DARLA MOORE
SPEECH TO THE UPSTATE ALLIANCE 2004 ANNUAL MEETING

BMW ZENTRUM
GREER, SOUTH CAROLINA
FEBRUARY 25, 2004

I appreciate the opportunity to be here today. Thank you Sam for inviting me.

I want to brief you on where we are with the South Carolina Competitiveness Initiative, which is one of the most important and exciting things I've ever been involved in. And Sam's asked me to take a few questions which I will after my remarks.

I also came here to praise the Upstate Alliance under Sam's leadership for your extraordinary vision.

About four years ago, you caught the vision of what it takes to compete in the knowledge-based economy and it's heartening to see a region of the state "get it". The Palmetto Institute released a baseline study of South Carolina's economy in October of 2002 that found our state lagging behind in per capita income, and inadequately prepared to compete in the knowledge-based economy.

We since have teamed up with The Monitor Group and Harvard Professor Michael Porter, a leading expert on economic growth and cluster development, to flesh out what we need to do and how to do it.

Two of Porter's foundational principles are that we must, one, forget about county and city lines and work regionally to identify and grow inherent industry clusters, and two, that economic development must be led by the private sector in cooperation with government.

So you're right on track.

Ten counties, two cities and more than a hundred businesses and business groups constitute the Alliance, with about 60 percent of your membership coming from the private sector.

That's impressive.

Now I know none of you has abandoned your local pride and there's still healthy competition. But by working together, you are creating a template on how to conduct economic development which, over time, can raise the standard of living. Another strategy that Mike Porter preaches is the essential integration of higher education in economic development. Again, we are seeing that reality being played out in the Upstate with the development of ICAR, a project of historic proportions.

I don't know if any of us can fully grasp the profound benefits all of the Upstate will realize over the next 10 to 20 years, and I believe that ICAR will reach even beyond the Upstate.

When people ask me what the future of economic development should look like, I tell them to look at ICAR.

You've identified a potential growth cluster in automotive, and you've come together regionally, in tandem with higher education, business and government, to create what will be a world-class research and development facility.

And let me assure you of one thing: every entity in the Upstate Alliance will benefit. I think you will be amazed over the spin-off potential that will reach into every county represented here. Benefits for some of your member counties may not at this point be apparent, but experiences in other regions of the country indicate that all of your ships will rise with the tide that begins here in Greenville.

Now let's look at the state as a whole.

We are at a critical junction in South Carolina history.

Per capita income is at 81 percent of the national average and our worker productivity is lagging. Patents per 10,000 workers, an excellent indicator of future productivity, are about 3.6 in South Carolina compared to the U. S. average of twice that.

It would be even worse if not for Milliken and the Savannah River Plant.

For the first time since the Great Depression, we have had three consecutive years of job losses. Falling trade barriers and increased foreign competition are largely responsible for the loss of 25,000 jobs in this region in the last two years. Your unemployment rate is close to a two-decade high.

But even with all the bad stuff that's happened here, you're still better off than other regions of the state.

It's been a long time since the state has captured a big fish with the bait of cheap labor and low taxes. Those days are over.

We don't have access to venture capital because either there's little to invest in or we are not promoting our entrepreneurs sufficiently to attract investments.

Either way, when compared to our neighboring states, we have to do better. That is why I would like to commend John Warner for his efforts to organize the InnoVenture Conference in May. This is exactly the type of collaboration that is required to make our state competitive. In addition, we have not historically used our research universities as laboratories for new ideas for business.

As an aside, there's a bill in a conference committee in the General Assembly that will free our research universities, Clemson, USC and the Medical University, to work in partnership with business and industry. It would provide much-needed matching money as well for research facilities.

This bill also addresses the important potential cluster of life sciences and provides a way for us to attract more venture capital.

I urge you to urge your legislators to support final passage of this bill because it's the single most important action the General Assembly can take to create jobs.

Back to the point I was making: we've not had a lot of good economic news in the last few years. The good news is that the political, business and academic leadership of South Carolina realizes we are in a crisis that produced a job loss of 40,000 jobs in a year, and they're willing to do something about it.

If The Palmetto Institute has been able to do anything, I think we've served as a rallying point for many groups that have been laboring in the fields for a long time.

They say timing is everything, and maybe we came along at just the right time with research that validated what many of you have been thinking and experiencing. Thanks to you and many others across the state, the collective leadership has decided that problems of today do not have to be predictors of tomorrow. The South Carolina Competitiveness Initiative, I am convinced, can transform the state's approach to economic development and begin the long trek towards raising prosperity.

The first phase of the Initiative which is completed was a six-month effort that rigorously assessed our competitive position in four clusters important to our state: automotive, chemicals, textiles and tourism. The study was conducted by Mike Porter and The Monitor Group. They produced the outline for a new strategic direction.

First, we've got to reposition the state as a nationally recognized center for advanced processing in manufacturing and services.

Second, they recommend we create a business environment which enables companies to compete, not through cheap costs, but by providing higher value to their products and services. That is revolutionary thinking in South Carolina.

Third, we must build robust industry clusters and retool the economy to grow our own companies, which is exactly what ICAR is all about.

And last, they rightly point out that South Carolina has a history of government-driven economic development, with business largely sitting on the sidelines cheering. They say we will not get where we want to be unless the private sector takes the lead in cooperation with government, not unlike the Upstate Alliance template.

Successes such as BMW, Michelin, Roche and Fuji indicate we clearly are capable of competing in higher value commerce. The challenge is to apply the principles of these success stories statewide. That is what the South Carolina Competitiveness Initiative is designed to do.

Let me pause here for a moment to talk about our efforts in a little more detail. As we discussed, we are using as the basis of our initiative the establishment and nurturing of industry clusters. The reason is two-fold:

First, the very best research we can find tells us this approach works.

The second reason we decided on the clustering initiative was more of a response to our problems in South Carolina. We have a disconnect in this state between educational attainment, workforce development, and economic development. Now, let me hasten to add before Black Cat Barton or President Barker jumps me - we do have pockets of collaboration in certain areas, but it is certainly not a statewide effort and it is certainly not based upon a long-term strategic plan.

What clusters do is compel government and the business and academic communities to collaborate to assist in the growth of clusters. Concentration of businesses alone is not a cluster. There must be solid, sustainable relationships at the core of a cluster that help provide an abundance of specialized labor, suppliers, capital infrastructure, on-going research, and government support. The bottom-line is that our policies must be broadly based and supported by the education agenda, the infrastructure strategies, the incentives, and the training opportunities offered to industries to support clusters. Workforce providers must also see the importance of building and supporting a knowledge base that can support the cluster. Expertise in a cluster attracts more expertise; retention of talent feeds and expands the supply chain of workers. This is our target. In a nutshell, we want to give the economic development professionals the necessary tools to grow existing industries and to attract new industries based upon our assets. We believe that clusters offer us this opportunity. Let me make this abundantly clear, our efforts are not to get in your way, but our efforts are to help you. That is why we are driving the competitiveness initiative.

You may have heard that Governor Sanford and Blue Cross/Blue Shield Chairman Ed Sellers are co-chairing the Competitiveness Council, which will be the real workhorse for the Initiative. That represents the private/public sector partnership that we must have to thrive.

This Council, which will be composed of somewhere between 35-40 leaders, will convene working groups to address eight key issues that our research has identified as critical to our economic future.

These issues range from improving work force skills and education, to nurturing small businesses and homegrown companies to invigorating distressed regions of the state.

While the Competitiveness Council will be limited to about 40 people, we will invite others to sit on the eight working groups that will be formulating new policies for these eight critical issues. When all is said and done, I expect 200 or more people will be involved.

The first 12 members of the Competitiveness Council have been appointed, and the Upstate is ably represented by Mack Whittle, Carl Flesher and Bill Barnet. I am sure that as we move ahead, many others will be asked to participate in one way or another.

I hope I've conveyed two things to you: the urgency of this task, but also the confidence that it can be accomplished.

Professor Porter who, by the way, has family ties to South Carolina, says South Carolina has what it takes to build a competitive, productive, vibrant economy.

The real question, he asks, is do we have the will? I look at what you, the Chambers of Commerce, Clemson, the technical schools, the Carolina Crescent Coalition and a host of others are doing and I say we do have the will.

All across the state, leaders of business, government and academia are putting aside their differences and coming together.

Those involved in the Council on Competitiveness and its working groups are committing vast chunks of time and resources to change this state.

And we are getting significant cooperation from our elected leaders, including Governor Sanford, Bob Faith and the legislative leadership.

As Professor Porter says: Competitiveness is a marathon, not a sprint. We will improve our prosperity by making consistent progress over a long period of time, not with a quick burst of activity.

In 1903, a group of South Carolina women lobbied the legislature to do what to that point was unthinkable. They got the first law limiting child labor. Historian Walter Edgar says that one success sparked a progressive era that led to all kinds of reforms in education, literacy and health care.

Let us hope that historians 50 years from now will write that the year 2004 initiated another progressive era. One in which citizens decided to increase prosperity for themselves and future generations and did it.

We've already had our first success-creation of the Council on Competitiveness. It's now time to build upon that which we started. Thank you.

Thank you.