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We have repeatedly heard the need to spur economic growth through manufacturing. Whether these make soap and toothpaste, as well as cars and other equipment, these manufacturing activities spur economic growth, employ many locals, and give the country a supply of locally-made products.
Establishing a manufacturing investment such as a car manufacturing plant is not the same as setting up a food cart business. Prospective investors in manufacturing likely look at many variables in making an investment decision. Among other things, the major consideration is sustainable profitability. Investors go to where their operations are profitable over the long term, not just for the first five years. Thus, it makes sense to see long-term prospects and opportunities over the next 25 or 50 years.
They also look at whether the manufacturing activity's location makes it reasonable or affordable to ship products to markets near and far. This means not only local markets but if there is access to other nearby foreign markets.
Another important aspect is affordable access to raw materials or components needed to manufacture. An example of this includes locating mineral processing plants near the mines or putting banana chip factories near banana farms. This also includes having low shipping costs when sourcing foreign materials and components or shipping out finished products. In some cases, plants are built near markets so that it lowers the cost of shipping products to consumers.
Additionally, a place having enough trained personnel to run the plant is crucial to lower the cost of locating personnel from other areas. The key question is whether locating the plant in this jurisdiction enables the company to make and sell at a low cost and compete with rivals in the medium and long term.
Knowing these things, a package of fiscal and other related incentives can attract the investor, but we must bear in mind that these are but sweeteners since they are best offered only to support the initial entry of the investment and will be removed once the bottom- and top-line financial targets or significant profits are achieved within the first several years. Over time, lower costs of production and expanded markets need to be achieved so that the manufacturing activity remains competitive.
Attracting and sustaining manufacturing activities in a given area can be done in great part by encouraging collaboration between government agencies and private sector groups in a given area to create the right environment for manufacturing to locate and thrive.
Eyes on British elections
After about 14 years of Conservative party leadership of the British government, the Labor Party wrests control of the parliament via a dramatic landslide, taking a large majority of parliamentary seats and sweeping party leader Sir Keir Starmer into office as the new Prime Minister.
How the Labor government will lead the UK’s almost 68 million people to navigate global uncertainties on top of Brexit will be interesting to watch. Many will watch closely how the government will pursue trade in emerging markets such as ASEAN. London is a key global financial center where key global investment decisions are made. A key person to watch is Rachel Reeves, the new Chancellor of the Exchequer, the equivalent of our Secretary of Finance since her position largely determines policy that affects larger economic and even trade priorities.
Strategic partnerships with Britain’s innovative technology, pharmaceutical, engineering, and food and beverage sectors can be explored by many local business groups spurring trade and investment.