Terrorist attacks ripple into economic development efforts

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Published: November 5,2001

It became immediately apparent that the events of Sept. 11 would have far-reaching effects. But few probably recognized the ripple effect in the economy that would take a toll on many different types of businesses across the entire country.

Manufacturing was already in a recession before Sept. 11, and since then consumer confidence has eroded creating less demand for products.

“People say they were starting to see an increase before Sept. 11 and then the bottom dropped out,” said Charleigh D. Ford, executive director, Columbus-Lowndes County Economic Development Administration.

“About all the manufacturers have said business has really dropped off after the terrorist attack. Some companies are seeing the light at the end of the tunnel. People involved in these issues feel like we are at or near the bottom of this recession we are in, and should be able to see some recovery next year. Everyone is cautiously optimistic that we will see a turnaround sometime in 2002.”

Ford said airline business is down, which has caused declining sales for hotels and convention centers. Because of those declines, renovation and expansion plans for hotels, convention centers and related industries are being put off.

As far as economic development activity, Ford reports they are still seeing a lot of industrial prospects activity. The way economic developers are approaching recruitment has changed, but Ford said those kinds of procedures are subjected to “a constant tweaking.”

“We always trying it a little differently,” Ford said. “For instance, there was a time you would go and send out a big pile of letters to a state, go visit the state and make calls. Few people do that any more. The biggest source of cold calls now is these trade shows. We all go to those things.”

Michael J. Olivier, CED, executive director of the Harrison County Development Commission, said strategies for economic development have shifted to recruitment strategies focusing on existing business and industry and recruiting suppliers, international companies and niche companies that are in a growth mode.

“An emphasis is placed on existing business and industry expansion and support to keep what we’ve got,” Olivier said. “One thing is certain, the way we have to do business is changed. It will cost more due to security and other issues and that cost will be passed on the consumers and will be, in part, borne by the government.”

Economic development activity since Sept. 11 has been negatively impacted. Olivier said projects have been placed on hold, site visitations have been postponed, and companies are rethinking corporate strategies.

“Advertising has been postponed or curtailed for the immediate time,” Olivier said. “Marketing efforts are being focused on personal contact, face time with prospects and more time on follow up procedures.”

Olivier said security will be the highest priority or business expansion will be slow. Economic development funds for business development support may not be as available. However, he says everyone knows they have a safe place to do business, which has long been a feature attraction to foreign firms doing business in the U.S.

J. Britt Herrin, executive director of the Pike County Economic Development District, McComb, also reports seeing a major economic backlash due to the terrorist attacks.

“I was in New York City at the Chemical Manufacturing Show, and attendance at it was probably one-third of what it was last year,” Herrin said. “Even more profound, besides almost empty restaurants in New York City, I flew out of JFK and it was almost a ghost town.”

In Pike County as elsewhere the uncertainty has led to companies refraining from strategic decisions, and being a lot more careful with capital investments. A lot of plant expansions are on hold for now, and a lot of companies are cutting back.

“We do have to face up to the reality that there are going to be fewer industries looking to expand right now in this current environment,” Herrin said. “I think there is an upside to it. I have talked with people in companies who feel strongly that the previous rush of manufacturing jobs overseas may slow because companies will find it very difficult to get managers to move to overseas locations.”

Mark Goodman, commercial development manager for the Lamar County Economic Development District (EDD), said it may be too early to tell whether the 9-11 attacks, and the events that have followed have had, or will have, an impact on business recruitment.

“Businesses looking to relocate are still making decisions based upon economics,” Goodman said. “If the cost of doing business here is less in good times, it is still less in difficult times. I believe existing business development has more to do with the state of the economy, as a whole. It is hard to say what the final impact 9-11 will have on the economy.”

Goodman said he recently flew to two trade shows where he saw a lot of activity taking place. He found that encouraging. And on the commercial/retail side, the Lamar County EDD continues to market the potential buying power in their market.

“If we, or those in our trade area, do not experience significant job loss, our market for retail purchases will remain strong,” Goodman said.

It is possible that in some cases losses in one business could eventually result in gains for another. For example, because air travel is down, possibly more conventions will be held locally.

Gray Swoope, president of the Area Development Partnership (ADP) in Hattiesburg, said immediately after Sept. 11 the ADP-managed Lake Terrace Convention Center immediately saw cancellations. But, future bookings are holding and look better for 2002.

“In fact, the fear of travel has caused some companies to look at conducting more regional meetings than national ones,” Swoope said. “This could cause more demand for markets like Hattiesburg. On another positive note, many of the business prospects that we are working with have not shelved new investment plans. Even before Sept. 11, these clients were already counting on a slow economy when developing business forecasts. With the cost of money continuing to be extremely attractive, these companies feel it is still right for prudent investment opportunities. Companies with strong cash positions will take advantage of lower interest rates and be in expansion and acquisition modes. “

A less positive development that hurts business is delays at airports.

“Having flown six times since the 11th, I have seen first hand the adverse impact on the ability to conduct business,” Swoope said. “You must plan on extra time to accommodate lengthy delays for boarding and security checks. In business, time translates into money.

“Secondly, the ADP and other economic development agencies rely heavily on direct mail marketing for generating new leads. This will become increasingly more difficult due to the U.S. mail system being used as a weapon for bio-terrorism. Unsolicited mail to key decision makers may never find their intended destination. So we will rethink our strategy and find more effective ways to reach targeted audiences.”

Swoope thinks there will be increased efforts to support local existing industries and help them survive until the economy picks up. He said that, in reality, communities need a strong economic development effort more so now than in boom times.

Contact MBJ staff writer Becky Gillette at mullein@datasync.com or (228) 872-3457.


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