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standfirst standfirst standfirst standfirst stand first standfirst stand first standfirst Courtney Fingar
FOR A GLOBALISATION horror story, it does not get much more dramatic than the recent two-part series starring NCR and Simclar. This script has it all: a foreign investor sacking loyal local, a home-grown business invoking the dreaded O-word, and both sending Scottish jobs to cheaper, eastern locations. Cut to images of protesters outside the gates and a bread line snaking halfway down the high street.
It is a show Scotland has seen before – around the same time last year Lexmark, Sanmina-SCI and Inventec were shedding factory jobs – and it is one that is playing in locations the world over, in many different languages.
Yet there is hardly any reason to run screaming from the theatre. According foreign direct investment (FDI) data compiled by OCO Consulting, Scotland had a very strong fourth quarter in 2006, bringing in nine projects totalling $2.8bn and creating 1698 jobs, compared with $160m and 365 jobs in the same quarter of 2005. Scottish Development International is soon to release its annual FDI report, and while no precise numbers have been leaked, officials are said to be more than a little pleased.
Two weeks before the NCR news, JP Morgan said it would create 200 more jobs at its European Technology Centre in Glasgow over the next two years, to add to the 100 IT jobs it had already announced. And two weeks before that, US electronic payments processor First Data announced it would open a new customer contact centre in the city employing 430 people over the next five years.
The fact that several hundred Glaswegians are about to get posh new offices might be little consolation to the 650 people laid off by NCR in Dundee. But it is worth remembering that, for these American companies, Scotland is an offshore location. Of course, offshoring and outsourcing are not so scary when the jobs are flowing in your direction.
Manufacturing functions, of the sort Simclar is moving offshore, have restless feet – they travel the world in search of ever-lower costs. Many are still beating a path to China, where labour is cheap and plentiful, but its cost competitiveness is being eroded as its very success in attracting projects leads to wage inflation and recruitment woes. As a result, Thailand, Vietnam and Cambodia are presenting themselves as nice alternatives.
In Europe, as the likes of Hungary and move on up to biotechnology and research and development, countries such as Romania, Slovakia and Turkey lay claim to more screwdriver manufacturing projects.
In Latin America, pending trade deals could position countries in central America, as well
as Colombia and Peru, to compete with Mexico as convenient production platforms for serving the US market.
On the emotive issue of outsourcing, India looms largest in the public i magination, although its strengths tend to be in business process outsourcing, call centres and shared services rather than production. Quite apart from the business rationale behind such decisions, there is a long-term economic benefit for the source country.
FDI into India has contributed to economic growth and increased corporate activity, fuelling investment out from India and back into the UK. India is now the UK’s third largest source country for investment. FDI might seem like a zero-sum game, but it can also be a virtuous circle.
In discussions about NCR and Simclar, it is easy to overlook the not-insignificant fact their intentions to shift the focus of their Scottish facilities from low value/high volume to high-value/low volume functions are completely in line with the stated investment promotion strateg y of the Scottish government, which is to move the economy up the value chain and focus more on high value-added projects that bring higher paid jobs with them.
The difficulty is that in order to cultivate the high end of the value chain you have to let some of the low end go. This is a trade-off that has been happening in Scotland for years. As of September 2006, manufacturing employed 225,200 people in Scotland, compared with
317,600 in 1996, and 395,800 in 1986. Financial services, meanwhile, employed 114,700 in September 2006, up from 76,200 in 1996, and 65,900 in 1986.
The other difficulty is the fight for high value added investments is a f ierce one; and Scotland’s commitment to being a skills-based services and technology-driven economy is shared by every other industrialised and semiindustrialised nation in the world. There is much to consider, much to do and much to decide in order to stay competitive.
The biggest question, says location adviser Douglas Clark, of consultancy Tenon techlocate, is: “What does Scotland bring to the world?” It has clear strengths in life sciences and financial services, promising potential for environmental technologies and scope for more development of ICT. Bio informatics, the space where biotech and infomrtaion technology meet, is a new niche in which Scotland could excel.”
Scotland is good at attracting value-added projects, says Clark, but it is worth pondering: “Realistically how many more can it get? What resources will be required to keep attracting them? If high-value investment is the strategy, how tenuous is it?”
Compounding the complexity, of course, is the way in which FDI strategy is tied up with broader debates about Scotland’s place in the
Tough call: NCR workers in Dundee felt the cold blast of global economics
On the line: India has built an impressive call centre sector
China in their hand: Shanghai symbolises the rise of the world’s new economic superpower