AEDC Director: Follow-up from China trip underway

Grant Tennille, director of the Arkansas Economic Development Commission, says he's already building on Gov. Mike Beebe's trade trip to China.

Tennille, appointed to the AEDC post in late March, said follow-up to the Chinese trade mission will include diligent pursuit of discussions from the 12-day trip.

"The most important thing for us to continue to do is to build on the relationships that the Governor established when he was in China," Tennille said in a Talk Business exclusive interview (See video of the interview at the end of this story.). "I'll tell you that very quickly we've already had one provincial government call us just in the last few days and tell us that they want to bring an education delegation over here, maybe as soon as May."

Beebe met with business and governmental leaders during his trade trip in an effort to recruit Chinese investment to Arkansas. Beebe also used the trip to push for more export opportunities for state businesses, such as Wal-Mart Stores and Tyson Foods, doing business in mainland China. He said the one-on-one meetings between Beebe and high-level Chinese dignitaries were crucial for advancing Arkansas' trade interests.

"We figured out very quickly that personal relationships are everything to the Chinese, especially at the provincial government level. Some of our most productive meetings were the governor-to-provincial governor meetings that we had," Tennille said.

FAMOUS ARKANSAS EXPORTS
At the urging of Chinese officials, nearly every meeting opened with a discussion of Arkansas' three most highly visible exports: Wal-Mart, Tyson Foods and Bill and Hillary Clinton. Interest in the topics was almost universal, but Tennille said conversations shifted after an initial exchange on those three state assets.

"Then it was our job to explain that while those are obviously our three most famous exports, Arkansas is really much more," he said.

Tennille said that one of the strongest assets Arkansas marketed to Chinese investors is the state's geographical position in the western hemisphere.

"I think for many Chinese companies their interest extends beyond North America when they look at Arkansas as a place to locate. I think they look at Arkansas and see the ability not only to reach markets within North America very, very easily, they look at Arkansas and they see the ability to reach into central and south America relatively easily from a place that is much more stable," Tennille said.

In his post-China briefing with reporters, Gov. Beebe said he had been approached by the French government about a potential summer trade mission to discuss agricultural-related issues. Tennille said the invitation had come at the behest of the French minister of agriculture and is expected to center on opportunities that could benefit Arkansas row-crop farmers as well as the livestock and poultry industries.

NEW INCENTIVES?
Tennille acknowledges that a paradigm shift is taking place between old and new industrial recruiting.

Manufacturing concerns are becoming more high-tech and less labor intensive. Likewise, many of the bigger projects that states are pursuing these days resemble the Conway-based Hewlett-Packard facility — which is staffed with higher-pay, knowledge-based workers, not big machines and heavy equipment.

"The tools that we've got in Arkansas, in terms of incentives, are very much designed for another era. They're designed for big-iron manufacturers, there's no other way to put it," Tennille said.

He noted that state incentives tend to tie to assets or capital that the state can recoup if the business fails.

"When you talk about knowledge-based industries, the assets of those companies exist within the six-inch space between a bunch of smart people's ears and you can't put a mortgage on a human being," he said. "We really are working very hard right now to try to understand how we re-calibrate some of these tools."

Tennille said the state has been able to help some tech-based industries with incentives, but the biggest obstacle is one that government is ill-suited for: risk.

"The difficulty is, for government, these are risky endeavors and we are talking about tax dollars. And government isn't really good at risk because taxpayers expect a return," Tennille said. "If you talk to any venture capitalist, they'll tell you they fire at 10 companies or 20 companies hoping that one of them will hit. Those aren't great odds for government."

Tennille said conversations are underway to examine potential changes to economic development incentives to adapt to the modern landscape. He said he expected ideas to emerge by the 2013 legislative session.