Institute of Social and Economic Research, University of Alaska Anchorage Fostering Alaska Business...

Institute of Social and Economic Research, University of Alaska Anchorage

Fostering Alaska Business Development

A Commonwealth North Report

Financial Support Provided by

First National Bank Alaska

March 26, 2002

Edward Lee Gorsuch

Chancellor

University of Alaska Anchorage


3 Principles

• A Rising Tide Lifts All Boats• Growth Doesn’t Equal Development• Growth Is a Double Edged Sword


Principle #1: Rising Tide Growth Increases Output (Gross Product)

65 70 75 80 85 90 95$0

$5

$10

$15

$20

$0

$5

$10

$15

$20

Billi

on 1

998

$

ALASKA REAL GROSS PRODUCT( NET OIL AND GAS)


Principle #1: Rising Tide Growth Puts Alaskans to Work

65 70 75 80 85 90 95

0

50

100

150

200

250

300

350

0

50

100

150

200

250

300

350

STATE / LOCAL GOVT SUPPORT INFRASTRUCTURE BASIC

ALASKA EMPLOYMENTTHOUSANDS


Principle #1: Rising Tide Growth Increases the Market (Personal Income)

60 65 70 75 80 85 90 95$0

$5

$10

$15

$20

$0

$5

$10

$15

$20

Billi

on 1

998

$ALASKA REAL PERSONAL INCOME


Principle #1: Rising Tide Growth Drives Down the Cost of Living

1960 1965 1970 1975 1980 1985 1990 1995 2000

1.0

1.1

1.2

1.3

1.4

1.5

1.0

1.1

1.2

1.3

1.4

1.5

ANCHORAGE COST OF LIVINGRatio to US Average


Principle #2: Growth Not DevelopmentPermanent Fund Dividend Payout (mill 99$)

$0

$200

$400

$600

$800

$1,000

$1,200

1995 2001


$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,50098

$

1990 GROWTH 1990 TO 1995 GROWTH 1995 TO 1999

Principle #2: Growth Not Development Federal Aid Per Capita: #1 in Nation


Principle #2: Growth Not Development Job Growth Slowing

60 65 70 75 80 85 90 95-5%

0%

5%

10%

15%

-5%

0%

5%

10%

15%

AN

NU

AL

PE

RC

EN

T C

HA

NG

EAlaska Annual Job Growth


Principle #2: Growth Not Development Real Income Growth Since 1990

$813

$251

$78

-$500 $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000

Millions of 1998 $

LABORINCOME

INVESTMENTINCOME

GOVTTRANSFERS

(INC PFD)


Principle #2: Growth Not Development Per Capita Income is Falling Behind

1960 1965 1970 1975 1980 1985 1990 1995

($4)

($2)

$0

$2

$4

$6

$8

1998

TH

OU

SA

ND

$

ADJUSTED FOR ALASKA COST OF LIVING DIFFERENTIAL

ALASKA PER CAPITA INCOMEDOLLARS ABOVE OR BELOW US AVERAGE


Principle #2: Growth Not Development Out-Migration During Growth

50 55 60 65 70 75 80 85 90 95-20

-10

0

10

20

30

Tho

usan

ds

Alaska Net Migration


Principle #2: Growth Not Development Population Aging Since 1990 (000)

-10

0

10

20

30

40

50

60

70

80

0-39 40-64 65+

.


Principle #3:Economic Growth is a Double Edged Sword

• Competition from Outside firms– Economies of Scale– Market Dominance– Expatriating Jobs and Profits

• Consumer Benefits– Lower Cost of Living– Recycled Savings


Principle #3:Economic Growth is a Double Edged Sword

• Growth Brings Outsiders– Walmart– Safeway– Wells Fargo

• National Trends Toward Consolidation– BP/Amoco– Phillips/ARCO/Marathon

• National Trends Toward Devolution– DELL– Auto Manufacturing


4 Strategies

• Increase Exports• Add Value to Exports• Substitute Local Production for Imports• Manage Fiscal Policy


Strategy #1: Exports

• Definition - Expand Goods and Services Sold Outside Alaska

• Payoff• Potential—Big



1960 1965 1970 1975 1980 1985 1990 1995$0

$5

$10

$15

$20

$25

AGRICULTURETIMBER

SEAFOODGAS

OIL MINERALS

VALUE OF NATURAL RESOURCE PRODUCTIONBILLION 1998 $



• Examples– Oil and Gas– Mining– Tourism– Education– Seafood

• Challenges– World Markets for Traditional Resources– Supply Constraints


Strategy #2: Value Added

• Definition - Process What We Produce• Payoff• Potential—Modest



65 70 75 80 85 90 950

2

4

6

8

10

12

14

0

2

4

6

8

10

12

14

Tho

usan

d

Oil and Gas TImber Seafood

ALASKA PROCESSING EMPLOYMENT



• Examples– Seafood Processing– Refining– Timber– B&B’s– GTL’s– Veneer

• Challenges– Distance to Market– Cost– Scale


Strategy #3: Import Substitution

• Definition: Do for ourselves what we currently pay others to do

• Payoff• Potential--Modest


Strategy #3: Import Substitution: Progress in Recent Years

0

0.2

0.4

0.6

0.8

1

1.2

Ratio to US

Average1987

1997


Strategy #3: Import Substitution: Wholesale Trade Deficit

0

2,000

4,000

6,000

8,000

10,000

12,000

Jobs

Durable Goods Non-DurableGoods


Strategy #3: Import Substitution: Services Deficit

0

1,000

2,000

3,000

4,000

Jobs


Strategy #3: Import Substitution

• Examples– Jet Fuel– Oil Field Modules– Health– Education– Engineering and Related Services

• Challenges


Strategy #4: Managing Fiscal Policy

• Fair• Sustainable• Realistic• Gradual• Complete

• Strategic• Flexible• Efficient• Stable• Transparent


Strategy #4: Managing Fiscal PolicyThe Alaska Disconnect:

Best Case Scenario Assumptions

• New Basic Sector Jobs in Anchorage• New Workers have Families• Families Use Local Services and State

Transport Services• Families Pay Their Share of State & Local Taxes• New Development Pays it Pro Rata Share of

State and Local Taxes


Strategy #4: Managing Fiscal PolicyThe Alaska Disconnect:

Best Case Scenario Fiscal Results[ Excludes PFD]

• Each New Basic Job creates a $1,100 Annual Burden on Public Finances– Revenues = $5,200– Expenditures = $6,300

• Local Government Net Benefit = $300• State Government Net Burden = $1,400


4 Promising Opportunities

• Traditional Resources• New Resources• Import Substitution / Services• Quality of Life


Promising Opportunity #1:Traditional Resources

• Oil– North Slope Exploration Support

• Gas– North Slope Gasline Support– Cook Inlet Gas Exploration– GTL Technology, Finance, and Design

• Mining– Tidewater Smelter


Promising Opportunity #2:New Resources

• Tourism– New High End Attractions– Music, Theatre, Eco-Tourism– New Destinations

• Air Cargo– Warehousing– Assembly– Manufacturing

• Technology– Engineering– Finance– Telecommunications


Promising Opportunity #3:Import Substitution / Services

• Health Care• Professional Services• Prisons• Higher Education• Federal Research and Development


Promising Opportunity #4:Quality of Life

• Telecommuting• Footloose Industry• Retirees


6 Roles for Public Policy

• Target Opportunities and Compete• Create Investment Attractive Environment• Secure Federal Regulatory Relief• Invest in Human Capital and Infrastructure• Expand Mechanism for “Buy Alaska”• Support a Policy Research Agenda


Fostering Alaska Business Development

A Commonwealth North Report

Financial Support Provided by

First National Bank AlaskaMarch 26, 2002

Edward Lee Gorsuch

Chancellor

University of Alaska Anchorage

Date post:	29-Dec-2015
Category:	Documents
Upload:	kellie-lane
View:	215 times
Download:	2 times

Institute of Social and Economic Research, University of Alaska Anchorage Fostering Alaska Business...

Documents