“Our region is ideally poised to capture a significant share of the re-shoring and near-shoring of manufacturing back to North America…The key word is integrated.”
MCALLEN, RGV – A recent and very comprehensive white paper boldly proposes “targeted economic development” along the South Texas Border to provide “a sound alternative to the reality perennially faced by Mexico: low job creation, fear, ever-growing violence and little hope for a better life.”
The author is Dr. Carlos Marin, Founder and CEO for Ambiotec, Inc. The paper, A Binational Border Economic Development Action Plan, is focused on strategic development of targeted goals and in the use of resources toward achievement of those goals to create a strong regional economy. Co-authors are Dr. Mark Kroll of UT-RGV and Dr. Miguel Gonzalez of UT-RGV.
The paper was the platform for a keynote address by Dr. Marin at a recent Symposium on Border Economics, Economic Development and Entrepreneurship, sponsored by the Federal Reserve Bank of Dallas, University of Texas Rio Grande Valley and McAllen Chamber of Commerce. It was held at the Embassy Suites in McAllen.
Dr. Marin has over 30 years of consulting experience in helping both public and private sector clients identify cost-effective infrastructure management strategies that maximize economic development opportunities. He is the author of numerous publications and invited presentations.
Use of traditional command and control strategies to protect our Southern Border “has reached a point of diminishing returns,” according to Dr. Marin. “The marginal benefits from reduced illegal immigration and insecurity produced by constructing more border fencing and adding more ‘boots on the ground’ far exceed their cost.” Command and control measures are viewed as an “important first step” in controlling the borders, but continuing their expansion is now “a wasteful use of scarce resources.”
Many reasons exist for this premise, said Dr. Marin, but the fundamental one is that “traditional command and control measures do not address the principal root causes of illegal immigration and insecurity: poverty, insecurity and lack of opportunity…Even in war zones like Iraq, U.S. military thinking acknowledges the importance of community and economic development to supplement traditional command and control strategies.”
Dr. Marin points out that a regional strategy to create and promote secure economic development zones, coordinated with a parallel effort by Mexico on its southern border, will significantly reduce illegal immigration and insecurity on the U.S. Southern Border in a sustainable and cost-effective way.
If declining trends in the socioeconomic conditions on the U.S.-Mexico border remain unabated, warns Dr. Marin, “they will lead to regionally disruptive social and economic displacements. This will undermine the long-term interests of both countries, leading to increased insecurity, social instability and illegal immigration.”
Border walls and increased boots on the ground “are not the most effective methods for reversing the downward trends. Nor is more unilateral focus on developing down the traditional pass-through path of our border economies”, no matter how efficient border crossings can be made.
“It is time to work with our southern neighbors and vital trade partners to invest in building secure economic development zones in both of our corresponding borders.”
The paper indicates that over the next 35 years the South Texas border region will have the fastest population growth rate in the State of Texas, according to the Texas Water Development Board. With such growth comes the need for more streets, more water, more jobs, more schools and the challenge of how to pay for these. Given the fact that the area has the lowest education levels in Texas, the challenge of payment for these is tremendous.
Dr. Marin cautions that, with conditions as they are and if these trends continue, “there will be: more unemployment, more government dependency, continued insecurity and illegal immigration not only along the US-Mexico border but also throughout the State.”
Essential to building a prosperous and sustainable economy for the region is creation of opportunities for all people, especially for the youth. This will deter the need for migration of people to other population centers north of the Rio South Texas Region.
The strategic path lies in creating the conditions necessary to foster an innovative, competitive, integrated and collaborative binational border economic development region. According to Dr. Marin, it can be positioned to capture a greater share of the economic development resurgence to re-shoring and near-shoring of manufacturing that is occurring in the U.S., and even more so in the interior of Mexico. This, says Dr. Marin, is “a Mexico that is forecast to become a major competitive driver for North America into the future especially as NAFTA 2.0 becomes a reality.”
Manufacturing can produce significant benefits to the economy of any region. In the case of a region like the Rio Grande Valley, “manufacturing has had, and is having, a transformative effect on both the economy and the culture of the region.” But, even though the Mexican side of the border has one of the highest concentrations of manufacturing jobs in North America, the overall region’s economy, especially on the U.S. side, can be largely characterized as a “pass-through” economy focused on non-traded (non-exported) products and services. Products, engineered and manufactured elsewhere, pass through the region and are consumed elsewhere; the main source of trade is internal (e.g. public sector jobs).
This reality has given rise to the idea internally and externally that the key to our regional economic development is through increased border crossing infrastructure that reduces waiting times and transaction costs. While this is a necessary condition for the growth of the overall North American economy, it is not sufficient to promote economic development and prosperity along the U.S.-Mexico border region. “Jobs and wealth creation in a region are a function of the value added,” emphasized Dr. Marin. And in a pass-through economy, since the value added is marginal by definition, the resulting job increment and wealth creation are very low.
A Rio Grande Valley ecosystem for sustainable economic prosperity requiring a stronger manufacturing sector, based on a binational collaborative regional plan, must be devised and implemented.
The innovative approach embraced in the paper is called BiNED, an acronym for Binational Border Economic Development. Promoting a safe and prosperous border, BiNED uses targeted economic development by means of a binational advanced manufacturing strategy that encompasses the entire southwestern border of the U.S. linked with Mexico. It is based on a world class Advanced/Intelligent Manufacturing Cluster.
The BiNED zone will encompass both sides of the border and initially be positioned in the Rio South Texas Mega Region. The Rio South Texas Mega Region would encompass the area of Hidalgo and Cameron Counties in South Texas, and the municipalities of Matamoros and Reynosa in the Mexican State of Tamaulipas. The initial BiNED pilot zone encompassing the Rio South Texas Region would be the short-term target.
Once the initial BiNED zone is established and its positive impacts are verified, it can then be expanded to span a corridor from Brownsville to San Diego, and Tijuana to Matamoros. The BiNED zone would gain a competitive advantage by eliminating the physical and policy barriers associated with the defined border area so that, to the greatest practical and effective extent, border economies can act as single, integrated markets.
The key word is “integrated”. A “frictionless” BiNED zone would allow the strongest competitive advantages of each respective country to emerge, (e.g. low energy costs, research and engineering, management, greater financial lending and infrastructure/logistics capacity on the U.S. side; on the Mexican side, competitive labor markets and existing advanced manufacturing capacity). This would create a more competitive, secure and prosperous region than one that currently exists under separate, non-integrated entities.
Innovation is the key to economic growth. Research and engineering functions need to be co-located with manufacturing facilities for optimal innovation to occur, points out Dr. Marin. At the same time, mass customization consumer trends have placed a premium on the delivery of products to a demanding customer market with quickly changing preferences. The U.S.-Mexico border is the optimal place for co-location of the competitive labor markets and existing advanced capacities of Mexico with the advanced research/engineering, financial/management and infrastructure/logistics capacities of the U.S.–and the capacity to deliver them more quickly.
The objective of the BiNED strategy is to create a competitive U.S.-Mexico border (Rio South Texas BiNED) Mega Region to attract investment in advanced (Intelligent) manufacturing in order to create jobs and promote a prosperous and safe region in a sustainable and equitable manner.
This region provides an ideal area for case for the development of a pilot BiNED Mega Region focused on advanced manufacturing. BiNED’s mantra is “integrated”—the U.S.-Mexico economies working together as a single mega-region to fully realize the region’s full potential.
The BiNED Region is located from Brownsville to McAllen, and Reynosa to Matamoros. The creation of a strategic binational border economic development program to be implemented jointly by Mexico and the U.S. could control illegal immigration and insecurity in a more cost effective way, while increasing economic prosperity and jobs for both countries.
It would be an innovative and competitive binational Mega Region whose economic focus is advanced manufacturing. BiNED changes the dialogue of the Border Region. The border becomes a gate to economic development rather than a wall, with both sides as business partners for a secure and prosperous border.
The paper proposes a “rapid response” advanced manufacturing strategy that builds on the border’s natural competitive advantage—proximity to U.S. markets–making it ideally positioned to take advantage of prevalent mass customization preferences and market trends. There is no better place to bring together the best of the U.S. and Mexico than on the border.
According to the white paper, the BiNED strategy is designed to create regional and binational prosperity and shun regional and binational decline. With BiNED:
* Leadership will foster a regional community, will leverage assets, and be open to innovation and entrepreneurship.
* Quality of Life will change from inadequate infrastructure, high unemployment, low wages, inadequate healthcare, and increasing crime, to become a place where infrastructure serves the population; talent is recruited, developed and retained; there is civic and social entrepreneurship, innovative healthcare systems, and shared prosperity.
* There will be eradication of high dropout rates, dead-end careers, and limited post-secondary education; instead, education access will be enhanced, and more graduate degree programs and research & development will be provided.
* Business & industry will shift from emphasizing land and physical assets, and depending on tourism and service industries with limited career growth; instead will emphasize education and knowledge assets; invest in knowledge-based industries, binational technology, career development and entrepreneurship, and create wealth.
According to Dr. Marin, the BiNED region is ideally poised to capture a significant share of the re-shoring and near-shoring of manufacturing back to North America for several reasons:
* Debits of China locations are mounting, especially in relation to wages and transportation, so competitive wage advantages in China have been eroding.
“Increasing rate pressures in China mean that Mexican manufacturing wages are now on par or lower than corresponding Chinese wages,” and increased overseas transportation costs have placed an additional cost disadvantage on Chinese products.
* The advent and increasing prevalence of mass customization. This consumer trend puts a premium on rapid response manufacturing and provides a competitive advantage to manufacturers that are located near their target consumer markets. Time-to-market and shipping are crucial. No other region is closer to the world’s largest U.S. markets than the U.S.-Mexico Border.
* Large energy reserves, and the recent expansion of power generating and transmission capacity have led to significantly lower utility costs in the region.
* The Rio South Texas Mega Region is already among the areas with the largest concentrations of facilities and employees engaged in the manufacturing sector. Reynosa and Matamoros alone have over 261 manufacturing facilities. And, there are over 209,000 manufacturing jobs in the Rio South Texas Mega Region.
* A shared manufacturing platform is a possibility.
Single Development Plan and Regionalization
Competitiveness is not just about low labor costs or short waiting times at bridges and lower border crossing transaction costs. These conditions create advantages only if the Region’s organizations and people work together– using the mantra of “integrated”.
A single economic development plan for the Rio South Texas BiNED Mega Region is critical to success. Instead of having several regional disjointed efforts, where different cities are acting in independent disjointed silos, or even within cities where individual strategies are disjointed, e.g., infrastructure or workforce development pursuing disparate uncoordinated initiatives, “a single regional development will create a unified path forward for the economic development of the region…a unified framework for integrating all the necessary elements of an economic development strategy under one umbrella.” This is a necessary condition for transforming the economy of the region.
According to Dr. Marin, a bi-national economic model already in place on the Sweden-Denmark border can serve as a prototype for the BiNED initiative, as can elements of the Safe Economic Development Zones proposed by Mexican President Enrique Pena Nieto for Mexico’s Southern Border.
Various components of the plan include technology, infrastructure, institutional capacity, entrepreneurship/innovation, capital and workforce development. Competitive Factors include: Technology, Talent/Education, Capital/Business climate, Infrastructure, Leadership (public & private), Quality of Life/Security. Developing a competitive zone will involve: recruiting outside firms; retaining and evolving existing firms, and building new companies.
Political changes are paving the way for the value of BiNED, as evidenced in the recent Brexit vote, a bellwether for positioning from globalization to smaller continental/regional economies. Local successes from NAFTA have shown the value of working with Mexico and lining up resources to enable the international cooperation.
Being a leader is important in the global marketplace, but integrated economic regions are the future. BiNED creates the scale needed to create an effective regional economy.
There are a number of initiatives that are needed for the region to capture the opportunities, but the most critical of these will be the development and implementation of intelligent manufacturing technologies that allow production lines to quickly adapt to market trends. Also, the integration of supply chains in the region; development and implementation of a binational workforce development strategy, and creating an infrastructure/utility infrastructure that is dictated by the mega region’s economic development strategy—not the other way around.
The white paper lays out the BiNED strategy in three sections: 1) Concept, premise and features of a proposed pilot BiNED Mega Region located in South Texas and in the northeastern section of the State of Tamaulipas in Mexico. 2) A focus on manufacturing as the best path forward for creating a prosperous border region. 3) A path forward for implementing a pilot BiNED Zone in the Rio South Texas Mega Region. The white paper indicates the following specific sectors where The BiNED Region has a potential competitive advantage: 1) consumer electronics; 2) energy exploration, production and servicing; 3) aerospace; 4) automotive, and 5) medical.
The BiNED strategy offers the optimal chance for innovation by positioning engineering/r&d and manufacturing under one roof. The zone would be bi-national, bilingual and demonstrate an integrated culture. Integration within the zone provides cost-effective energy, logistics and low cost utilities, enhanced by location.
Some existing examples of the BiNED type operations include Pre-Inspection Pilot Programs in Nuevo Laredo’s Dual Customs Airport and the Foxcon Facility in Chihuahua. These demonstrate competitive border region and economic development planning.
Work in Progress
The BiNED plan is designed to create jobs in both countries. It gives Mexicans and Central Americans an opportunity to live and work in their own countries, and will, in turn, lessen the number of those who come across the border in search of better alternatives for their families.
The Plan is being developed by a BiNED Coordinating Board for the Rio South Texas Mega Region. The coordination of an integrated economic development strategy cannot be created in an ad-hoc, piecemeal fashion. It requires a sustainable framework for collaborative planning and implementation, and provides a platform for sustainable and effective regional collaboration.
The BiNED Coordinating Board is a public/private collaborative. It is to include representatives from all major cities in the Rio South Texas Mega Region, along with other regional economic development groups to lead specific functions, in order to increase regional support and consensus in order to reduce duplication of efforts. The Board’s functions would include outreach, marketing, research, policy analysis, lobbying and fundraising.
Bylaws have been developed and applications for both 501©3 non-profit status and 501©6 for lobbying have been completed. Work on determining the organization’s funding mechanism is underway.
After the development work is completed, a Manufacturing Summit will be held with leading manufacturing chief executive officers to gather their input on work that has been done, and on work that is anticipated. A BiNED Supply Chain Integration Study and Economic Development Plan will be created and legislative efforts will be initiated to seek support for: a BiNED workforce development strategy; a BiNED International MSA; a BiNED Leadership Institute; a BiNED University and r&d facilities, and a BiNED International (manufacturing) Free Trade Zone.
BiNED’s Competitiveness Goal is to Provide a Total Operating Cost Value Proposition vis-à-vis other regions.
BINED’s Talent (Education)/Technology Strategy incorporates a single coordinated workforce training program for the entire Region. Included in this will be: entrepreneurship\incubation programs; internship and apprenticeship programs; a network of University r&d/technical education facilities; educational paths with multiple career pathways; involving school districts, technical colleges, universities, r&d facilities and business entities. According to Dr. Marin, “The bottom line is a World Class Educational Training Program.”
BiNED’s Infrastructure Strategy includes: creation of a low cost-high service efficiency water, energy and transportation binational infrastructure system; regional/binational water/wastewater facilities and planning; regional/binational energy facilities and planning, and regional/binational transportation facilities and planning. Economies of scale and integrated planning are key.
To enhance the capital/business climate would be Customs Preclearance on both sides from Manufacturing facilities to transportation over the border—secure transference from facility to facility—incorporated in a BiNED Free Trade Zone.
BiNED would seek to develop a Bi-national Free Trade Innovation Zone, petitioning for: credit enhancements for border projects, tax credits for border manufacturing projects, and tax credits for private r&d facilities on the border. The BiNED Bi-national Free Trade Innovation Zone would combine engineering and r&d under the same “roof” as the manufacturing line. It would, according to the white paper, “be innovation driven, with the best of the U.S & Mexico under one roof.”
BiNED is a multi-faceted, multi-strategy method to bring prosperity and security to the U.S.-Mexico Border and change the perception of the U.S.-Mexico border from a challenge to an opportunity. The white paper presents elements of the BiNED planning and development process which is underway and which will necessarily involve many people and organizations on both sides of the U.S.-Mexico border. Short-term goals include: creating the initial geographical and educational structure, creating needed financial infrastructure to facilitate technology- based entrepreneurship and outreach, and a Border Manufacturing Alliance. Longer term goals include: establishment of the Border Region as a “sufficiently prosperous region with enough jobs to make a difference in the regional immigration environment and insecurity in the region”; recognition of the region as “the leading international technology-based innovation hub anchored on its advanced manufacturing capabilities for providing customized quality products at unmatched speeds”, and “mutual recognition from both governments.”