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Business development case study: how Northern ireland lassos industry; if Alaska wants to get serious about attracting industry and jobs, the successful Northern Ireland development program is a valuable model.


With a new, clearly "pro-development" administration in residence in Juneau, there is a lot of talk these days about state government pulling out the stops to attract business and industry and to promote resource development and new jobs in Alaska. A trip nearly halfway around the globe, to the northern tip of the Emerald Isle, shows painfully just how far Alaska has to go to become a big league player in enticing new industry.

Admittedly, Alaska never has professed to be the best place for industry to set up manufacturing plants. The state, through its half-dozen economic development specialists in the Alaska Department of Commerce and Economic Development, hasn't attempted to stress Alaska as a site for manufacturing. Instead, business development specialists have emphasized efforts to promote Alaska's fisheries, timber and minerals development.

Also, the quasi-independent Alaska Industrial Development and Export Authority hasn't pushed Alaska as a site for manufacturing. The organization primarily has made low-cost loans for construction and startups of natural resource extraction and support industries.

Other business development programs from agencies in the Department of Commerce and Economic Development and the Department of Fish and Game have offered revolving loan funds. These provide relatively small loans for everything from inventory and equipment purchases to tourism developments and new fish hatcheries. The Alaska Seafood Marketing Institute has been the leader in expanding markets for the state's seafood, while the relatively new Alaska Tourism Marketing Association has taken over, from the state's Division of Tourism, the main burden of efforts to attract visitors to the last frontier.

In hopes of fostering joint ventures and new business in Alaska, the state has promoted trade missions to the Far East for the past decade and recently to the Soviet Far East. The state also has been advancing Interior timber sales with the intention of fostering new furniture manufacturing business in Southcentral Alaska.

For years former Gov. Steve Cowper discussed the importance of improving Alaska's communication systems to establish a beachhead in attracting research facilities of science and high- technology firms. The Alaska Science and Technology Foundation is his legacy toward continuing those efforts.

Funding for state promotion of business development is scattered throughout the budget and, in some cases, is open to interpretation. But new funding each year, not counting money for actual tourism and seafood advertising, probably doesn't exceed $15 million, a fraction of this year's state budget of $2.82 billion.

Big League. Alaska's development spending is a pittance compared to the efforts to promote jobs and industrial development by one of Alaska's worldwide competitors. In Northern Ireland, a country with three times the population of Alaska and only eight-tenths of one percent the size, the British government this year is spending about $240 million to promote "inward investment" - the new international buzz word for business development.

The expenditures in Northern Ireland are working. During the past year alone, 14 new companies have invested about $230 million in new plants in Northern Ireland. Those plants have created 2,000 new jobs. Since the province moved into industrial attraction in a big way in 1982, Northern Ireland has attracted 209 companies and 55,000 new jobs.

Norman Houston, a spokesman for Northern Ireland's main industrial promotion agency, the Industrial Development Board for Northern Ireland (IDB), says, "The simple fact is that we decided that attracting new investment and new jobs was vital to solving the problems that we face in Northern Ireland. But there are 200 major industrial development organizations worldwide, all trying to attract the same firms that we are trying to attract. Given that level of competition, you have to be serious if you're going to get anywhere."

A trip to the development board's offices in Belfast is impressive, not just because arriving visitors are whisked into a plush theater, shown a slide presentation of the advantages of relocation in Northern Ireland and given individual attache cases to cart home the reams of promotional materials (including tiny bottles of Bushmills whiskey from Northern Ireland's prime distillery). The trip is memorable for learning about programs the agency offers to business.

First, the industrial development board offers meaningful financial assistance to all new businesses agreeing to relocate to Northern Ireland. Such support includes providing construction grants of up to 50 percent, but normally 30 percent, of the cost of building a new plant, as well as rent grants that pay the rent for leased facilities for up to five years.

Further, IDB not only will sell low-cost land on which to build a plant, but also has an arm that actually will cut through red tape to allow companies to build new plants quickly - in months, not years. When Canyon Inc., a Japanese electronics company, thought of building a new plant closer to Europe prior to the start of the European economic union in 1993, the industrial development board provided the firm $4.6 million in assistance and built the new plant in just seven months.

Says A. Ishihara, general manager of Canyon, "We were very encouraged that it was possible for us to reach the manufacturing capacity of the plant so far ahead of schedule. The company had not anticipated reaching our current level of output until its third year of operation."

Ongoing Support. Besides the capital funding, the British government provides financial aid to firms that wish to either improve their technology or conduct research. IDB will pay up to 50 percent of the cost of research and development projects. Last year the government funded 135 projects at a cost of $15.6 million.

The British government will pay up to 40 percent of the costs, $120,000 a year, of the multiyear marketing expenses for new businesses. It also funds development of industrywide marketing and helps firms find orders for their goods. Further, through IDB, the government provides grants to improve company management.

Another form of direct financial assistance comes from IDB's willingness to pick up a sizable amount of the tab for detailed training for new industries' employees. Thus, when Korea's Daewoo Electronics opened a new video cassette recorder plant in Antrim in 1989, the development board set up VCR-assembly classes to train workers at the local Irish equivalent of an American junior college. IDB also provided free English language classes to Daewoo's Korean management team and their wives and families.

In Alaska the closest equivalent to the training program is mining technology classes now being offered by the University of Alaska Southeast in Juneau.

Says IDB's Houston, "Our services don't end once the plant is operating. We will continue to provide aid to foreign managements and their employees for years, to help them adjust to life in Europe."

Northern Ireland's development board also is putting into practice former Alaska Gov. Cowper's blueprint for communication industry attraction. Arguing that satellite communication and computers make it possible for companies to shift their ordering, billing and communication offices anywhere - depending on costs - Northern Ireland in the past year has convinced British Telecom to move all of its directory assistance operators from throughout the British Isles to low-cost offices outside Portadown.

In 1991 Northern Ireland is funding trade missions to Milan, Brussels and Amsterdam, Tokyo and Hong Kong, Budapest, Warsaw and Prague, Dusseldorf and Hamburg, Sao Paulo and Rio de Janeiro, Helsinki and Stockholm, Kuala Lumpur, Singapore and Jakarta, and Chicago, not counting an annual show in Boston. During 1989-90, eight trade missions sponsored by the government resulted in $79.4 million in orders for Northern Ireland firms, while the country also sponsored 10 additional trade fairs worldwide that resulted in $72.2 million worth of confirmed orders.

IDB also has full-time offices in England; West Germany; Japan; Korea; Hong Kong; Amsterdam, to serve all of Scandinavia; and in New York, Chicago and Los Angeles. Those offices have a budget of $23.2 million for administrative expenses this year.

Alaska has a few foreign offices in the Far East and a part-time representative in Europe. Total state spending for its offices usually runs far below $1 million a year.

Northern Ireland's development board also pays for a quality control program that covers products made by all participating Northern Ireland companies. One hundred three companies were in the program at the end of 1990.

In Alaska, only the seafood industry - through efforts of the Alaska Department of Environmental Conservation, Alaska Seafood Marketing Institute, and the Department of Fish and Game - has any similar type of quality control effort under way.

Overall, as a result of all of Northern Ireland's economic development efforts, the country netted a total of $880 million in new investment last year. Through a variety of grants, the government funded $186 million, picking up 21 percent of the tab.

Because of the jobs created, Belfast, the country's leading community, has seen more than 200 new restaurants, bars and nightclubs open within the past three years. Last spring Belfast enjoyed the opening of Northern Ireland's largest commercial shopping mall, the $150 million CastleCourt.

Impediments. Of course, there are good reasons why Northern Ireland must work so hard to promote industrial development. The country traditionally has had the highest unemployment rate in Western Europe. That picture has not improved, given hard times that have fallen on the nation's traditional industries of shipbuilding and textiles. Prospects for its military airplane manufacturing concerns also are uncertain.

Last fall unemployment averaged 14.1 percent, meaning nearly 100,000 unemployed workers in Northern Ireland. In the Catholic ghettos of West Belfast, the unemployment rate hit 70 percent.

The historical violence that has surrounded the religious strife between Catholics and Protestants is a hindrance in selling Northern Ireland as a place for industrial development. Belfast and Londonderry have large, trained, available work forces and, because the violence - particularly the bombs - of the past 20 years has resulted in such extensive property damage, plenty of land available for development.

Of the roughly $21 billion spent on Northern Ireland development and security during the past seven years, the British government has made $2.3 billion available for industrial development, mostly in hopes that producing jobs for Irish residents of both sects eventually will prove the best way of settling the bloodbath. From 1969 through 1990, the conflict claimed 2,849 lives.

Andy Bready, an official of Northern Ireland's Department of the Environment and a participant in IDB's "Make Belfast Work" initiative, says, "Clearly the reason for spending is that the British feel that the only solution to the violence will be through a better economy and better education system in Northern Ireland."

But Northern Ireland's high level of spending to attract business has led many competing industrial development organizations throughout Europe to boost their spending. This trend is considered likely to spread to American East Coast investment promotion organizations.

In 1990, IDB convinced America's Fruit of the Loom to build a new $120 million, 500-job plant in Londonderry. The board also attracted new American plants by DuPont, DDL Electronics, Harris Laboratories and Printpack.

Northern Ireland is a tough sell because of its violence, even though it offers a large supply of cheap labor, is close to European onshore markets, sports low taxes and has operating costs roughly half of those of neighboring England. Alaska, too, is a tough sell, because the state is characterized by high labor costs, high freight costs, high capital construction tabs and a severe climate that can raise operating costs.

Given the business development lead of Northern Ireland, Alaska has a long, bumpy and costly road ahead in competing for any industry that might diversify the state's economy away from its sole reliance on resource extraction concerns.

PHOTO : Workers of a firm that has relocated to Belfast receive training funded primarily by the Industrial Development Board for Northern Ireland.
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Author:Kleeschulte, Chuck
Publication:Alaska Business Monthly
Date:Apr 1, 1991
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