Tuesday, March 13, 2007

The Benefit of Hindsight.

I see that the 'hindsight' critics are at it again. This time its the LG inward investment project in Newport, that went belly-up a few years ago. Well, I'm not joining in. As far as I can see it was a perfectly reasonable investment decision to make. The chance of 6000 new jobs was worth some element of risk.

The project emerged after I left the WDA, so I have no background knowledge of it, except that I know how much competition there would have been for the project. I also know that there was no reason to think the market would collapse as it did, leaving the Korean investment so exposed. Lucky Goldstar was a blue chip company, who would have known better than anyone the state of the market. Sometimes these things just happen.

The Auditor's report is as good as could have been expected. The idea that a project like this one could have been cast iron safe is unreal. And the same thing would apply to a big inward investment today. Whether the Assembly Government would be entrepreneurial enough to take the sort of chance that would be needed to pull off a big deal is a question that only time will answer.

I will not criticise initiative - even when there might be some opportunistic advantage available. A few months ago, some opposition AMs were trying to embarrass the Labour Government when Dairygold shut up shop in Ceredigion after receiving Government grants. I didn't join in. There will never be any investment in Ceredigion without some risk - and some opportunity for the 'hindsight merchants' to criticise.

So, I say to the Assembly Government "Be willing to take risk, but make sure it is calculated risk - and don't be too frightened of the auditor's backlash. It is only those who achieve nothing at all who will remain immune from the auditor's criticism.


Marcusian said...

I agree with what you are saying Mr Davies, many of my friends gained employment in LG and on whole found it a job they enjoyed. It was a risk worth taking, and its hasnt been a financial disaster as the WAG have claimed half the money back...

Bloomin' eck! i nearly praising the tories in wales!! i need a lie down.

Anonymous said...

i thougt glyn was praising the labour government over the dairygold fiasco as well so praising the tories is fair enough

Glyn Davies AM said...

I don't pretend that either LG or Dairygold worked out as we hoped - but all forms of public sector business support involve some risk. I do think we need to put in place strong controls to recover money - but even here if the controls are so onerous as to eliminate risk, new developments will not go ahead.
When I look back to when I was taking these sort of decisions, I did take risks - and, luckily all the big ones came off. But I do recall one mega-million project involving a New Zealand company called Fortex, that I would have taken a big risk on - only to find out that its Chief Executive was cooking the books. If Fortex hadn't gone 'bust' just in the nick of time, I would have landed myself in big trouble. So I have some sympathy for today's decision makers.

Ted Jones said...

Don't you think that economic policy has been to skewered towards inward investment over the last forty odd years.

of the 3000 or so factories opened between the 60s and 2000, over 2000 of them have left or closed.

don't you think we need a change of approach, one that works with Welsh based companies - ie those who have a stake in our communities?

Glyn Davies AM said...

I think ted makes a fair point - but only to an extent.

I have absolutely no doubt that inward investment was the only sensible policy following major restructuring in the coal and steel industries in the 70s/80s, when huge numbers of people lost their jobs at the same time as there was a lot of foreign investment looking for a home. There was a certain ammount of unjustified 'glamour' about this entirely practical response, which attracted far too much publicity.

The same situation doesn't exist today. There isn't the pool of unemployment, which was the main attraction 20 years ago, and Wales cannot now compete for manufacturing jobs with the emerging economies of Eastern Europe, China and India etc.

Our inward investment strategies today have to aimed at higher quality jobs today - and there has to be much greater concentration on growing our own. Which is why skills and entrepreneurship are now so much more important. So ted is right about current policy.

Anonymous said...

Oh i remember all the 'glamour' when you and Gwyn Jones were jetting around the world. you were never off the tv. at least youre still around. one thing i have to say for you is that you are a survivor

Anonymous said...

As the Japanese saying goes 'To accumulate you have to speculate!'