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15th Anniversary Edition Part IV 2008-2012

In 2007 and 2008, Southern Business & Development magazine, the parent company of SouthernAutoCorridor.com, celebrated its 15th anniversary. During our 15th anniversary, we wrote a four-part feature series that looked back 15 years and looked ahead five years at what occurred and what is likely to occur in economic development in the South. This is Part IV of the series, which looks ahead at possible economic development events and issues in the South from 2008-2012. If you would like to subscribe to SB&D, click on the "Subscribe to SB&D for Free" button on the default page of this Web site. if you qualify, you will receive SB&D the magazine for free.

What’s Ahead? Our Look at the Next Five Years
Economic development experts weigh in on what’s in store for the South.

By Trisha Ostrowski

Editor’s note: In celebration of SB&D’s 15th anniversary, we have spent the past three issues taking a historic look at how far the South’s economy has come in the past 15 years. Part three of this series looked back at 2003-2007, part two looked at 1998-2002, and part one reviewed 1993-1997. Now, in the final part of this series, we look ahead at what could occur in economic development in the South over the next five years.

A look ahead at the South’s next five years brings up several pressing questions: Will the South continue to be an economic powerhouse, outpacing the rest of the nation? What kind of companies will benefit most from a southern location? What forces will drive the South’s economy?

To help us look down the road ahead, SB&D assembled a team of experts who have decades of economic development experience. Here’s what our panel has to say about what could be in store for the South:

Our Panel of Experts

Neal Wade
Director, Alabama Development Office (Montgomery, Ala.)
Fred Humes
Director, Economic Development Partnership (Aiken/Edgefield, S.C.)
Chris Steinocher
Chief Operating Officer, Senior Vice President, Marketing & Business Development, Tampa Bay Partnership (Tampa Bay, Fla.)
Hartley Powell
National Practice Leader, KPMG (Charlotte, N.C.)
Betty Macintosh
Director, Location Incentives Group Capital Markets, Cushman & Wakefield (Atlanta, Ga.)
Jim Bruce
President, BFPC (Norcross, Ga.)
J. Michael Mullis
President & CEO, J.M. Mullis, Inc. (Memphis, Tenn.)
Mark Williams
President, Strategic Development Group (Columbia, S.C.)
Ronnie Bryant
President and CEO, Charlotte Regional Partnership (Charlotte, N.C.)
Buzz Canup
President, Canup & Associates, Inc. (Austin, Tex.)
Jim Fain
Secretary, N.C. Department of Commerce (Raleigh, N.C.)

SB&D: What are some of the industry trends you see for the South in the next five years?

Wade: “We hope that manufacturing will continue to be a major growth sector, but we are expecting that knowledge-based and life sciences projects will gain much stronger positions as well.”

Humes: “I believe one of the up-and-coming sectors is energy. The nuclear industry will expand simply because of the demand the South will generate for increased electrical power. Support industries such as engineering and nuclear-certified industries, such as valves, instrumentation, steel and piping, will come to the forefront. We’ll also see growth in renewable energy, such as hydrogen, plug-in, solar and wind. On the more traditional side, specialty textiles and materials will see increased demand. Textiles are not dead, but changing, and companies with vision to respond to the new markets will do well. We’ll also see some movement back from Asia, India and other countries as outsourced service industries like call centers return to the U.S. Finally, there will be a resurgence of defense-related companies as the Iraq war either continues or the military rebuilds its equipment.”

Steinocher: “Florida’s big name research institutes of SRI, Scripps, Burnham, Moffitt, Max Planck and Torrey Pines will reshape the economy and we should see a tremendous amount of spin-offs, partnerships and venture capital investments. The sciences will become a driver for the economy and an attractor for talent. The South will also benefit dramatically from the weak dollar by capturing a sizeable share of the foreign direct investment. This will bring a renewed investment in industrial and specialty manufacturing as companies set up shop closer to the large U.S. consumer market. Finally, you’ll see the port cities benefiting from the widening of the Panama Canal as container shipments look for an alternative to the congested and expensive west coast. That’ll bring investments in logistics and distribution facilities to serve the South and eventually the eastern half of the U.S.”

Powell: “The transportation/equipment sector, particularly the automotive industry, should continue to influence the southern economy, provided that America’s economic downturn is minimal.  Expect to see additional expansions and investment by a second wave of suppliers and parts manufacturers related to the current investments from international OEMs. Other sectors I see shaping the South’s economy are advanced manufacturing, distribution (given the projected population growth), biotech, pharmaceutical and R&D, health care-related services, and energy-related projects.”

Macintosh: “More service-related industries will come to the South’s metro areas along with health care-related services. Also, because of the recent consumer scares from Chinese-made products, I believe that some of the manufacturing that’s been pushed offshore may return to the South. Pharmaceutical manufacturing is another area where the South is a potential hotspot because it offers many low-cost operational areas with good labor.”

Bruce: “One of the more positive events will be ongoing growth of sectors that employ well educated people and compensate them appropriately—finance, corporate administration, higher-end segments of health care, professional and technical services, advanced manufacturing, and entrepreneurship. This is very favorable because of the wealth they directly create, the markets which they and their people generate, and the broadening effect they have on the region’s economy, demographics and quality of life. Other areas where the South will experience growth will be in investment by overseas companies from Asia (adding Chinese and Korean firms to the established Japanese) and from many parts of Europe and Latin America. Not only will this include manufacturing, which has long shown a preference for the South, but also regional management, sales and R&D operations that employ managerial and senior technical personnel. Many places in the South have proven to be comfortable settings for people originally from outside the U.S.”

Mullis: “The most promising industries for the South include automotive, aerospace, food processing and beverages, steel, plastics and composites, biotechnology, information technology, headquarters of all types and levels, and distribution. Most likely to fade are labor-intensive industries.”

Williams: “The South remains well positioned to continue development of its automotive industry as more and more of U.S. automotive market share is captured by facilities located in the South.  The South will also continue to attract locations of emerging business clusters such as alternative energy production as well as traditional sectors employing innovative technologies such as steel and plastics.  Finally, the South will continue to experience transportation-related developments resulting from continued expansion of international trade.”

Bryant: “We believe that there is a lot of evidence suggesting three economic sectors will drive the economy—health care and life sciences, defense and aerospace, and energy and the environment. We believe that the South is the most competitive location in the U.S. and that large investments in these sectors will follow the movement of talent and other capital resources being invested in our part of the world.”

Canup: “One of the interesting arenas is manufacturing. As older manufacturing jobs have been displaced and sent to Asia, high-tech manufacturing will continue to grow in the South and do well. I believe we’ll see manufacturing growth in areas such as aerospace, pharmaceuticals and semiconductors. The bioscience field also seems to be getting more visibility and activity with growth of the health-care industry and the aging population. Next, we should see continued growth of the automotive industry in extremely high-tech new plants that use robots and offer a large number of technical jobs. My bold prediction is that we’ll see three new auto assembly plants in the South in the next five years. We’ll also see rapid growth in renewable energy fields, which are a perfect fit for the ‘sunny South.’”

Fain: “The South as a region will continue to diversify its industry base, help existing businesses expand, and recruit new companies that provide sustainable, well-paying, knowledge-based jobs. We have done that in North Carolina through aggressive funding for education, work force training and infrastructure. We’ve also worked hard to maintain our business-friendly environment and a wonderful quality of life. The region also will continue to “go global” and make stronger connections with international partners. Another major part of our economic development strategy: tapping into the emerging knowledge-based economy. From pharmaceutical companies like Merck and Novartis and finance giants such as Fidelity Investments and Credit Suisse to high-tech manufacturers such as GE Hitachi, we’ve successfully attracted major corporations to our state. Specifically, we’re focusing on sectors such as aviation, plastics and biotechnology, as well as finance and information technology. So we see three factors – a global orientation, a knowledge-based economy and investments in education and training – as major and emerging industry trends that will continue to fuel our growth.”    

SB&D: Moving forward, how do you believe the South will improve its competitive position?

Wade: “Education and work force development will be the keys to continue the growth in the South. The South must strengthen K-12 education to build the next generation of workers and expand work force training techniques beyond the emphasis on manufacturing.”

Humes: “The South will continue to build its economy by improving its educational position. The demands in the future for technology-sophisticated workers will only grow and the regions that can meet the demands will prosper.”

Steinocher: “You’ll see a larger commitment to the concept of attracting talent to your community by offering amenities, lifestyle and culture. You’ll also see a rush of communities focused on utilizing the concepts of sustainability – working as hard on their ‘greenprints’ as their ‘blueprints.’”

Powell: “All southern states emphasize work force initiatives, typically coordinated through the technical college network. While traditional programs have focused predominantly on the needs of manufacturing, to remain competitive, these programs must be expanded to include non-manufacturing industries and customer-service occupations, as well as entrepreneurial and small business to develop a stronger, broader and deeper work force base.”

MacIntosh: “The perception still exists that southerners aren’t as well educated as people in other parts of the country. This has to be addressed and corrected.”

Bruce: “Historically, the region’s economic development efforts have brought a high concentration of industries like textiles, garments, furniture and metal/fabrication—where the fit with the U.S. work force has now gone away and production has moved overseas. Moving forward, many communities in the South will aggressively work to recruit new kinds of industries.”

Mullis: “The South needs a strong commitment with a well-documented plan and adequate funding for all types and levels of education. Also, development of a more skilled and diversified, dependable work force, an accelerated regulatory environment for permitting, more innovative and aggressive incentive packages with performance-based standards, stronger state and community readiness plans to seek and secure qualified new businesses and existing business.”

Williams: “The South must maintain its aggressive approach to attracting and growing business. Emergence of high-tech business applications will require accelerated improvement of skill levels and an intense focus on education and work force improvement.”

Canup: “The South has made great strides in the last 20 years. Even just 30 years ago, the region was primarily agrarian. One of the most positive changes has been the development of a two-year, post-secondary education system. Thirty years ago, we had a lot of catching up to do. Now, the South’s work force training is as strong if not stronger than any other part of the country. The training programs and the greater work force availability comes together to make the South quite competitive. Most southern states are also very aggressive in incentives and many states have created “deal closing” funds to help attract corporate investment, which give locating companies a real advantage. Moving forward, I think we’ll also begin to see more “retention” incentives to help existing companies grow and create additional jobs in southern markets.”

Bryant: “Education is clearly the key. We must graduate more of our high school students, provide even more support with our community college systems (which are already the best in the world), and further engage our university systems in the process of economic development, so that our alignment is deeper and stronger than ever before.”

Fain: “The South has been attractive to new and expanding industries in recent years for a number of reasons, including business costs and work force availability, but there are always areas that can be improved. Education and worker training, for example, are areas that are vital to the region’s continued success.”

SB&D: What changes do you believe are in store for the South in the next five years?

Wade: “I think five years from now there will be a more diverse economic base in the South and my hope is that we will be working across state lines where it makes sense for cooperative trade and economic development. There should also be a greater emphasis on sustainable economic development, which is more of a focus on the existing industry base in each community and state to ensure that these companies are successful and growing quality jobs.”

Humes: “Changes will be significant because of the changing nature of future industries. I think that we will see both an energy crisis and a water crisis as populations grow and new technology raises demands for electricity. Companies that prepare now by introducing energy- and water-saving technology will benefit most in the future.”

Steinocher: “We anticipate continued growth due to the South’s competitive cost structure, major education institutions that drive innovation, and a tremendous and enviable quality of life.”

Powell: “We should expect to see an increase in diverse international investment from the Pacific Rim and, especially, European companies. Today’s devalued dollar offers unparalleled opportunity for foreign investments. The U.S. is now considered a low-cost country, positioning the southern states as one of, if not, the most competitive business environment globally.”

MacIntosh: “Labor is going to be a serious issue, not just in the South, but everywhere, as Baby Boomers retire.”

Bruce: “One of the very appealing aspects of the South is the recent advance of many moderate-sized communities from rather unremarkable status into more sophisticated, diverse urban centers—Albany and Statesboro, Ga.; Bowling Green, Ky.; Bryan/College Station, Texas; and Wilmington, N.C., extending up to Jacksonville and down to Myrtle Beach (S.C.).  Such communities often build on universities, hospitals, and other institutions with strong dedication to outreach and community development.  Not far behind them on the ladder is a set of aggressively expanding smaller cities such as Pulaski, Tenn.; Jonesboro, Ark.; and McAlester, Okla., where you can now buy the same Starbucks latte as in Manhattan. Watch for these mid-size and small markets to thrive.”

Mullis: “We’ll see more competition for new and expanding existing businesses in the U.S., and globally.”

Williams: “The South’s growth and involvement in the global economy will continue to expand. The lower value of the U.S. dollar will result in increased locations from Europe, Asia, the Middle East and Canada for companies selling in the U.S. and desiring to mitigate the risk of currency fluctuation.”

Canup: “As we deal with the burst of the housing bubble and recent economic fallout, it’s becoming clear that the South is not as sensitive to a recession as many other parts of the country, which will help the region over the next five years. From an energy perspective, I believe that we as a nation will put more resources into becoming energy independent. This is important not only for the South, but for the nation as a whole. The U.S. has the largest coal reserves in the universe, and coal can be used to meet most of the country’s petroleum energy needs through coal gasification plants - as is currently done in South Africa. When supplemented with biofuels and renewable energy, we can, and should, become energy independent. I see the South as a leader in renewable energy, solar energy, and wind energy, and the region has outstanding research universities to lead the way in development of these vitally needed energy resources.”

Bryant: “The southern U.S. will experience a great deal of change as our urban areas continue to grow in economic importance, energy costs rise, and our work force continues to grow. We must address our transportation systems to reflect the new cost of oil and energy. It is absolutely imperative that we address shortcomings in our existing transportation infrastructure to support our growth and keep pace with our international competitors. Finally, we think regionalism will be embraced on a larger level as well - with metropolitan regions working more closely, and even states working on projects together to benefit the entire southern region. We are extremely optimistic about the future.”

Fain: “We believe we’ll see a continuation and acceleration of the emerging trends of the last 10 years. That will include more opportunities for international trade, and more challenges in training our workers to continue meeting the knowledge-based skills demands of the 21st century. Also, we can’t over-emphasize the importance and value of working together, in the public and private sectors, as partners. We’ve realized that the most critical success factor in economic development is teamwork. Local and state economic developers, legislators, educators, work force development professionals, business allies and others are working closer together in ways we would never have dreamed of even a decade ago. It’s true: economic development is a team sport, and we’re collaborating with more people, in more entities, than ever before. Universities, community colleges, public schools, chambers of commerce, the economic developers association, our private sector allies and many others are all a part of this economic success story.”


    
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