Archive for June, 2008


Building Chicago’s Human Capital

Wednesday 25 June, 2008

This event was the final installment in the Global Edge series sponsored by the Chicago Council on Global Affairs The Global Edge: Building Chicago’s Human Capital

Hank Perritt put the series in perspective, noting that cities can’t succeed without successful economies which require abundant quality human capital.

Larry Rothfield, authored the study on Chicago’s music scene, observed today jobs follow talent rather than the reverse. Quality of life attracts/retains creative workers, & they are consumers of the arts. In the music case study, Chicago trails NY & LA in most categories except variety of specific genres & grassroots musical opportunities as reflected by musical sites.

Eden Martin walked us through a presentation on the Chicago public school system, which indicated education in Chicago was improving, but maybe not, due to changes in the tests & scoring them. The net observation is we have a long way to go to provide equal opportunity through the Chicago Public Schools.

Cheryle Jackson provided a summary of a report by the Chicago Urban League on The Future Economic Development for African Americans in the Chicago Metropolitan Area: the next 10 years (click on Policy & Research & then special reports), which found them to be untapped human capital. Workforce training @ community colleges would help, as would mapping curriculum to industry needs. Their plight is not a social problem, rather a competitive problem.

Q&A revealed

-we need to train for jobs with growth & know where the opportunities are to provided motivation in addition to changing curriculum

-Chicago shares its problem of public schools with many other large urban areas, but they are problems similar to those of a monopoly & not because of teachers unions

-childhood education needs to be improved to reduce the number of remedial students who are behind

-low hanging musical fruit would simply be to emulate Austin, TX

-charter schools encourage parental involvement in schools, but they are capped by the legislature

My impression is this panel was put together simply to promote a few special interests of the CCGA. Sure the music industry in Chicago can be better promoted & gain greater visibility, & add some economic activity to the city, but it’s not going to add proportionately as much as it does in say Nashville. Obviously, the Chicago public schools are a problem, but the surrounding suburban school districts add a layer of quality that mitigates those problems. Some can propose that Chicago can only be as great as it’s least common denominator, the line the Urban League forwards, but I think they miss the point. When I think of global cities, I think of Amsterdam, Kopenhagen, & Singapore. A few characteristics of the human capital of these cities is that they speak many different languages & are aware of the different histories & cultures of their neighbors & trading partners. To compete in the global economy, you have to engage in it, & the CCGA doesn’t seem to have examined these variables at all & should. They seem very proud of surpassing other midwestern cities like Detroit, Cleveland, & Minneapolis, but miss the point in that I think the basis of comparison is wrong. We now compete with Dubai, Caracas, & Mumbai, so need to make comparisons with them rather than our declining neighbors.


Restoring U.S. Legitimacy in Europe and Beyond

Tuesday 24 June, 2008

I saw Josef Joffe, publisher and editor of the German weekly Die Zeit speak on Restoring U.S. Legitimacy in Europe and Beyond which proved to be 1 of the most entertaining programs the CCGA has presented this year. Maybe they should fly in jet-lagged speakers all the time to loosen up the proceedings a bit. Here’s what he had to say.

The US is still the single superpower & indispensable linchpin in the world, proven by bad English being the fastest growing language in the world. Legitimacy does not equal legality, which requires impartial judges & enforcers & the world has none. Legitimacy is more vague, but stronger, based on united interests. For example, Iraq war I was legitimate, Iraq war II was not. The US doesn’t need permission, but does need support. There are differences betwee force & influence, & coercion & leadership.

Europe doesn’t have the means to be a superpower. The US spends 4% of its GDP on defense while Germany spends only 1.2%. Russia wants back what it lost. China puts itself above the world. Japan is isolationist. India is a strictly regulated power. The Anglo Saxons took the wider view & formed institutions after WWII, such as the UN, NATO, etc.

What’s in it for the US to maintain this postion? Security, but only as long as it brings on others with legitimate influence & power.

Q&A brought out these issues

Europe can’t become a strategic leader because it’s an empire by invitation only.

Despite Bush, the US remains the default power in the world.

Iraq may become more legitimate because al Queda blew it by killing Shia & Sunnis, so we are starting to win.

Economic power is now much more important today, which means deficits & currencies matter, but military might still trumps all.

In Kabul, Afghanistan, locals joke with contempt about European soldiers, governments, & hypocrisy because Europeans are not strategic actors there.

This was a great event: educational, informative, practical, thought provoking, & entertaining.
Herr Joffe is well-informed & presents his insights deftly. Who would have thought a comedic Kraut could integrate international affairs & local movies so well?


Increasing Chicago’s Global Engagement

Monday 23 June, 2008

I checked out this event recently The Global Edge: Increasing Chicago’s Global Engagement Here’s how it went.

Paul O’Connor, formerly of World Business Chicago, summarized the role of local public institutions (Daley helps), transportation infrastructure (needs help), & human capital (help reform city colleges) in Chicago’s place in the world.

John Livingston of McKinsey talked to branding Chicago. We’re in a good starting point because many are aware of Chicago, but there is much to be done. How do we segment the market? What’s the message? Do we focus on landing headquarters locations or bringing jobs to the area?
John Murray from the Chicago 2016 Olympics office brought us up to date with the bid & put it in perspective: hosting an Olympics has 20 times the economic impact of hosting the national democratic convention.

Q&A addressed these issues:

2016 should help improve the Chicago Transportation Agency.

the midwest could cooperate on a regional high-speed rail system, but those are very expensive.

small-medium sized businesses have the same access to talent in the city, so they have the opportunity to go international as well. How well they capitalize on it is up to them & remains to be seen. Some services businesses are.

technology commercialization is a stranded asset & difficult to leverage.

Chicago’s geographic centrality in the US Central time zone makes communications with both Europe & Asia possible during work hours, which differentiates us from the coasts.

My take is the Chicago Council on Global Affairs published “The Global Edge: an agenda for Chicago’s future” & is attempting to promote that agenda more aggressively. There are a number of big global corporations which are obviously deeply engaged globally. My impression is there is a small group @ the top of each of these companies that travel the world & maybe have even lived & worked elsewhere & know the subtler & even not so subtle differences between Chicago & other world-class cities. They are qualified to steer the direction of this project. My concern is there are very few who know the rest of the world well-enough to make valid propositions on how Chicago organizations can change to compete in the future. We no longer compete with just Cleveland, Detroit, & Minneapolis, rather with Copenhagen, Delhi, & Moscow. I laud the effort & the intent. I question whether the CCGA will be able to have the desired impact of elevating Chicago to the global city to which they aspire.


Invest in Hong Kong & Zhaoqing

Friday 20 June, 2008

I attended this event recently Hong Kong-Zhaoqing your winning combination China Here’s what I gleaned from the conference.

Growth in Hong Kong GDP has been 6.3% & it’s the 2nd largest destination of foreign direct investment after the mainland. Zhaoqing has grown @ a 15% rate & garnered $775M in fdi. Mike Rowse, Dir-Gen of Invest Hong Kong, suggested Hong Kong as the best jumping off point for E. Asia. A domestic market of 7M, no GST, VAT, & sales taxes, common law, & English language proficiency add to the arguement. It also provides access to world-class products @ a “China price.” His organization provides “how-to.”

The mayor of Zhaoqing offered a surprisingly environmentally-friendly speech, focusing on hygiene & environmental protection, water power, wetlands, etc. There are 1300 foreign-funded firms there from 30 countries. The US has started 59 projects worth $103M.

Former head of Citigroup Hong Kong presented a case study for finance in the region. Citi located their regional HQ there because of location, information flow, proximity to China, local market, financial resources, & talent, & the law. They entered mainland China via a JV with Shanghai-Pudong Bank in Guandong Development Bank which resulted in the 1st foreign management of a Chinese bank.

Arnold Berney of Leggett & Platt provided an industrial case study where they now have 15 operations (to be near their customers) which are 100% owned. He focused on different rules, cultures, practices, i.e. teamwork is good among family members, but not among strangers. He noted finding the right partner is 90% of your success.

Peter Guang Chen of Deloitte focused on structuring finances & taxes in Hong Kong & China. Generally Hong Kong is an autonomous free market with low taxes & few restrictions. Many legal structures are available. Hong Kong is a “tax paradise” with no GST, VAT, sales taxes. There are taxes on property, profits, & salaries. China has benefited from an explosion of FDI ($5B->$70B in 1981->2007). Taxes are being reformed. There are a number of foreign investment vehicles (rep ofc, branch, JV, WOFE). Equity & loan financing are available. You must comply with forex exchange regulations & filing, registrations, & reporting requirements.

The Director of the Zhaoqing Foreign Trade & Economic Cooperation Bureau Director said e-government is a focus.

Q&A revealed the biggest financial challenge is the regulatory environment. Credit cards are just starting there. Intellectual property protection is not assured, but the Mayor made a special point of saying there is a strict law with severe punishment which is being implemented. Rowse mentioned the the farther from Beiging you are, the harder it is & suggested splitting up IP among different locations.

I requested presentations from Gary Clinton & Peter Guang Chen, but have yet to receive them. The following further information was provided: Zhaoqing high technology industry development zone

I visited Hong Kong a few years ago & can attest, it’s an amazing metropolis. I ventured into China from there, & even on a Sunday, it was 1 big construction zone. I can’t evaluate each as an investment destination because every investor’s requirements are different, but will suggest that starting out in more westernized Hong Kong makes more sense than jumping right into vastly different China.


Silk Road business opportunities

Wednesday 18 June, 2008

I attended this event which was organized by Harry Lepinske of the Central Asian Productivity Research Center & Rizwan Kadir of the Pakistan Alumni Club of the University of Chicago Graduate School of Business & co-sponsored by the commercial attache of the consulate general of Turkey & consul of Pakistan in Chicago. It featured the consuls general of many of the nations along the ancient Silk Road from China in the east to Turkey on the west, & Azerbaijan, India, Kazakhstan, & Pakistan in between. Here’s what I learned:

-The Silk Road perhaps should be renamed the Oil Pipeline Road because the economies of this region are dominated by energy & oil resources. Dealing with Afghanistan, Iran & the Russian federation are major issues for most of these countries.

-Azerbaijan had the fastest growing economy in the world @ 35% GDP growth & highest FDI per capita in the world.

-The US is the biggest investor ($18B) in mineral resources & geological exploration in Kazakhstan. Import tariffs are coming down as Kazakhstan is entering the WTO. Their industrial strategy is to reduce dependence on oil & focus on high technology.

-The Engineering Export Promotion Council of India, whose US office is located in the suburbs of Chicago, can provide more resources on Indian exports.

-Here are some resources which were provided for Pakistan: State Bank of Pakistan, Ministry of Finance, Board of Investment.

-Turkey is a pivotal East-West & North-South gateway which co-founded the UN’s Alliance of Civilizations which increases understanding of Islam throughout the world.  Here is the Turkish Counsel General’s presentation turkish-economy-for-the-silk-road.

-Contact Thelma Diaz of the Asian Development Bank for information on that organization.

Asad Hayuddin, trade counsel @ the Pakistan consulate provided a very informative overview of the silk road countries which were not present @ the event. This was particularly enlightening because he did his doctoral dissertation on the region & spoke about his research instead of as a government representative. Most notable was the 3 of the so-named BRIC nations are on the silk road & play different roles-China is becoming a major consumer while Russia is becoming a major supplier of energy to Europe.

This was a humbling conference for me because I like to think of myself as well-informed about world affairs, but learned how little I know about this part of the world. Regardless, a number of the region’s biggest companies are active in the silk road countries, for example Motorola, Sears, & Boeing in Pakistan, & all Chicago-based Fortune 500 companies in Turkey. I requested the presentations from each of the speakers, but have yet to receive them. We were informed the presentations would be up on the Pakistan Club’s website. It’s difficult to summarize a 1/2 day seminar in a few hundred words, so if you’d like more information, contact me.


Bridge to Birmingham, (UK not Alabama)

Monday 16 June, 2008

I attended this event Bridge 2 Growth which was hosted by British Midlands Development Corp. The offer was to entice those looking to expand in the Europe/UK to look @ Birmingham, England’s 2nd largest city, & the British Midlands, as an alternative to London. A cabinet member of Birmingham city council suggested this area as a gateway to India, & noted that 40% of all foreign direct investment into the European Union comes from the U.S. The head of regeneration of Birmingham city council emphasized the quality of life in the area & mentioned that they are expanding the city from 200km2 to 2000km2 & are seeking residents for 50-75,000 new homes. The inward investment official made European comparisons by mentioning that you are fined if you don’t offer apprenticeships in Germany, while you’re provided with assistance for apprenticeships in the Midlands.

The crux of the offering is lots of free services:

-UK company information

-market support grants & R&D tax advice

-legal & tax guidance

-free banking services

-office space for 6 months

A number of examples were given of midwestern companies which have started operations in the midlands. AAR, a cable distribution company from Ohio, a weatherstripping company, & a simulations company which develops serious games were all named as successful local clients who have taken the plunge. ICT has been the fastest growing sector there in the last year. Birmingham is 1 1/2 hours drive northwest of London & has much less congestion, & consequently a higher quality of life than the capitol of the UK. Financial services are a focus in both locations, but the midlands offers 30% cost savings-Deutsche Bank claimed 50% savings. Incentives are available from the EU, UK, & local authorities, but shouldn’t be the basis for a long-term decision. I requested twice that they send over their presentation & was twice told that it would be sent, but haven’t received anything yet.


Financial Times/Italian manufacturing event

Tuesday 10 June, 2008

I attended this event last week Manufacturing for the Future Conference: Competitive Edge Through Advanced Manufacturing Strategies which has co-hosted by the Financial Times & Machines Italia of the Italian Trade Commission. Apparently this event is on tour & on it’s way from Toronto & possibly elsewhere.

Peter Marsh, Manufacturing Editor of the Financial Times set the table by prefacing that we’ve produced as much in the last 10 years as 10 X what we’ve manufactured prior to that.

Pasqual Bova, Italian Trade Commissioner in Chicago noted that while 1/2 of world growth comes from the US today, by 2020, 80% will come from outside of the US.

Dr. Delachi of the Delmac Group informed us that flexibility is so required in manufacturing today that whereas a customer, Masco, would ask for 10,000 pieces that could be produced in 2-5 hours, now they ask for 200 pieces which are made in 10 minutes.

Sean T. Mahony, a partner with AT Kearney Management Consultants presented “The Future of Manufacturing,” atk-ft-presentation-vf (Copyright A.T. Kearney, 2008. All rights reserved. Reprinted with permission.) In Q&A he noted human resources issues are critical, in that there are older maintenance workers who have specific knowledge who are retiring & we may lose that knowledge when they leave the workforce. The knowledge of those processes need to be documented so that these manufacturing don’t stop when they retire.

Dr. Contino related mostly his experience with Ducati Italian motorcycle maker, who emphasized creativity
in manufacturing.

James Rutt of BLM Group Corp. presented essentially a commercial for his tube processing technology firm.

The Partnering for Success panel was moderated by Ruari McCallion, a Scotsman editor of The Manufacturer magazine, & hosted Rosy Trovato of Meccanotecnica Riesi based in Sicily & Don Massa of Massa Products Corp. based in Massachusetts. The panelists were brought together by a mutual friend in a partnership. Massa simply saw a great product made by good people @ an acceptable price, so they moved forward. Although they admitted the personal introduction helps, Massa did forge an alliance with a direct competitor by opening up a dialogue rather than discount each other into submisssion.

What blows my mind about all this is that Italy is still even promoting manufacturing & that this event even took place. I know that the Italians, Germans, & other Europeans are still heavily invested in manufacturing, probably to maintain employment, but I question how much growth there is in making new things in these expensive regions. I think many of them are moving operations eastward. My impression is that although the US is still the largest manufacturing country in the world, we’re abdicating future growth to China & other less expensive countries, hopefully not in the race to the cost bottom. Eventually someone will be able to convince leaders in Latin America & Africa to learn that corruption ultimately will not pay off, & that progress for their people will outweigh hoarding wealth among a few individuals, moving manufacturing to probably the last low cost destinations.