Poor nations and U.S. states offer huge financial breaks to biotechnology; DEVELOPMENT: Poor Nations, States Dream of a Biotech Boom

BYLINE: Adrianne Appel

What often happens is the local government gives away so much in tax breaks that they can't pay for providing the services that the companies expect are going to be provided,' Phil Mattera, research director of Good Jobs First, told IPS.

Nowhere is this competition more in view than at the annual meeting of biotechnology companies, staged this year in Boston.

There, poorer nations and states, like Mexico, Louisiana and Kentucky, or those representing them, spend tens of thousands of dollars each -- and some more than a million dollars -- to rent space in the meeting's cavernous exhibition hall.

They lavish trinkets and liquor on visitors to their booths and stand ready to describe the basket of financial breaks, like low or no taxes, available to biotech companies that move to their communities.

Like a microcosm of the global market, their decorative booths compete against each other, and those of France, Australia, California, Massachusetts and other wealthier regions.

'You use the party to showcase your assets. We'll have wine and cheese,' Laura Malis, of Connecticut United for Research, a group that promotes biotechnology, told IPS at last week's Bio International Convention here.

But while wealthier regions compete by offering a highly skilled labour force, good schools and a cosmopolitan atmosphere, less wealthy areas try to lure biotech with their low cost of living and low taxes.

'Often it is a race to the bottom because places compete against each other to offer the biggest tax breaks,' Mattera said.

At the convention, biotechnology managers swayed to Puerto Rican music, drank Mexican tequila and flashed New Orleans Mardi Gras beads, thanks to some of the poorest U.S. states and nations.

'When a company comes here we'll have more employment and the jobs are good, not manufacturing jobs. We want to have a better life for people,' Jessica Montano, of the Consejo Epresarial de Biotecnologia (an organisation that promotes biotechnology), of the Mexican state of Baja California, told IPS at the meeting.

'Our labour is cheaper. Even our scientists don't charge much,' added Graciela Guererra, of the Entrepreneur Council of Biotechnology.

Warren Nash, deputy commissioner for economic development of Kentucky, said, 'We can help businesses from beginning to end.'

His state, among the poorest in the U.S. in terms of personal income, health and education, would offer 'a low cost of doing business, cash and loan programmes and tax incentives' to biotechnology companies, Nash told IPS.

Nearby, the Louisiana booth was decorated like a living room, with carpeting and easy chairs, and a pot of hot coffee ready to be poured for any visitor. The booth was giving away thumbnail-sized bottles of Tabasco sauce.

'We invest in specialised buildings, labs, incubators. But that's only the half of it,' said Jack Sharp, president of the Biomedical Research Foundation, a group that promotes biotechnology in Louisiana.

'The cost of doing business in Louisiana is competitive,' he said. Because of the state's low cost of living, 'Companies save 15 to 40 percent in operating costs compared to locations on the East and West coast' of the United States.

The group also helps young biotechnology companies find money from wealthy investors.

'We want to make sure the new economy is present for our communities,' Sharp said.

Biotechnology, the manipulation of living cells to produce drugs, medical devices and new strains of seeds, generated 50 billion dollars in revenues in 2005, according to the Biotechnology Industry Organisation.

The line between the pharmaceutical industry and biotech is blurry, and it is not uncommon for small biotechnology companies to work with large pharmaceutical or agriculture companies.

'It's not as if without public money there would be no biotech. There's no reason for taxpayers to have to underwrite for a for-profit industry,' Mattera said.

Karen Kraut, of United for a Fair Economy, told IPS that communities may want to scrutinise the salaries drawn by the top managers of a biotech company before promising to give big tax and other breaks.

'If you can afford to pay a CEO exorbitant wages maybe you disqualify yourself from the subsidy. What would a regular taxpayer think if we subsidise an industry where the CEO gets a million-dollar salary?' Kraut said.

Kraut said that giving big financial help to one industry like biotechnology is not a lasting way for a community to raise its standard of living.

'Elected officials believe that by throwing money at corporations rather than investing in the workforce or the infrastructure that this will help their community,' Kraut said.

'Communities can't just throw money at a corporation and hope that this will be your job plan. A comprehensive jobs strategy is needed,' Kraut said.

Sometimes, arrangements between communities and biotech go terribly bad. Singapore is currently in a dispute with Viacell. Singapore offered incentives to the company but according to Singapore officials, Viacell did not hire the number of people it promised to. Singapore wants its money back, according to reports.

Rhode Island, not a wealthy state, also is in a bind since agreeing to provide water to biotech giant Amgen, which had revenues of 12 billion dollars in 2005. The company's demand for a million gallons of water a day is more than the state can currently provide, without digging new, expensive wells or causing shortages for residents.

'The thing about biotech is that economic developers think of it as a magic bullet, the solution to all their problems,' Mattera said.

There are about 1,400 biotech companies in the U.S. and they are mainly concentrated in just 12 U.S. states and Canada, according to the Biotechnology Industry Organisation.

A 2002 Brookings Institute study found that biotech companies prefer states with a highly educated workforce, a scientific community and good public schools, like California, Massachusetts and parts of North Carolina.

New Hampshire is not among the 12 favourite states but this did not stop the state from hosting a big booth at the recent Boston meeting.

'Let me emphasise, we are here to promote the state for biotechnology business,' John DiNapoli, business development manager for New Hampshire, told IPS. He stood beneath a broad banner that read 'Tax-Free New Hampshire'. The state, known for its generally poor public schools and services, features no personal income tax and low taxes for some industries.

Pennsylvania, among the top 12 states for biotechnology companies, drew a big crowd at the Boston meeting by giving away a Harley Davidson motorcycle.

'It probably brought 2,000 people here today,' Ted Martin, director of economic development for Pennsylvania, told IPS. 'It highlights what Pennsylvania has to offer.'

Explained Jenny Ewing, who booked a jazz band that entertained visitors of the Canada biotechnology booth, 'Bio is big. © 2007 NoticiasFinancieras - IPS - All rights reserved