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A conversation with. Patrick Gottschalk, Secretary, Virginia Department of Commerce and Trade

"Our close proximity to Washington, D.C., lets us compete for federal contracts. Virginia is second in the nation in defense spending. We treat the Department of Defense like an economic development prospect."

Apr/May 07
Q. What were the statistics on development last year?
Approximately 435 projects were announced last year at $2.2 billion of new investment, and the creation of over 25,000 new jobs.

Q. What were some of the high points driving economic development in Virginia?
In February 2006, the relocation of Mead Westvaco, a global packaging company, promised to create about 400 new jobs to the Richmond metropolitan area. Later in the year, IKEA, a Swedish furniture manufacturer, launched the North American manufacturing headquarters for its Swedwood subsidiary in Danville. The project should create 740 jobs when all phases are complete at the end of the year. SRI International , a nonprofit research institute out of Menlo Park, California, is establishing the new Center for Advanced Drug Research (CADR) in an East Coast location in Harrisonburg. SRI does a lot of work for the federal government. The center will be involved with "proteomics," the study of proteins in relation to custom-tailored drug therapies. In affiliation with James Madison University, they plan to hire 100 Ph.D.-level researchers, and we know that spinoff activity comes out of research. They will also collaborate with the University of Virginia and Virginia Tech, and bring venture capital to the area, in a way that was not there before.

Q. Is Virginia targeting any specific growth niches?
We had success in the life sciences when the Howard Hughes Medical Institute opened in Loudoun County in 2006. It's a $50 million research facility. Other categories include services and security - such as IT services, federal security agencies, finance, insurance, headquarters, and professional and business services - advanced manufacturing; science and research, including energy; and transportation/ global logistics.

Q. Are certain regions bustling with specific types of activity?
In 2005, in Russell County, in Southwest Virginia, Northrup Grumman announced a $272 million capital investment and a promise of 433 jobs. Also during that time, CGI-AMS unveiled plans for a software development and systems integration facility there. They have already hired 140 people out of their goal of 300. As a result of this, we are anticipating clustering activity. We have seen global logistics activity in Hampton Roads, due to the port, Dulles International Airport, and the rail and interstate network. Also in the Hampton Roads region, we are seeing modeling and simulation activity. Old Dominion University offers master's and Ph.D. degrees in modeling and simulation, and significant opportunities for clustering are around the Joint Forces Command, especially for military applications. The Virginia Modeling, Analysis and Simulation Center (VMASC), managed by Old Dominion, is involved with transportation modeling for homeland security. Richmond has been fortunate to attract headquarters for companies such as Genworth Financial, Wachovia Securities, and Philip Morris. These companies typically come from large cities such as New York and find our tax structure lower and overall business costs more competitive.

Q. How do exports figure into Virginia's economy?
One of Governor Tim Kaine's focuses is the global economy. As part of his Economic Development Strategic Plan, we are concentrating on international investment, as well as exports. On the investment side, we are seeing leading companies from Canada, Germany, Japan, the United Kingdom, and France settling their manufacturing, warehousing or sales activities here. On the export side, Canada is in first place, followed by Germany, China, Japan, and the United Kingdom. Top exports are electronics and machinery, non-electronic machinery, vehicles, minerals, fuel and oil, tobacco, plastics, and paper and paperboard. This is the first time in the history of Virginia's economy that semiconductors/microchips exceeded the number of cigarettes exported. Two fabs, Qimonda in Henrico County and Micron Technology in Manassas, are responsible for much of that statistic.

Q. Any other factors influencing development?
Virginia saw $43 billion worth of impact from Department of Defense contracts, plus all military activity, both civilian and uniformed, in the state. Our close proximity to Washington, D.C., lets us compete for federal contracts. Virginia is second in the nation in defense spending. We treat the Department of Defense like an economic development prospect. The governor's economic development plan includes increasing the total amount of Defense Department-related contracts for Virginia firms by 5 percent or $1.15 billion by 2010.

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