Innovation 2.0 A Winning Strategy for Driving Growth A Policy Reset in Time of Fiscal Constraint Prepared for: Washingto

1. Innovation 2.0 A Winning Strategy for Driving Growth A Policy Reset in Time of Fiscal Constraint Prepared for: Washington Economic Development Association Winter Legislative Conference February 15, 2011 Egils Milbergs Executive Director Washington Economic Development Commission www.wedc.wa.gov 1.1 WA Economic Development Commission

2. Summary

3. Sputnik Moments 2011 1985 1957 “this is our generations’ Sputnik moment” President’s Commission on Industrial Competitiveness “one small ball in the air”

4. The World is Changing“not your father’s economy” Innovation Our Goal: Make Washington the most attractive, creative and fertile environment for innovation in the world by 2020 Washington Economic Development Commission

5. 2010 New Economy Index Overall Scores • 26 indicators in five categories: • Knowledge Jobs • Globalization • Economic Dynamism • Digital Economy • Innovation Capacity Source: ITIF WA Economic Development Commission

6. Soaring R&D in China Knowledge-based Competition China is now the world’s second largest economy

7. We are in tough hole …….. Peak to trough job losses 1981-82: 2.9% of labor force This time: 5.5% of labor force WA Economic Development Commission

8. The Great Reset FROM • Public Sector Jobs • Shovel Ready • Expand Safety Net • Consumption • Debt • Competing Regions • Top-down macro strategies TO • Private Sector Jobs • Innovation • Upgrading Skills • Investment • Exports • Collaborating Regions • Bottom-up cluster strategies WA Economic Development Commission

9. WEDC Innovation Strategy Public Impact Business Performance World Greatest Innovation Ecosystem Talent & Workforce Investment & Entrepreneurship Infrastructure

10. Innovation Clusters Matter • New industries and JOBS • Grow faster • Pay higher wages • More spin-off and start-up opportunities • Offset advantages of low wage competition • Attract talent and investment • Solve social, energy, environmental problems • Maintain defense and homeland security WA Economic Development Commission

11. Global Health Marine Technology Medical Devices Freight Mobility Health Services Nano Photonics Bio-Fuels Defense Technology Advanced Manufacturing Electric Car Wine, Water Environment Technology Advanced Materials Value-Add Food Smart Grid Clean Tech Cloud Computing, Data Centers WA Economic Development Commission

12. WA Economic Development Commission

13. Major WA Military Installations 191,000 jobs $12.2 billion in output $10.5 billion in labor income $5.2 billion in defense contracts Whidbey Island Naval Air Naval Station Everett Naval Submarine Base Bangor Spokane Fairchild AFB US Coast Guard • Intelligence, Surveillance, and Recon • Special forces and special operations • Network-centric operations • Cyber security • Composite materials • Unmanned systems – both air and sea • Energy efficiency and alternatives • Health care for veterans WA Nat’l Guard Puget Sound Naval Shipyard Joint Base Lewis McChord Madigan Medical Center US Army, YakimaUS Marine Corps WA Economic Development Commission

14. Washington Economic Development Commission

16. Key Policy Strategies Washington Economic Development Commission

17. TALENT: New Pathways for Learning • Protect training capacity for high demand occupations • Increase production of science & engineering and innovation graduates • Expand use of on-line education • Reduce K-12 drop-out rate

18. INVESTMENT: Accelerate Commercialization • Compete aggressively for Federal R&D funds • Double recruitment of STARS and EIRs • Double start-ups by access to expertise and entrepreneurial capital • Make permanent R&D tax credit • Clean Energy Public-Private Partnership

19. Infrastructure & Regulations • Expand local infrastructure financing tools (e.g. TIF) • Define infrastructure to include “intangible” capital • Build-out broadband(wired & wireless) • Create mechanism for self-financing of industry clusters • Reduce regulatory barriers and uncertainty

20. Seize Global Markets Implement Governor’s export assistance initiative Invest in freight mobility & infrastructure Focus trade promotion on competitive clusters, not national markets Improve foreign market intelligence and on-line tools Washington Economic Development Commission

21. World’s Greatest Innovation ParkCollaboration across regional boundaries • Provide operational funding for IPZs • Strengthen links with defense and mfg. sectors • Pursue Federal funding of regional innovation clusters • Create mechanism for self-financing of industry clusters

22. Brand “Decade of Innovation” • Utilize media to promote how WA innovates • Leverage the 2012 World’s Fair Anniversary • Define metrics to track trends, inputs & outcomes • Launch innovation “X” Prize The Next Fifty

23. Innovation ecosystem is even bigger…. PNWER Region (GDP/Pop.) State/Prov. GDP* Population Wash. 311,270 6,468,424 Alberta 259,900 3,585,000 Oregon 158,233 3,790,060 B.C. 150,412 4,310,305 Idaho 51,149 1,523,816 Sask. 40,340 1,008,697 Alaska 44,517 686,293 Montana 34,253 967,440 Yukon 1,767 32,714 Total 1,051,841 22,372,731 *2007 population & GDP in $US Million If Pacific Northwest Economic Region were a separate country, it would rank 13th in total GDP

24. Setting Priorities….. Economic Development Programs WA Economic Development Commission

25. Federal • Federal • Private Sector WA Economic Development Commission

26. The risks inherent to starting a thriving enterprise in today’s troubled waters are immense, but the rewards have never been greater. Washington Economic Development Commission

27. Thank You