REMARKS AS PREPARED FOR DELIVERY - SANDY K. BARUAH, ASSISTANT SECRETARY OF COMMERCE FOR ECONOMIC DEVELOPMENT - IEDC FEDERAL ECONOMIC FORUM

TUESDAY, MARCH 20, 2007

AS PREPARED FOR DELIVERY

Introduction by Gene DePrez, Americas Leader, Global Location Strategies/Plant Location International, IBM Global Business Services

INTRODUCTION

SLIDE 1 – Logo
Thank you, Gene. I’d like to applaud IBM as a world-class example of a leader in innovation – and a fitting participant in any conference focused on “innovation.” Thank you for your participation.

I’d also like to acknowledge Louisiana Secretary of Commerce Michael Olivier who is here today. Mr. Secretary, on behalf of the President and the Secretary, our thoughts and prayers continue to be with the people of the Gulf Coast and I appreciate your hard work and steadfast commitment to the economic recovery of the Gulf Coast.

My participation here this morning is part of a longtime, ongoing partnership between the Commerce Department’s Economic Development Administration and the International Economic Development Council. EDA and IEDC have been working together on several initiatives that are making a real difference in advancing the art and science of economic development.

EDA supports IEDC’s Economic Recovery Volunteer Program, which deploys professionals to the Gulf Coast to assist business owners, and this work is playing an important role in helping to jumpstart the Gulf Coast’s economic recovery.

EDA and IEDC have joined forces with the National Association of Regional Councils to provide economic development professionals with information on the art and science of 21st Century economic development. This information dissemination campaign features television shows, a quarterly magazine, electronic news updates, and this year includes five Economic Development Symposia across the nation. Please forgive my 3 second commercial, but I do hope that you will be able to join us in one or more of these symposia. We have top tier talent lined up as speakers and just like today’s conference, there is so much that we can all learn from each other.

SLIDE 2 – Innovation
I applaud the theme of today’s conference: innovation. This theme is right on the money, because at the end of the day, the ability to innovate is our country’s – and any other country’s – only possible sustainable competitive advantage in the 21st Century. It’s not location. It’s not cost of doing business. Such factors will continually shift in a dynamic worldwide economy. But if a nation can maintain its edge in innovation, it will grow and prosper.

I am proud that America is clearly the world’s leader in innovation. The spirit of discovery is one of our national strengths. From Edison's light bulb to Jarvik’s artificial heart to IBM’s personal computer, to the frozen pizza to the I-Pod, we have brought more technological breakthroughs to the marketplace than any other nation – and this has made not just America, but the world, safer, healthier, more productive and more prosperous.

While the U.S. has led the global marketplace in fostering new ideas and bringing them to fruition, we must not allow our leadership today to make us complacent tomorrow. International competitors are rapidly commercializing technological advances, educating skilled workforces, and offering world-class research venues.

The 20th Century undoubtedly belonged to the United States. The question now is how to continue that preeminence in the 21st Century. To stay competitive we must maintain a business environment that encourages innovation. And it’s not just businesses that need to innovate, it is also government and other public institutions, and the Economic Development Administration is no exception.

Innovation is not easy. I’ve been watching the CNBC specials that have been running on Sunday nights – sponsored by IBM, by the way – “The Business of Innovation,” where I heard the most compelling definition of innovation I’ve heard in a while: innovation requires you to have 100 people tell you that your idea is stupid, and still go to the 101st.

We all know that innovation is not easy. And it’s especially not easy in the worlds of non-profits and government. In our worlds, all the pressures that bear down on us encourage us to maintain the status quo – the status quo albeit with fewer dollars. Our stakeholders; be it elected officials, our business partners, perhaps even the public, all are pressuring us not to change, yet demand that we become more effective.

But, one of the traits possessed by successful economic development professionals is the ability to be forward thinking. Innovation and competitiveness drive our economy, and if we – as economic development professionals are not innovative and competitive ourselves, then we fall short of the very mission and responsibilities entrusted to us to maintain America’s global leadership.

SLIDE 3 – EDA Policy Priorities
That’s why EDA places such a strong emphasis on investments that support innovation and competitiveness, in addition to encouraging entrepreneurship and supporting collaborative regional economic development approaches. We look for investment opportunities that answer the “what’s next” question for America’s economic regions. That means building on regional competitive advantages, advancing innovation and productivity that, at the end of the day, foster higher-skill, higher-wage job creation and foster private sector investment.

As innovation is the theme of this conference, I know that you have heard from some of the best and brightest from the business, academic and public sectors. So instead of giving you my take on the importance of innovation, allow me please to describe for you how the Department of Commerce is advancing an innovation in how we do business that, I believe, will make life better for you – the customers of EDA’s programs.

I’ll begin with a small anecdote that illustrates that challenges with the current way that EDA’s funding programs are organized. Let’s say that it is my mission to provide you lunch today and that we both know that there is a total of $15 in my pocket. The catch is the $15 is in the form of three $5 bills that you must spend separately for each part of your meal.

So, here’s how your lunch experience must go: You pick up your sandwich and wait in line to buy it with your first $5 bill. The problem is, the sandwich you really want is more than $5. Then you pick up your chips and wait in line again and buy the chips with your second $5 bill. Now, your chips are only $2 so you have change and you think to yourself, well these couple of extra dollars could have gone toward the sandwich I really wanted. Then you get your soda and wait in line again to buy it with your third $5 bill.

At this point, you don’t exactly have the lunch you want, really for no good reason, you have spent a lot of time in line, you’ve had the cashier print out three receipts wasting time and paper…it just doesn’t make any sense to you and you come to me and say “why did you make me do this?” And my response would be: “because this is the way we’ve always done it, that’s why!” Now this may be a good tactic if I don’t want to have lunch with you again, but EDA wants to do business with you and I believe a bit more flexibility is in order.

Therefore, in the 2008 budget, EDA is again proposing the Regional Development Account – the “RDA.” Basically, the RDA pools the three competitive programs administered by EDA’s regional offices into one account. I’d like to outline this proposal by doing two things:

1. First, outlining what the RDA is, and, since at the end of the day, any change to EDA’s program is worthless unless it is a direct benefit to the people we serve, I’ll outline what it means to you;

2. And, second, I’ll discuss what the RDA is not to help address some of the questions that I have received about this proposal.

WHAT THE RDA IS
SLIDE 4 – EDA Today: Multiple Program “Buckets”
What you see here are the “buckets” of EDA program funding:

• Public Works.

• Economic Adjustment.

• Technical Assistance.

• Partnership Planning.

• Trade Adjustment Assistance.

The first 3 – the ones highlighted in blue – are the competitive programs administered by EDA’s regional offices. The other 2, Partnership Planning and TAA for Firms are separate, non-competitive programs that are administered in a completely separate manner.

What has happened for generations now is that folks inside the Beltway tell you – the local economic development professional – and EDA’s regional offices exactly what your Public Works needs are…exactly what your Economic Adjustment needs are…exactly what your Technical Assistance needs are by dictating from Washington how much should go into each of these buckets. You, the EDA customer, are required to separate your inter-related development needs to fit into one of these EDA buckets, and to pursue EDA assistance for each of these needs separately.

The RDA would put an end to this current funding structure that severely limits EDA’s flexibility, and would shift decision-making on how EDA funding should be used to a more local level.

SLIDE 5 – EDA Proposed: Single RDA “Bucket”
Here’s how the RDA would allow EDA to be more flexible. As I mentioned, the RDA would simply consolidate EDA’s three primary competitive investment programs – Public Works, Economic Adjustment, and Technical Assistance – into a unified, holistic, and flexible program account.

Ultimately, this is what is important: Every EDA program dollar would have attached to it Public Works authority, Economic Adjustment authority, and Technical Assistance authority. Our Regional Offices would no longer have to worry about how much money is left in any particular bucket. If EDA has money left, we could use it for what ever the pressing economic development need is – and not make decisions regarding what we fund or don’t fund based on how much money is left in a particular funding bucket.

It’s a simple proposal, but I believe it provides you important benefits.

SLIDE 6 – More flexibility
First: It makes it easier for you to access EDA programs. Under the RDA, you will be able to apply for multiple activities in a single EDA grant.

One investment application. One approval. One set of reporting requirements. Yet you can use your EDA funds for both Public Works and Technical Assistance.

I think this is important, because successful economic development today is holistic in nature. Under the RDA, you as an EDA investment recipient could finally use EDA funds in a holistic manner.

Here’s an example of how this would work: You would apply to EDA as you usually do for, let’s say a Public Works investment to support an inter-modal facility. But in the same grant, you could also ask for some technical assistance funds to help build the relationship infrastructure – with the private sector, with neighboring political jurisdictions, with other non-profits such as workforce development boards, with local community colleges, and other economic players in your region, to ensure that once you are done constructing your inter-modal facility, your project will be as successful as it can be.

SLIDE 7 – Administrative Savings for You – and EDA
The beauty of being able to do multiple things with a single EDA grant is that is means less paperwork for you! Instead of applying for two grants, which means two applications, two approvals, two sets of reporting requirements, two sets of EDA staff to keep informed, you’d only have one grant and its associated requirements to keep on top of.

This also means that EDA would have fewer grants to process, approve, and monitor – and that’s a meaningful administrative savings to the agency at time when we are scrambling for resources. No one can argue that this would be more efficient.

SLIDE 8 – Local Control
The RDA puts regional people, not Washington officials, in a better position to respond to regional economic development needs. Under our current system, we are effectively telling each of the six EDA regions, this is your level of resource need for public works and infrastructure…this is your level of resource need for technical assistance. Why make these decisions in Washington when we have economic development professionals across the country who are in a better position to evaluate local conditions?

This makes sense for investment recipients as well as for the EDA team. Our budget has shrunk so much that the allocation for Technical Assistance for our Regional Offices is only between $1 and $2 million per year. That doesn’t go far.

With the RDA, our regional offices will have greater discretion to allocate their precious EDA dollars in the manner that best suits the needs of their region.

SLIDE 9 – RDA Based on a Proven Approach
If you are thinking that the RDA does not sound like a new concept – you’re right. The RDA is built upon EDA’s proven and most popular program account: the Economic Adjustment Account. EDA’s Economic Adjustment Account has the flexibility to do Public Works, strategic planning, and Technical Assistance, but the Economic Adjustment Account is only able to be accessed in response to a “sudden and severe” economic dislocation.

The bottom line here is, the RDA turns all the competitive program funds administered by EDA’s regional offices into a large Economic Adjustment Account, without the requirement of sudden and severe economic distress.

THE TOP 7 OF WHAT THE RDA IS NOT
SLIDE 10 – The Top 7 of What the RDA is Not
So, that’s an overview of what the RDA is. Let’s spend a moment talking about what the RDA is not. I’d like to borrow from David Letterman and do this in the Top 10 format, but first, in good Republican tradition, lets cut this by 30%...therefore, ladies and gentlemen, the top 7 things the RDA is not:

#7: Although I may joke about cutting a top 10 list, there is no joke about cutting in any way the funding allocation to EDA’s regional offices. The RDA – in no uncertain terms – would not affect regional office budgets. The funding allocation to EDA’s regional offices is a carefully crafted formula approved by Congress several years ago, and that formula and methodology would be untouched by the RDA.

#6: The RDA will not alter EDA’s investment selection criteria, investment processes, or focus on economic distress. The RDA would in no way impact how EDA makes a grant, where EDA makes a grant, or the processes used to determine who gets an EDA grant. All of EDA’s eligibility requirements would remain as is and our process, funding priorities, and investment policy guidelines all would remain as they are today.

#5: The RDA has absolutely no impact on the agency’s commitment to Public Works projects. Public Works infrastructure is where EDA gets our “bang for our buck” – job creation and private sector investment. We need these infrastructure projects in order to keep our performance results high, because that’s how we are judged by OMB and many folks on Capitol Hill.

#4: The RDA does not touch the Partnership Planning Program, which will remain as a separate, stand-alone program focused on supporting the Economic Development Districts.

SLIDE 11 – The Top 7 of What the RDA is Not (continued)
#3: The RDA will not put some states at an advantage over others. There will be no change in EDA’s longstanding commitment to safeguard to ensure that no state can receive more than 10% of EDA’s total funding per year.

#2: The RDA is not going to reduce EDA’s investments in small or rural communities. EDA never had a set-aside for rural communities, yet we make over half of our investments in rural areas – and that will continue under the RDA.

And the #1 thing that the RDA is Not: The RDA is not a mechanism to cut EDA funding. EDA’s funding will not change based on the implementation of the RDA. In fact, the RDA was first introduced last year when President Bush proposed a $47 million increase for EDA. And for the record, let me remind you, that in 4 of the last 5 years, President Bush has proposed more funds for EDA than the Congress has appropriated. Just like my $15 lunch example, the number is the number and it won’t change…so whether the money is divided into three accounts or one, $15 is $15.

CLOSING
SLIDE 12 – Logo
So that’s a brief overview of what the Regional Development Account is, and what it’s not. It’s an innovative strategy for helping to utilize our resources in a more efficient manner, but most importantly, it helps EDA’s investment partners and acknowledges that economic development today is holistic. It’s more than just building something, it’s about answering the “what’s next” question.

We, as economic development professionals need to be innovative and we need to do everything in our power to encourage the competitiveness of the economic regions we serve. We need to advance the art and science of economic development by promoting holistic approaches.

I’d like to hear from you, if you think this is a good idea, then let’s work together to get these changes made…if you disagree with me, I would like to understand why. If you have questions, please do not hesitate to contact me or others on the EDA team.

On behalf of President Bush and Secretary Gutierrez, I thank you for your kind attention today, I hope you enjoy the rest of the conference and thanks again for the invitation to be here.

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