Portfolio Business
Enterprise network Achieving the best
Will Peakin Business Correspondent
Scotland’s economic development strategy will come under scrutiny this week
If Lena Wilson, chief executive of Scottish Enterprise, feels any sense of weariness at yet another inquiry into the economic development network, she does not display it. In fact, it appears as if the chemical adenosine is missing from her DNA; were it not for the arrival of a press officer, you feel her capable of expounding on the merits of her agency through the night and into the next morning. Indeed, Wilson bemoans the lack of hours in
the day with which to convince her detractors. She can reel off figures from the agency’s recent annual report: with the help of Scottish Enterprise, 2000 companies have grown their turnover by £376m; 900 companies found new markets overseas; £82m was invested by companies in research and development; and £100m of risk capital was secured through its co-investment funds. Scotland is also the most significant destination for foreign direct investment, yielding high-value jobs, outside London and the south-east. Tere are the companies she meets week
in, week out, who say they could not have achieved their success without the agency’s support. Tere is the long and varied international career in economic development that tells her that Scotland’s model is the envy of the world. And there is her “obsession”
Beyond the headlines China moves west
The world’s largest producer of electronics, Hon Hai, has announced plans to shift its factories to China’s interior provinces. Nearly 70 per cent of its one million workforce will work in inland cities within five years, compared with 20 per cent today. According to Ben Simpfendorfer, Chief China Economist for the Royal Bank of Scotland, Hon Hai, the maker of products for Apple, Nokia, and Hewlett- Packard, is betting that lower costs in China’s interior will help cut costs.
56 Holyrood 20 September 2010 Lena Wilson
with producing incontrovertible evidence that taxpayers’ money produces a multi-fold return. If the members of the Scottish Parliament’s
Economy, Energy and Tourism Committee, who will begin taking evidence this week, are expecting someone on their backfoot, they will be quickly disabused: “Tis is the Parliament’s and the committee’s entitlement. It’s part of an ongoing relationship and dialogue. Tere’s been a lot of change in the UK and in the world. “What I do hope is that we can get all the
evidence on the table and that we can expose some of the myths. I hope we look at what it is we want to achieve for Scotland; I’d like to get some cross-party agreement about what the best way forward is for economic development. We have been one of the most scrutinised public agencies in Scotland for many years and I suppose I’m well used to it now.” Te committee’s move comes in the wake
of a radical reform of the enterprise network begun in 2007. Tere are question marks over whether delivery of services to local businesses have improved with the transfer of Business Gateway to local authorities and
“It’s part of China’s gradual drift westwards, away from the coast. It also makes the prospect of overland transport all the more compelling. The longer it takes to deliver goods to coastal ports, the less reason to send goods by sea,” he writes in his blog,
silkroadeconomy.com “And it was Hon Hai that was rumoured to be thinking of sending more goods by train to Europe before the global crisis. Its decision to shift its factories westwards, several days drive from the coast, appears to confirm the rumours.”
Simpfendorfer said he had to “add the usual caveats”. There are good reasons to be suspicious of land transport, not least as it leaves China’s supply chains vulnerable to
how well connected are the various agencies, locally and nationally, that are charged with supporting economic recovery. But there are more fundamental challenges
to Scottish Enterprise (SE) and Highlands and Islands Enterprise (HIE). Te inquiry will question whether the enterprise agencies’ methods for calculating return on investment stand up to scrutiny. It will consider whether SE and HIE should be merged. And it will also examine whether the Scottish Government’s economic aims could be achieved in a different way; if there are more successful or efficient models of delivery in other parts of the world. Tom Miers, of Te Policy Institute, a public
policy consultant and author of Te Devolution Distraction, takes a radical view of how Scotland’s economic problems - its low levels of business formation and entrepreneurship, a lack of investment capital and a failure to turn good ideas into successful businesses – should be tackled: “It is very difficult to show that a government-funded agency can tackle these problems and exploit these opportunities without doing more harm than good. “Orthodox economics suggest that
governments are not as effective as markets at distributing resources or making investments. Te market process, on the other hand, is one of discovery, where myriad companies and individuals find opportunities to generate sales, develop new products, improve quality and cut costs. Tis dynamic is at the heart of our prosperity, and we tamper with it at our peril.” While less radical, the Royal Society of Edinburgh has said that SE “must concentrate on Scotland’s areas of competitive advantage and act as a nimbler, swifter enabler of economic development. It continues to carry out too many activities not directly linked
‘foreign interests’, he said. But, more practically, there are also issues of standardising rail gauges and passing through multiple customs regimes. But, he points out, China isn’t shy of helping neighbouring countries build their rail networks. Last week, China’s Railways Minister was in Tehran to sign a $2bn deal, to build a railway line between Tehran to the Iraqi border. China has also talked more generally of building railways throughout Central Asia. “So while rail won’t provide a substitute for sea, it will provide an alternative, especially as China’s economy starts to lean westwards again, for the first time in centuries.”
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