Adjusting to new economic realities: local growth and investment strategies.

Debra Mountford Udine, 2013

• Local economies confronted by serious challenges in the pursuits of viable economic growth and job creation.

• Local government budgets have been reduced.

• National level funding streams and redistributive grants have diminished.

• Access to private capital more demanding and risk averse.

A challenging context for local development

• Growth Strategies• Investment tools and trends• Economic leadership• City approaches• Challenges for national governments• The changing role of the private

sector.

Lessons from our work

(1) More strategic cluster consolidation capable of growing employment

– Improved pathways for intra-sector sharing of technology and investment opportunities

(2) Clearer support for SME research base around leading universities

- commercially profitable synergies

- More self-conscious HE cluster

- international students/universities.

(3) Growing jobs base by maximising reach into new global markets – pathways (events, missions, new air routes) for executives and business tourists – local businesses as international ambassadors and advocates

Growth Strategy

Growth Strategy Key initiatives

Amsterdam

7-sector approach with Amsterdam Economic Board

Integration along 2 development corridors ‘Humuslaag’- densification of research Conversion of office space

Barcelona Barcelona Creixement (Growth) 30-point plan

Start-up culture: financing, employment markets, space

China outreach round-table Mobile World Capital

BostonInitiatives of City of Boston and BRA

Innovation District Create Boston, single PoC

Brisbane 2031 Economic Development Plan

• Conventions and cultural events• Programme for Asian resource firms Digital Economy governance

Cape Town

Economic Development Strategy

Metropolitan public transport corridors Radically improve the skills base.

Hamburg Vision Hamburg - Responsible Growth

Cluster strategy in aviation, maritime, renewables

Upgrade of port

Growth Strategy Key initiatives

Manchester

Greater Manchester Strategy Expand trade links - China, India, ME Grow Oxford Road science corridor Employer-led skills programmes 

Lyon Devised with CoC, the Univ/Lyon, and business groups

La Part-Dieu and Confluence districts BIOASTER institute of research Business ambassadors

Nanjing Live business development strategy since 2009

321 Talent Plan to attract 3,000 entrepreneurs by 2016

Attract anchor engineering institutions

Oslo Untitled World-class cluster groupings High-speed rail links with Gothenburg and

Copenhagen

Shenzhen Implemented through Five-Year Plan

Qianhai – major new financial zone Large expansion of HE $2bn Creative Valley project

Zurich Metropolitan initiatives + Strategien Zurich 2025

Integrate clean technology cluster Expand spatial access for creative

industries

Public investment

•Retention of revenues generated within metropolitan area (eg. Manchester)

•Decentralisation of nationally/provincially-held infrastructure funding mechanisms(Zurich)

•Pursue core projects by trimming budgets (Amsterdam).

•Consolidatation of regional investment capabilities (Cape Town)

•Investment in training to maintain private sector jobs (Hamburg)

Private investment

•Privately-backed funds to grow science sectors (e.g. Amsterdam, Lyon and Nanjing).

•Business-friendly Zones with favourable tax offerings and high accessibility (e.g. Manchester, Boston)

•Competitions, accelerators and investment forums to better connect start-ups to private funds (e.g Lyon, Barcelona)

Investment Tools and Trends

Main sources of investment since 2008 What’s changed?

Amsterdam

American investment leads in ICT, creative, finance.

Twice as many Chinese companies investing

Strong, growing Japanese logistics presence around airport.

Barcelona Netherlands, US and France - key sources in software, chemicals, imaging, automotive, agrifood

€500m Hong Kong investment in Port expansion.

Grasp of Barcelona’s potential as a gateway to Mediterranean

Boston Developers instrumental in innovation district Influx of European life science firm investment Harvard Business School support from Tata

Group

Funding more school tuition Summer internships scheme

Brisbane Foreign and institutional investment mostly active in quality central property assets, and toll road PPPs

Firms seek direct exposure to thriving Queensland economy

Cape Town

Banks primary funders of central city overhaul Convention Centre precinct €500m, private-led

Surge in wind/photovoltaic sectors

New interest from S.A./ Singapore

Hamburg Logistics and industrial firms engaged in office-building projects

Open-ended real estate funds very active

Increase in private house-building

More Korean and Japanese investment in energy/shipping

Main sources of investment since 2008 What’s changed?

Manchester

Reliance on expanding US firms, also German and Italian, esp.ICT, life sciences, advanced manufacturing

Recognition as a cheaper and viable location for headquarters

Lyon French biotechnology firms Fast growing SME setup in e-commerce

Established tech firms show more support for SME and start-ups

Nanjing Most foreign investment through Development Zone.

Investment higher up the value chain in software and outsourcing.

Oslo Investment in cultural flagship projects Surrounding niche financial services

Large real estate investment influx due to stability and low debt

Shenzhen Japanese investment in retail, electronics. MNC interest in business-equipped offices HK and global financial firm interest in

Qianhai

FDI boom in real estate, vehicles

Recognition of Qianhai Zone’s regulatory advantages

Zurich • Swisscom CHF300m investment in fibre-optic network

• Local investment from headquarter bodies: e.g. FIFA

• More partnered investment in cultural institutions

Public investment tools Private investment tools

Amsterdam

• Scholarship Fund, 50% local govt, to attract PhD-level talent

• Life Sciences Fund - investment capital to early-stage biomedical firms. Backed by major banks

Barcelona• Pla Empenta – redirects €80m of

local funds from investment budget into housing, to attract €300m private investment

• Barcelona City Protocol - certification system

• Tax Free Zone for mobile technology start-ups

Boston• Relies on state government for

capital grant funding for life science/transport

• Up to 20% tax cuts for Innovation District firms

• MassChallenge $1m entrepreneur competition

Brisbane • Accelerated shared city-state-federal funding for road tunnels, resurfacing

40-45% R&D tax offset for mining sector

3-year moratorium on hotel developer charges

Cape Town

Pool resources at provincial and city level

From Red Tape to Red Carpet Building upgrade cost offset in UDZs

Hamburg• City’s own VC company for SMEs

(BTG Hamburg) supports companies’ equity base.

Employee Qualification Programme, funds up to €3k of training per employee

Programme to support high-risk SME tech start-ups

Public investment tools Private investment tools

Manchester

• ‘City Deal’ to earn back up to £30m/yr

• £300m Evergreen fund using pension fund investment

• Regional Growth Fund

High-tech Enterprise Zone around the airport, offering 5-year business rate discounts 

Lyon• City of Entrepreneurship programme• ‘Future Investments’ for funds in

edu, digital

• BoostInLyon start-up accelerator• €90m in BIOASTER microbiology

institute

Nanjing• Re-organisation of SOEs to improve

efficiency of large-scale housing and transport projects

Personal financial incentives of €120k 50% loan interest offset for small firm

incubation

Oslo

Toll fare increase to fund road tunnels

€100m state fund for life science start-ups

• new regional Knowledge Partnership • National R&D tax credit scheme -

SkatteFUNN

Shenzhen 3-5 year bond tranches as a check on local government debt

Creation of coastal development zones, with simplified tax system, more liberal HR laws

Relocation subsidies for IT firms

Zurich• Rail Infrastructure Fund to integrate

funding governance + waive interest on debt financing

tax assistance for some entrepreneurs

Overcome political fragmentation through integrated city-regional bodies

-Increased applicability and efficacy of innovation and mobility strategies

-Shared ideas about integration and regional identity (Zurich, Lyon)

-Pathway for dedicated and evidence-led private sector input (Manchester, Cape Town)

-More professional approach to the fundamentally metropolitan and commercial character of economies.

-Overturning the lack of shared vision and co-operation between stakeholders.

Cluster agglomeration as driver of strategic cooperation across political boundaries. (eg Zurich)

Improved relations with higher tiers of government: delegated powers (Oslo, Brisbane, Hamburg)

More influence for expert development agencies over workforce development, land-use and infrastructure (Boston)

Delivery and organisational adjustments

Amsterdam Commitment to specific core projects (especially logistics and transport-related)

Barcelona Emergency debt-relief financing support

Boston Growing amount of state aid (from Massachusetts)

Brisbane Queensland state government more attuned to city needs Incremental devolution of planning and tourism powers

Cape Town Delegation of greater transport and housing powers Sharing national fuel tax with local government to replace council

levies

Hamburg Recognition of cluster competitiveness to complement infrastructure support

Manchester More competition for funding based on economic case. City beginning to be more successful in bids.

Lyon More targeted funding for a handful of growth sectors

Nanjing More national support for software ambitions

Oslo Preparation of SMEs for international competition

Shenzhen Recognition of functional economic region size of Guangdong

Province Permitted creation of joint ventures Regulatory relaxation in Qianhai Zone

Zurich Overcoming deadlock over funding channels and arrangements for key infrastructure projects

How has national/regional government role changed?

New ethos of pragmatism •Compromises to improve the coherence of cluster and mobility strategies•Mindful of previous over-ambition•More astute lobbying for favourable national/federal investment

Lead the agenda for open-ness•Communicate value of diversity and high-value immigrant workers for value chain position

Positive and authentic engagement with private sector•Business support and market knowledge to re-assure end-user firms/investors

Commitment to sound fiscal platform•Careful stewardship of balance sheets, projection of reliability and consistency

Long-term, multi-cycle approach•encourage reflection on core assets

A new kind of leadership

• Local business climate and stable framework conditions

• Rationalisation of complex policies and programmes into simple-to-pursue frameworks

• National-level transport infrastructure investment (greater fiscal and organisational authority over transport needs)

• Initial investment in niche higher education facilities

• Recognition of practical economic geographies

• Facilitate expansion of the private rented housing sector

• Evidence-based and trend-based rather than politicised approach to local economies

What’s needed from national government?

• Grasp the changing economic requirements of local areas.

• Foster a competitive business climate

• Support the internationalisation process with specialist knowledge

• Activity and leadership in the housing sector

• Address the jobs challenge for young people

• Become a systematic strategic partner

What’s needed from the private sector?