Monday, June 28, 2010
Look to Asia for jobs
Virginia's new secretary of commerce and trade, Jim Cheng, discusses his plans to bring new jobs to Southside and Southwest Virginia.
Blue Ridge Business Journal
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The Roanoke Times
For a generation, Southside Virginians watched helplessly as the region's traditional economic engines -- tobacco, textiles and furniture manufacturing -- fell into decline. In a trend that continues to this day, companies felt compelled to reduce labor costs and moved manufacturing jobs overseas, particularly to Asia.
But Virginia's new secretary of commerce and trade, Jim Cheng, views Asia as a promising place to recruit new jobs for Southside and Southwest Virginia.
Cheng visited Southwest Virginia in early June and more recently has been on a trade mission to meet with business leaders in China, Hong Kong, South Korea, Japan and his native Taiwan. Shortly before the overseas trip, Cheng talked about Virginia's efforts to return jobs to a region that has suffered stubborn unemployment problems.
Folks in Southside Virginia who have lost so many jobs to Asian manufacturers might be excused for feeling there's some irony in your targeting Asia as a likely source of new jobs for Virginia. Can you explain the rationale behind this initiative?
Well, the real issue is economic cycles, and let me talk a little about a great success story: When I was down in Southwest Virginia, I visited the Nautilus [home fitness equipment] plant in Independence, in Grayson County. And they told me that, at one point, they had been planning to move their manufacturing out of the country. They make very heavy equipment out there. Now, when you go off-shore, there are certainly cheaper labor markets, but you might not get the right quality, and it might not make sense logistically. And in this case, I think they found it was just too much to be shipping across an ocean.
And it was great that a group of investors from the United States came in and made an investment, with the help of a loan from the [Virginia] Department of Business Assistance, to help them grow and expand with new ownership, but selling Nautilus equipment still made in Independence, Virginia. They've been there for more than 30 years, so it was great for the state to be able to help to keep the jobs there and maybe grow, too.
And I think that's part of the lesson: that off-shoring was the hot thing to do and a lot of companies did it. But they're finding out that sometimes it doesn't make much sense.
Let's take another example: Mercury Paper in Winchester, which is a story of how business can return to the United States. Mercury Paper is an Indonesian-Chinese company, and they're going to be making paper in the United States. They'll be shipping certain raw materials here from overseas, but they'll actually do the finished product here so they can have the flexibility to decide what types of paper to manufacture to meet consumer demand. And that's a great thing because they understand that sometimes it's not just the labor costs that make the difference. Sometimes, it's flexibility; it's having a great work force; it's having the right logistics. And I think Virginia was able to prove that economically it made sense to do manufacturing in the United States.
So we think there will be examples all over the place. And also, remember that China has a lot of money invested in the United States, a lot of dollars. And the best place for them to spend the money is in the United States. And this is also where a lot of these [overseas] companies have a lot of their customers.
So, I think it's an economic cycle. People are learning you don't have to off-shore to make money and there are a lot of good reasons to be here in Virginia and in the United States.
So, everybody was chasing cheap labor.
Yes, I think that was a part of it. But the cost of fuel has gone up, logistical expenses have gone up. And there are other considerations, too. If you order something from overseas and ship it on the ocean, it will take a long time to arrive. That makes you less flexible. If there's an economic downturn and you've got a lot of inventory on a ship headed your way, how flexible can you be? So I think people are learning there are cases where you can off-shore certain things, but there are times when it makes sense to keep operations nearby, where customers are, so you can be more flexible.
Asian economies are strong right now. Is that another reason for your interest in appealing to Asian companies to set up shop in Virginia?
Absolutely. The fastest-growing two economies in the world are China and India, and when they think of coming to do business in America, they don't necessarily think of coming to Virginia. I think they usually think of California and New York. So we have to remind them that some states are business-friendly and some are not, and Virginia is exceptionally business-friendly. As you know, we've been ranked best place to do business by Forbes and CNN many years in a row. We consider that low-hanging fruit. We need to get the word out. We've received some additional marketing money and we're going to go out there and get Virginia's name out -- that we're a right-to-work state, that we have great resources, a great harbor, great transportation and a great work force.
Virginia is a great location especially for Asian companies that want to distribute their products. Obviously the Port of Hampton Roads serves the Mid-Atlantic and the U.S. East Coast, but it also offers a fantastic base to serve European customers. And the cost of doing business here is competitive with everywhere else. And we have better workers. I mean, what more can you ask for? We have a great story to tell.
Is your own background going to be helpful in building relationships with firms in Asia?
Yes, I think so. They're always surprised when I speak Chinese to them. They're always impressed when they find that a governor had the foresight to hire an Asian commerce secretary and, golly, that's one of our targets: Asia. It doesn't hurt in that part of the world to speak to them in their native tongue, whether that's Chinese or Korean.
Do you have someone on your staff who speaks Korean?
Yes, one of our assistant secretaries speaks Korean. And you know there are a lot of large companies in Korea. The country itself is not huge, but they are very advanced and they sell a lot of goods in the United States. So he's going to ask them in Korean to build a plant in the United States and consider Virginia.
Virginia has had a trade office in Hong Kong for years, and there's a plan to open an office on the mainland. What's the timetable on that?
The new Virginia trade office probably will be in Shanghai, and we expect to open it for business later on this year. We also continue to operate a trade presence in Europe and Japan. Those are established, longtime relationships there and we don't want to diminish the importance of Europe and Japan, but we don't want to miss out on the great growth that's happening in China and Korea.
Three companies made announcements recently about bringing new jobs to Southside and Southwest Virginia. But at the same time there was news about other companies preparing to lay off workers and move more manufacturing operations overseas. In economic development these days, do you have to just admit that it's often one step forward, one step back?
Well, you hate the "one step back," but this is a free market and sometimes things happen that are out of our control. But people have to realize that, if we did nothing, it would be worse. And we're trying to put Virginia in the best position to be successful in the future. We're trying to get our policies in place, trying to get our people, our work force, in a place where we will get a chance to get those jobs when companies are looking to hire and expand. And I think local economic development people are aware of that and are working hard to make sure the region is ready when new technologies and opportunities present themselves.
You visited with local officials in Southwest Virginia on June 2 and 3. In your view, are they doing the right things to position themselves to attract economic development? What advice do you have for local economic development officers?
Well, they're certainly moving in the right direction. I find a lot of can-do spirit and a lot of hardworking folks down there. And if they're looking in the right direction, they've got the infrastructure in place and are looking at technology and growing industries that will be in demand in the future.
In a broad sense I can tell you that no locality is an island. The more closely they work with each other, the more cooperation there is, the more coordination there is in work force development, the better it is for everybody. I think most people understand the basics of what we need to do: We have to have broadband; we need to have our people educated.
We need regional cooperation so we can present ourselves as a unified, vibrant community rather than little pieces of Virginia going after one piece of work. When companies come to an area, they don't care about county lines and boundaries. They want to see a quality of life; they want to see a big picture of what Virginia is; they want to see that an area can work together to solve their problems. We saw this in many of our best economic development success stories. They didn't care which county it was or what locality it was. They wanted to know that their problems were going to get solved.
And I should note that there are many areas that do a great job cooperating, pooling their resources. Up in Northern Virginia, they benefit just from being in the Washington area. Down in Southwest and Southside, you really need to pool your resources and present a united front, and I've seen a lot of instances where that's worked very well.
What do you see as the industries that will be creating new jobs in Southwest and Southside Virginia in the coming years?
I think call centers are a good opportunity. You can put call centers anywhere you have a good work force and I think there's a great work force in Southside and Southwest. On my trip in early June, I saw medical IT systems and data centers. Very importantly they have the broadband infrastructure, the work force and educational institutions in the area to support those kinds of facilities.
I don't have a crystal ball. I think there are industries that we don't even know about that will be coming down the line in the future. We have a lot of inquiries from energy companies, not just biomass, but also energy research companies. And there's also interest in Virginia from advanced manufacturing companies, like the new Rolls-Royce plant going in south of Richmond, which we think will have an impact beyond just the Richmond region.
We're also trying to attract distribution centers, which could find fantastic locations off Interstate 81 or other major roads. Out in Southwest Virginia, you're closer to five other state capitals than you are to Richmond, so a distribution center there can serve a large part of the eastern U.S. So we have a lot to offer from a lot of angles.
Bassett native Mary Rae Carter is now on the job and reporting to you from the newly created post of deputy secretary for rural economic development. What are your expectations for the work she'll be doing?
She'll be the voice of rural Virginia for sure. She'll be the person that people can reach out and touch when people have issues that involve rural Virginia. And between the two of us, we're going to figure out how to help.
Considering the stubborn nature of unemployment, and also thinking of general concerns about the economy, do you worry at all that people will expect too much, too soon from this administration?
Well, managing expectations is always important and things take time. But if there's a worry, it's that people aren't being heard and problems aren't being solved. We haven't solved all of the issues, and we haven't heard from everyone yet. Of course, we don't want to oversell what we can do, but I think people are appreciative that someone is listening to them and getting the word back to Richmond.
What do you want people in Southwest and Southside Virginia to know about you, personally?
Well, I think the main thing is that I've been in Virginia 30 years. I consider myself a Virginian and I see the pride of being a Virginian and the passion for living in Virginia. And I want them to know that there are a lot of people outside of rural Virginia who don't know anything about them, and the more they learn, the more they'll appreciate what hard work they do, and we are here to make sure that all Virginians can benefit from a commonwealth of opportunity.
I'm an entrepreneur, so I'm always going to be on the optimistic side. Right now, we're seeing some upticks in activity and we're generating a lot of interest. And, of course, we hope to close some deals.