Two Southern California regional economic-development groups will use a newly issued, first-of-its-kind federal grant to study whether they can unite their economies with that of a Mexican state to create a “mega-region” anchored by applied biotechnology and four other industry clusters.
The US Department of Commerce’s Economic Development Administration has awarded $225,000 to the San Diego Regional Economic Development Corp. and Imperial Valley Economic Development Corp. Over the next 12 to 18 months, the two EDCs will study the economies of San Diego county, its impoverished neighbor Imperial county, and the northern section of Mexico’s Baja California.
The theory is that uniting the economies could help lift Imperial from poverty and help San Diego’s life-science industry find affordable locations for manufacturing and distribution operations. For its part, Northern Baja would continue supplying part of its electric power during crunch periods.
The study, which will also get $90,000 in matching or in-kind contributions from local businesses and institutions, aims to identify strategies for fusing the three areas into an economic “mega-region” anchored on applied biotech as well as cleantech, construction materials, specialized manufacturing, and the distribution, warehousing, and transportation of goods, the senior project manager overseeing the economic study told BioRegion News last week.
Christina Anne Luhn, public policy manager with the San Diego Regional EDC, said the Mega-Region Initiative is expected to strengthen a “pretty good” working relationship between the EDCs, and continue a regional-economic effort several years in the works.
Last September, for instance, the Board of Supervisors of San Diego County directed Chief Administrative Officer Walter Ekard to explore creating a state “economic-development district” for the region that would qualify San Diego and Imperial counties for additional economic incentives, an effort still in progress.
“We had some contact with Imperial around support of that idea, and then this opportunity came up to meet with the regional directors and pose some ideas about what else would make sense,” said Luhn. “We put forward this idea [of the mega-region study], but it came out of long conversations with Imperial County. And they liked it.”
She said that the “early part of the initiative — the part that’s really driven by the grant — is really about helping Imperial County better develop their economy so they can better integrate themselves into this larger region that we’re calling a mega-region.”
Luhn cautioned that the effort was in very early stages and therefore much of the specifics for carrying out the study have yet to be decided.
Imperial County was incorporated in 1907 with land from the southeastern half of San Diego County. It has a population of 155,823 in 2005, according to a US Census estimate.
Despite its name, derived from a land-development company that acquired much of the Colorado desert for agriculture, Imperial has long struggled with poverty and unemployment — especially during the past generation, as agriculture declined and waves of legal and illegal immigrants seeking economic opportunity in the US crossed the Mexican border.
The poorest of California’s 58 counties, Imperial recorded a median income last year of $40,000 for a family of four, compared with $69,400 for neighboring San Diego County, according to the US Department of Housing and Urban Development. The county is hamstrung in part by its topography: 75 percent of the county’s 4,597 square miles consists of desert sand and mountains, and average annual rainfall is less than 3 inches.
“People in San Diego often don’t think about going east, to Imperial, to do business. And … there’s still quite a bit of apprehension in the United States about what’s going on in Mexico.”
Luhn, who according to the San Diego Regional EDC played an instrumental role in obtaining the federal grant, joined the corporation last June after managing projects for the International Energy Agency in Paris and the US National Security Council.
A united economy, Luhn said, would help lift Imperial from poverty and help San Diego’s life sciences and other targeted industries by providing a location for manufacturing and distribution operations. And Northern Baja, in turn, can help the two California counties by continuing to supply part of its electric power during crunch periods such as the 2001 series of brownouts and blackouts that hamstrung the state, she said.
The region’s electric utility, San Diego Gas & Electric, has sought to address the energy supply issue in recent years by proposing a $1.3 billion, 150-mile transmission line between San Diego and Imperial County. The line, dubbed the Sunrise Powerlink, remains under review — the reason the utility has been publicly blamed for being the only utility unable to meet a 2010 mandate to obtain at least 20 percent of its power from renewable sources.
The mega-region can also benefit Baja California by broadening an economy now based on agriculture and fishing. In recent years the Mexican state has expanded its manufacturing sector to what the Baja California website
says is more than 700 factories, most of which have relocated from the US or Asia in the 14 years since the North American Free Trade Agreement took effect. Those factories specialize in clothing, electrical, electronic, glass, metal, and plastics.
But Baja California is also looking to capitalize on its best-in-Mexico school system to position itself as a desirable spot for biotech businesses. Mexico’s Secretariat of Economic Development has said that private and public employers in the sector have on the payroll 1,721 of the state’s 620,000-person work force.
One employer — Scantibodies Laboratory, headquartered in the San Diego suburb of Santee — in 2002 shifted its OEM operation, which manufactures 2 million pregnancy test kits each month, to the Baja California town of Tecate. Four years later, Scantibodies built an additional 125,000-square-foot skilled-assembly facility in Tecate’s El Bajio Industrial Park.
Baja California is also home to Ceni2t, an incubator that nurtures biotech, IT, and wireless tech startups. “A key benefit is supplying the teams, facilities, processes, and infrastructure that our clients need at a much lower cost than the United States,” the incubator said.
Imperial, too, has set its sights on applied biotech during the past few years, albeit with less to show for its effort than Baja California. Applied biotech was among eight industries targeted for growth in a 2006 strategic plan published by Imperial’s EDC.
“Imperial County should explore alignment with the San Diego Region to host some applied biotechnology industries. The ability for these companies to utilize inexpensive land to create the facilities and the availability of both water and energy provide a competitive advantage,” the strategic plan concluded. “The real advantage, that overseas and foreign competition cannot offer, is access for laboratory personnel to maintain quality control with a two-hour drive, rather then a fifteen-hour flight.”
The other seven were construction materials, energy generation, food processing, inbound call centers, specialized manufacturing and assembly, tourism, and distribution-warehousing-transportation.
“People in San Diego often don’t think about going east, to Imperial, to do business. And while there’s quite a bit of bi-national business, there’s still quite a bit of apprehension in the United States about what’s going on in Mexico,” according to Luhn. “There’s a whole public-education component to this that we have to deal with.
“There’s really good potential for making some really important policy recommendations about how to do immigration in a way that protects our borders yet [reflects that] our economies are already interconnected,” she added.
That dilemma will likely surface as the study considers how San Diego-area companies should pursue opportunities in the other two areas, without sparking the same kind of controversy that has followed other industries that shifted manufacturing across the border to Baja California
One solution — an admittedly long-term effort, Luhn acknowledged — would be to persuade San Diego life-science companies with agricultural needs to expand within Imperial County.
“For biotech companies that have an agriculture component, they shouldn’t have to leave the state and go to Florida or overseas when they can have access to agriculture” in Imperial County, Luhn said. “There’s already an understanding in certain elements of the industry that this has the potential to be really important for not just retaining the bio industries that we have, but also in terms of attracting new ones.”
The study effort will also benefit from matching or in-kind contributions totaling $90,000 from a variety of businesses and institutions. They include AT&T, Bank of America, the Brawley Inn Hotel and Conference Center, the county of Imperial, Imperial Irrigation District, Imperial Valley Joint Chambers of Commerce, San Diego Gas and Electric Co., the San Diego County Water Authority, and San Diego Workforce Partnership, a project of its namesake city and county.
“Everybody who’s been involved in this process understands that at the end of 12 or 18 months, when we get to the end of the grant cycle, there’s not going to be 30 new companies in Imperial,” Luhn said. “We’re not going to have a perfect ease of movement around the mega-region.
“What we do hope to have, and what I think is quite possible, is to have in place not just strategies for how to bring [new businesses and jobs] in, but for people in San Diego to have a better understanding of what we need to be doing to enhance the economic environment throughout the region,” she added.