-year loan and $250,000 worth of job training. (The Messenger, Iowa)

- Continental Airlines is trying to decide which airport to throw $45 million at for an expansion. Will it be Newark, Cleveland, or Houston? The expansion could bring up to 700 jobs to the region. And bragging rights. (Cleveland Plain Dealer)

- Those crafty developers from down under are getting set to move into the U.S.! Australia's Macquarie Goodman, the world's second largest industrial property trust, has spent $5 billion over the past 18 months to build its Euro and Asian platforms, and now is looking towards America. The trust would be going head-to-head with their biggest competitor, U.S.-based ProLogis. Look out for themŃthey expect to be a major presence within two years. (Reuters)

- Auto Owners Insurance Group plans to build a $45 million, 96,00 square-foot data center in Lansing, Michigan, adding 80 new jobs. the new facility will be near its corporate headquarters. On Monday, Delta Township voted to sell a half-acre of land to the company for $1. That's right, one hundred pennies. The township is also paying $24,000 in water and sewer connection fees. (The Lansing State Journal)

- First Jamaica Trust Limited (FJT) is seeking $25 million to develop real estate in Jamaica and Central America. On Wednesday, the International Monetary Fund proposed the full loan to FJT. The Trust invests through its property management firm which manages around 750,000 square feet of commercial and residential space in Kingston. (The Jamaica Observer)

- Speaking of Kingston, earlier this month, the mayor of the city, Desmond McKenzie, gave a speech in Massachusetts. He urged Jamaicans living in Boston to invest more of their savings in the country's development, to help restore the country's economic viability. (The Jamaica Gleaner)

- The World Bank approved a $7.5 million loan to support education and training of Namibia's workforce. This is the first part of a program called Namibia's Education and Training Sector Improvement Program (ETSIP1), a five-year, $357 million program to train workers and attract business. I hope it works, because that's a lot of money to pay back.

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Wednesday, May 23, 2007

Sparking the Reactors in Alabama


The Browns Ferry Nuclear Power Plant in Alabama restarted its Unit 1 reactor yesterday, 22 years after it was shut down for safety concerns. Once the largest nuclear power plant in the U.S., the revival is the result of a $1.8 billion renovation of the Tennessee Valley Authority's facility. The plant is capable of powering 1.95 million homes.

Will this mark a renewal in nuclear energy? The dangers are still there, and are seen in the history of the Browns Ferry plant. In 1975, an employee used a candle to check for air leaks in one of the reactors, which sparked a fire "considered the nation's worst nuclear power accident until the partial core meltdown of the Three Mile Island plant in 1979 in Pennsylvania," according to the Associated Press. However currently, spokespeople say that there are no reported problems.

Forbes reported that a watchdog group was questioning whether the plant should be operated at all:

Sara Barczak, safe energy director for the Southern Alliance for Clean Energy, said Browns Ferry has an "infamous history" that poses concerns even after the refurbishment. Reactors are most likely to have problems during and shortly after startups or as they age, she said, and Unit 1 falls into both categories.

"This restart is a high-alert time for safety," she said.

Sources: The Birmingham News, The Houston Chronicle, Forbes, The Decatur Daily, Tennessee Valley Authority

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Tuesday, May 22, 2007

Microsoft Loves Fargo

Microsoft will be adding a 120,000-square-foot facility to its sprawling Fargo, ND campus. The computer company's long-range plan is to have 3,800 people working there. That's a huge presence for such a small state (North Dakota has around 635,000 residents).

Microsoft acquired the facility six years ago for $1.1 billion. One of the reasons that the company is able to expand is the low cost of living. Apparently, a $50,000-a-year job in Fargo is equivalent to a $62,000-a-year job in Seattle. There are currently 1,245 Microsoft employees in North Dakota (that's roughly 1 out of every 500 people in the state).

If you're interested in keeping up with Microsoft's latest facility expansions, also check out last month's blog: "Microsoft, Everyone's Favorite Economic Developer".

Sources: Puget Sound Business Journal, Minnesota Public Radio, International Herald Tribune

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Monday, May 21, 2007

Albany moves to India

Albany Molecular Research Inc. (AMRI), a chemistry services company based in New York, announced today that it would buy two India-based companies for $11 million. The price includes all of the assets, including facilities, employees, products, and equipment.

AMRI will acquire pharmaceutical manufacturing sites in Aurangabad and Navi Mumbai, both of which specialize in manufacturing the ingredients of medications that treat heart disease and asthma. Additionally, the company will get extra land in Aurangabad, where it intends to invest about $15 million over the next three years.

In the past few years, the company has expanded its research to include operations in India, Singapore, Budapest, and Hungary. AMRI's CEO, Thomas D'Ambro, says that the strategy of locating manufacturing plants to areas of lower cost is crucial to the company's survival.

AMRI does contract work for pharmaceutical concerns looking to outsource. Past research has led to the discovery of medicines such as Allegra, which is developed and marketed by Sanofi-Aventis.

Sources: Forbes, The Business Review, PharmaLive

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Tuesday, May 15, 2007

The Rich Get Richer

You'd think Massachusetts would be content as one of the kingpins in biotechnology locations, but you'd be wrong, as this article from the Gloucester Daily Times points out.
Gov. Deval Patrick's sweeping plan to invest $1 billion in biotechnology research and life sciences companies over the next 10 years is also about jobs.

The proposal, which includes money to encourage companies to expand here and attract new ones, is expected to be an economic boon for the North of Boston region, where a cluster of biotechnology businesses has formed.
Ouch, Massachusetts--can't you give some of the little guys a chance? Then again, I have to think they're smart for doing this. It seems that when a location sits on its laurels too long, confident in its inherent dominance (Detroit, perhaps? Maybe Wall Street, too?), it inevitably gets the rug pulled out from under it by not paying attention to the rust accumulating around the edges. By the time they act, it's often too late.

The "rust" in the case of Massachusetts? Well, it's a good problem to have, but deadly nonetheless:
...Others, like PCI Synthesis President Edward Price, said encouraging biotechnology is a good idea. His Newburyport company manufacturers drugs that biotech companies develop.

One stumbling block is the work force.

Massachusetts workers have been leaving the state for years, and population growth has been stagnant.

Price suggested companies might be discouraged from expanding or locating here because they can't find qualified workers.

"I think the big problem Massachusetts faces in the short term is a lack of human resources," Price said.


Classic story...location invest in industry...industry blossoms...economy grows...location gains cachet...location gets too expensive for new grads to settle in...young families settle elsewhere...companies complain...companies chase workforce.

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Friday, May 11, 2007

Where there is sea, there are pirates, Part 2

I have an update for all the folks that transport goods via the high seas. US Naval Commander Rear-Admiral James Kelly told an Australian newspaper last week that China is building up its submarine and warship capacity to help protect its sea lanes.

China's booming economy means that it has a voracious appetite for raw materials (see previous China-related blogs), much of which needs to be imported. And this means that it has plenty of incentive to have the capability to keep its sea lanes open.

Most of China's trade goes through the Malacca Straits and the Bay of Bengal, which have more pirate activity than anywhere else in the world.

Over 65,000 vessels pass through the strait every year, carrying half the world's oil and more than a third of its commerce. The Strait of Malacca is notorious for robberies and kidnappings by pirates, mostly directed against commercial shipping. Increased security patrols by Malaysia, Singapore and Indonesia have helped the number of attacks drop drastically.

Sources: The Age, The Malaysia Star, The International Herald Tribune
Also See "Where there is sea, there are pirates," Part 1

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Dropping $50 million in Brooklyn

B&H Photo-Video (my favorite photo retailer, might I add) announced on Wednesday that it will add a 400,000-square foot, $50 million expansion to its 160,000-square-foot facility in the Brooklyn Navy Yard. Construction for the new multi-story building is expected to be completed by 2009, and B&H plans to create about 300 new jobs.

B&H, which is headquartered across the East River in Manhattan, will concentrate its phone and customer service operations in Brooklyn, and will use additional space as a warehouse. The company will also apply to the U.S. Green Building Council for a Leadership in Energy and Environmental Design (LEED) silver rating for the new buildings.

The Brooklyn Eagle reported a Navy Yard spokesperson as saying,ŇIt will be the biggest building constructed at the Navy Yard since World War II, and one of the largest multi-story industrial buildings built in the country in recent years."

The Brooklyn Navy Yard, a former shipbuilding yard founded in 1981, is a 300-acre industrial park in New York City. Today it boasts over 200 tenants and 3.5 million square feet of available space.

Sources: Commercial Property News, The Brooklyn Eagle,

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Thursday, May 10, 2007

Debt for Oil?

In April, it was established that the Russian oil company Lukoil will become the largest oil supplier in Iraq. They will be replacing the disgraced Halliburton and will become the dominant conveyor of "black gold" in the country. In fact, the Russian government is giving full support to Lukoil's ambition to become the first large international energy group to develop a major Iraqi oil field since the 2003 U.S. invasion.

What does this mean? As Iraq works to rebuild itself, it is still struggling with a massive amount of debt. Russia has forgiven Iraq for much of the debt, but not entirely. Since the world's top oil companies are scrambling to win a stake in Iraqi oilfields (which hold the third largest reserves in the world), Lukoil would like to exchange debt for oil. Iraq has so far refused. However, the passage of an oil law is expected within the next couple of weeks. If Iraq allows the countries that it is indebted to trade debt for resources, this would be good for businesses in Russia and other countries, and presumably it would be good for Iraq.

But would it? Refer to my earlier blogs on foreign investments in Africa, and WTO and IMF criticisms. What a fine line we walk as developers; jobs are good, facilities are good, money is good, however the risk is that the country could be dominated, or "sucked dry," by foreign interest.

A member of Iraq's Parliamentary Commission of Economy, Investment and Reconstruction told the press that Iraq needs around $300 billion to rebuild all its oil, economy, industry, agriculture, infrastructure. It is important to note that currently over seven foreign firms from Iran, China, Egypt, France, Germany, Italy, Japan, Saudi Arabia, and, of course, Russia (among others) are attending the Rebuild Iraq International Trade Fair, which is being held in Jordan right now. What are the alternatives to foreign investment in Iraq? Perhaps there are none.

Sources: Moscow News, MSNBC, Business Day (South Africa), The Middle East/North Africa Financial Network

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Wednesday, May 9, 2007

The Tundra of Indiana

YEAH, that's me with the Business Facilities hat in the driver's seat of a brand new 2007 Toyota Tundra full-size pickup truck. As a car nut envious of automotive journalists who get the chance to drive new vehicles on the market for a living, I had a rare opportunity a couple of weeks ago: the chance to get a Tundra on loan as a member of the press. If you've followed our coverage of Toyota's expansions in the U.S., you might recall that their newly opened plant in San Antonio, TX--in the heart of pickup country--was engineered to produce these monsters. (The truck I tested was built at the only other facility that makes Tundras, in Princeton, IN--hence the title of this post.)

By the way, this seems very apropos with the recent huge announcement by Toyota that it's getting into Mississippi. As I post this, our article about it just came online as well.

My impression is that this is part of an all-out effort on behalf of Toyota to get more publicity for a critical vehicle; this generation Tundra is the first Toyota truck to truly be as big, powerful, and macho looking as any American truck. (Pickup trucks are the last mainstream vehicle market in the U.S. still utterly dominated by Detroit.) Sales of the 2007 Tundra have been respectable, but not quite what Toyota was hoping for.

There are probably several reasons for this--the high price of gas and the legendary brand loyalty of truck owners in the U.S. come to mind--but I don't think you can make a case that the Tundra in any way fails to measure up to the competition. In some ways, it surpasses it; its standard features are impressive. (Trying to compare trucks is baffling because they offer a ridiculous number of configuration possibilities. I'm pretty sure that the Tundra is the only truck offering electronic stability control standard, a must on any vehicle with a high center of gravity in my opinion), and its payload, towing, and horsepower/torque figures (at least for the truck I tested, which had the top of the line 381-hp 5.7 liter iForce V-8) are astounding. Its competitors from Ford, Chevy, Dodge, and Nissan offer 300, 315, 345, and 317 horsepower, respectively, in their top engines. The Tundra tows more than any competing truck by more than one ton, except for the Nissan Titan, which is off by more like 1,000 lbs. And yet, the Tundra's gas mileage is about the same as the other guys (that is to say, godawful). Maybe it's the six gears in the optional automatic transmission--the other guys still offer only four or five at most. (In fairness, the base transmission of the Tundra is a five speed auto.)

My truck was the "Double Cab" model, meaning it had smallish rear doors the opened to a decent rear seat--a standard cab with no back seat is available, as is a "CrewMax" cab variant, with full-size rear doors and enormous backseat legroom. (Don't dismiss the Double Cab, though--unlike other similar cabs I've seen, the rear doors are forward-hinged, they open wide, and they can be opened without opening the front door on the same side. The back seat is adequate in size for most people, and the rear windows open just as you'd expect, not in some limited fashion.) The double cab can be had with a standard bed (around 6.5 feet I think, which is what my truck came equipped with) or a long bed (just over eight feet long) which will hold full sheets of plywood with the tailgate closed but increases the turning radius (and tendency to hit curbs with your rear wheels). I had my hands full with trying not to run over other cars and people with the standard bed, even though it drove well for a truck. (Again, in fairness, I know the Tundra has a very good turning radius--smaller than some competitors with even longer wheelbases I believe.)

My Tundra loaner also had the Toyota Racing Development (TRD) off-road suspension package; contrary to the recent write-up in The New York Times, I did not find this to make the ride harsh. Rather, I drove the beast into Manhattan and felt joy at being able to cream potholes that used to swallow my old sports coupe. With the top-level engine (a smaller V-8 and a V-6 are also available, depending on the cab configuration you choose) and the six-speed transmission, you'll be able to outrun more than a few sports cars, too. Just remember that without a load in the back, you'll chirp the tires from a stop really easily, especially if you're doing a hill start. (Traction control will prevent things from getting out of hand, however--can't really lay a patch, as they say.)

The truck I tested had the tow package, which includes a button you're supposed to press when you're towing something (I assume it changes the shift points or something--I was too lazy to look it up since I didn't have anything to tow). It also had a backup camera mounted in the tailgate latch assembly; the image popped up on a screen the size of a GameBoy's, mounted overhead, when I shifted into reverse. It was a dealer installed option, and it was disappointing in a couple of ways--the angle of the screen was such that you had to reposition yourself awkwardly to make out the image (it was too dark from the normal driving position--I find a lot of LCD screens are like this), and the fit of the module itself was poor. It didn't sit tight in its place overhead, and gaps around the edges of the plastic contrasted with the good fit generally seen everywhere else in the interior pieces. A gentle tug at it pulled it right out of its socket.

(If you get the DVD system with backup camera, you'll get the benefit of a much larger screen on which to view what's behind you. I never learned to trust the screen completely, but it did help me do an incredible parallel parking job in Manhattan and it's a must if you want to align your tow hitch with a trailer.)

I used the truck to transport some plywood, an exterior door, countertops, and a 14-foot long ladder. I'm no expert on pickup trucks, though I've driven a current generation Ford F-150; in all I'd say you'd be either stubborn or remiss if you didn't give the Tundra a try when shopping for a full-size pickup truck. It's at least as tough as anything else, and its interior features are designed with work, not play, in mind, such as an upper glove compartment that will hold a thermos; buttons, knobs, and latches you can operate with work gloves on; and a hanging file folder (for contractors with, er, contracts to sign) in a center console deep enough to pack a Shih Tzu and a Chihuahua into at the same time. It even had beer can moldings on the tailgate--did I mention the Tundra was designed in America? (Go to the official Web site for the Tundra and you'll hear the ubiquitous "voiceover truck guy" talking about how tough the Tundra is--you know Toyota is really serious in trying to win in this market segment.)

It was a blast to test a product from one of the facilities I've spent some time covering. (As I said, some of the Tundras--including all Double Cabs I believe--are built in Indiana ... most of the PR around the Tundra has emphasized its "Texas roots" though. Even our coverage of Toyota in Indiana has tended to focus on its partnership with Subaru to build Camry sedans.) I really appreciated the opportunity and I had a lot of fun. And, nothing against Toyota, but I hereby announce to Bentley that I'll find a way to squeeze them into this blog (admittedly, I haven't gotten too many economic development press releases from Crewe, England where they're built) if they set me up with a loaner. Oh, and BMW, are you listening? We've written more than a few words on your frabjous plant in South Carolina you know. ;)

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DIY Expansion

The DIY Group Inc., a large packaging company, has begun construction of a $2.25 million, 126,000-square-foot expansion project at its facility in Muncie, Indiana.

The expansion of DIY's existing 432,000-square-foot facility will make DIY one of the largest contract packaging operations in the Midwest. The company, which packs products into blister, clamshell packs, and shrink wrap, plans to add 25 employees to its current 246-person workforce. The DIY Group was granted a 10-year Real Property Tax Abatement by the Delaware County Council.

Source: The Star Press, The Muncie-Delaware Chamber of Commerce


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Tuesday, May 8, 2007

Dangerous Business Part 3: Economic Development or Exploitation?


"The discovery of oil in Africa has been, almost without exception, a disaster for the host countries," writes Andrew Leonard in his Salon.com review of John Ghazvinian's novel, "Untapped: The Scramble for Africa's Oil," "The reasons are partly economic, partly having to do with the lack of well-developed institutions in many African states, partly owing to colonial legacies, and partly the fault of Western oil companies all too willing to turn a blind eye to corruption while the getting is good. In virtually no case has oil money been successfully employed for economic development, and so far, the likely prospect is that nearly every African country with significant oil deposits will end up worse off after the oil is gone than they were before the pumping started."

The assumption is that when a wealthy country finds resources on a poor country (such as Ethiopia) the lives of the people in that country will be drastically improved. The company will mine the resources, and in return, help the country with infrastructure, schools, etc. The opposite is in fact may be true. Between 1970 and 1993, writes Ghazvinian, countries without oil saw their economies grow four times faster then those countries with oil.

You have most likely heard the stories of corrupt governments, fat pockets, poverty, and environmental destruction that seem to be the result of in Western expansions in many African countries. High risk investments in politically and economically unstable counties will most likely lead to violence, as on on April 24, when over 70 employees in a Chinese-run oilfield in Ethiopia were killed, and more were kidnapped.

According to the Voice of America the government has been urging state-owned companies to operate internationally to help support China's expanding economy. Today's article in the Sudan Tribune reported on the annual meeting of the African Development Bank, which will take place in Shanghai on May 16. The location alone shows the powerful role that China has in African redevelopment. Over 800 Chinese companies, and around 100,000 Chinese citizens, live in Africa.

Since the U.S. began operations of AFRICOM in February, Pentagon and many military analysts argue the continentŐs growing strategic importance necessitates a dedicated regional command.

On May 3, the Council on Foreign Relations reported:
Some experts suggest the commandŐs creation was motivated by more specific concerns: China and oil. With Soviet influence gone and FranceŐs traditional presence much diminished, China has poured money into the continent in recent years as it jockeys for access to natural resources. And the United States is projected to import at least 25 percent of its oil from Africa by 2015, according to the National Intelligence Council.
I was reminded to pay closer attention to this story when I read another article in The Sudan Tribune. A Darfur-based rebel group (the Sudan Liberation Movement) warned foreign oil companies that they should stop doing business in the area. They said that the mineral resources are the property of the people of Darfur, and should remain unexploited until the conflict (civil war) is over.
Only people of Darfur are enabled to decide on the fate of this wealth, they said.

Sources: The Wall Street Journal (subscription), Voice of America, The Sudan Tribune, Salon.com
Image: The African Oil Politics Blog

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London (Pharma) Calling


The London-based pharmaceutical company, AstraZeneca, announced yesterday that it was beginning construction on a $100 million, 132,000-square-foot research and development expansion to its facility in Waltham, Massachusetts. The company is planning on hiring 100 additional workers.

AstraZeneca recently acquired Maryland's largest biotech firm, MedImmune, for $15.6 billion. The company is planning a $250 million expansion project in Maryland, hiring an additional 250 employees. MedImmune will keep its name, as well as its headquarters in Gaithersburg.

Earlier this year, AstraZeneca announced restructuring plans, including firing 3,000 employees. Last week, the company announced that it would be closing its manufacturing facility in Plankstadt, Germany, by 2009. The plant currently employs 400 people

Sources: Reuters, Drug Researcher, Business Gazette

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Monday, May 7, 2007

Fueling Lockheed's Fire


On Saturday, the Decatur Daily of Alabama reported that a railroad spur connecting a main line to the Lockheed Martin Corporation's Courtland, AL facility would help allow the company to make future expansions.

The rail spur would extend over 6,000 feet of track from the Norfolk Southern Railroad to Lockheed's Missile Transfer Facility. The facility assembles and tests missiles.

In December, Lockheed, the largest military contractor, began construction of a $27.62 million expansion in Courtland, and is rumored to be preparing for another expansion in 2009.

This expansion is to support the U.S. Department of Defense Agency's Targets and Countermeasures program--to assemble and test missiles. They were awarded the contract, which was and is expected to pay the company $4.6 billion in government funding over 10 years, in December 2003.

Although the US Defense budget is expected to rise only 14.3% over the next four years, this does not include special supplementary budgets for the wars in Iraq, Afghanistan, and the war on terrorism. The five divisions of Lockheed Martin are Aeronautics (they produce the F-16, F-22, and F-35 fighter jets), Electronic Systems (missiles), Satellites, Integrated Systems for communication, and IT Systems. All of these divisions will benefit from the continuation of the wars.

Critics of companies like Lockheed Martin, Boeing, and Northrop Grumman, say that they are benefiting from war profiteering. Throughout this blog, I have also brought up expansions of companies making money, directly and indirectly, from world conflict (examples 1, 2, and 3).
The Pentagon's budget for 2007 is about $457 billion (with a proposed budget increase of 10% for 2008).

The expansion of the railroad in Alabama would be a tax on local government funding. The county is expected to pay for 3,240 feet of track, at a total estimated cost of $968,850. Supporters of the expansion hope that such an allowance from the government would spur economic development in the region.

The U.S. Army is expected to buy 80-100 Terminal High Altitude Area Defense (THAAD) launchers and aover 1,400 THAAD missiles. The Defense Industry Daily reported that Lockheed Martin began production this year.

Sources: 24/7 Wall Street, The Decatur Daily, Space News, The Middle East Online, Defense Industry Daily, Military and Aerospace Electronics, Lockheed Martin

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Saturday, May 5, 2007

Knee Bend, Indiana

Zimmer Holdings Inc., a maker of surgical products such as hip, knee, and spinal implants, plans a $66 million expansion of its manufacturing facility in Warsaw, Indiana. The project will add 120,000 square feet to its manufacturing facility, 100,000 square feet to its distribution center, and more than 140 jobs in manufacturing and distribution by 2008. The company already hires 2,200 people in Warsaw, which is in Northern Indiana.

If Zimmer adds the jobs by 2008, it could receive up to $1.9 million in tax credits from the state.

Zimmer recently launched a direct marketing campaign for its Gender Solutions Knee for women. The new knee has been boosting Zimmer's sales of surgical products since it was introduced last year.




Sources: The Fort Wayne News Sentinel via AP, Zimmer, Trading Markets

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Friday, May 4, 2007

The Next Generation of Spokane

The Indian pharmaceutical company, Jubilant Organosys, announced last week that it paid $122.5 million cash (cash!) for the laboratories of HollisterStier, a Spokane-based pharmaceutical company. HollisterStier specializes in allergy-treatment shots, and Jubilant is an enormous pharmaceutical manufacturer.

Jubilant plans to complete a $30 million expansion (which began last year), adding 50,000 square-feet to the 150,000 square foot plant.

In other Spokane news, fifty-one low-income residents in a downtown Spokane building are wondering whether or not California-based BlueRay Tecnologies will be taking over the building. The company has already madea deposit on the three-story commercial building, and would like to drop $12 million to turn it into a manufacturing facility. The plant could employ up to 150 workers.

There is a catch, of course. BlueRay is trying to figure out whether the residents and the factory can coexist. The building was formerly an annex to a local hotel, featuring single-occupancy rooms that were subsidized by the U.S. Department of Housing and Urban Development. BlueRay's plans include disc-making equipment in the basement and facilities on the first floor, which could allow residents to remain upstairs

BlueRay makes "next generation DVDs." Now, what are next generation DVDs? Apparently, they have much more memory than regular DVDs. One reviewer wrote:

. . .the picture was crisper, the colours more vibrant and there was an almost hallucinogenic 3D-like quality to the film.

The high capacity of both new formats - 50GB for a dual-layer Blu-ray disc and 30GB for a dual-layer HD-DVD - also means that there is a potential for even more content.


This is an interesting project because this part of Spokane is known to have a higher crime rate, and most of the residents in the building suffer from mental illnesses and drug and alcohol abuse problems. If the company decides that they can't co-exist, it could be a struggle to find alternative housing. If they can coexist, BlueRay could be a role model for this type of expansion.

SOURCES: The Seattle Post-Intelligencer, Spokesman Review, BBC

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Thursday, May 3, 2007

Taking the Out out of Outsourcing

This is kind of a cool white paper over at IW. While not news to some manufacturers, MPO (manufacturing process outsourcing) is the idea of taking some internal business procedure you do inside your own facility--like say, packing crates--and handing that off to another company. Of course, that company operates within your facility, where the crates are located.

This isn't something limited to manufacturing...it's like when you go to The Home Depot to get a lock reworked to fit your existing keyset, and the locksmith is actually a vendor contracting with the retailer since Home Depot doesn't really want to maintain a roster of locksmiths on its payroll. Why you would want to outsource crate packing is up to you, but suffice it to say there are situations in which you find it cheaper or more efficient to have someone else do an essential operation for you rather than maintain the skills in-house. If you want to know more, go ask an economics professor or the guy who wrote the article.

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Wednesday, May 2, 2007

Google Lands in Oklahoma

Wow--just got this across the wire: a $600 million data center project for Google has been sited in in Pryor, OK (about 45 minutes from Tulsa). It'll create 200 jobs averaging $48,000 in salary. Frankly, that's more jobs and salary than I would have guessed--rural Oklahoma is not an expensive area.

Now I have to tell you I've been out to MidAmerica, and it is quite a site. And quite a sight. The place is, uh, "ginormous" as they say: we're talking 9,000 acres with its own airport and coal-fired power plant (see photo, right). About 70 companies employ 4,000 people there. I actually slept in the park, alone, at the Russel Hunt Lodge (see photo, left). (Yes, I was invited to do so.)

MidAmerica owns its own water treatment and distribution system, which if you're into business parks, is quite rare. I believe, if memory serves, that the park was originally a munitions manufacturing complex during WWII, explaining its vast size, remote location, self sufficiency, and rail service through the middle of the park.

What a perfect place for a data center, in other words.

No word on who Mid America beat out to win this, but we do know that Google is taking advantage of the following incentives:

Economic Development Incentives
  • State statutory sales tax exemptions and ad valorem property tax exemptions
  • Oklahoma Quality Jobs Program has been offered by the State and may be pursued

Taxes Google will pay (after all economic development incentives)
  • Real and personal property: Tax exemptions expire after 5 years.
  • Sales tax: Estimated $6 million in just the next 2 years from the purchase of building materials.
  • Other: Payroll taxes (with the exception of any rebates obtained through the Quality Jobs Program, if any), sales tax from non-exempted purchases, corporate income taxes.
Full details are contained in these three press releases (MS-Word format):
  1. Main Release ("Google clicks Oklahoma for $600 million data center")
  2. Google's Oklahoma Project Fact Sheet
  3. Google's Oklahoma Project FAQ

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Previous 10 Posts

Piracy: The Illegal Incentive
Bismarck isnŐt sinking
Power portal
Bratislava Is Not Detroit, Just So You Know
Tonic for the China syndrome
Recipe for success in tough times
Magician makes $250 billion disappear
The New Silk Road
Red, white and blue states
Pity the fool

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