Economic development aims to improve the economic and social well-being of people and is not targeted at business alone – but the manner in which it is performed affects businesses across the nation. Wales has become so used to government intervention that we are arguably besotted with statism; there are few parts of life in Wales in which the state does not play, and is not expected to play, a significant role. It’s pretty clear from the stagnant nature of the Welsh economy that policies aimed at development and growth simply haven’t worked, which creates two key questions – firstly, can the state deliver? Secondly, if so, how?
Over the years, FDI (Foreign Direct Investment) – companies from outside Wales establishing activities here – has featured strongly in Wales’ politicians’ armoury for economic development. It’s had broad acceptance across the political spectrum and continues to do so. Recent increases in FDI are hailed as they show both the success of policy and the attractiveness of Wales as a place in which to invest, although it has to be borne in mind that the UK as a whole has seen solid increases in FDI.
FDI has, of course, had its vicissitudes: it declined markedly in the noughties as the global economy changed and other areas got in on the FDI act. Moreover, the decline of FDI in Wales was partly attributed to the demise of the Welsh Development Agency, the development organization created in 1975 and brought in house into the Welsh Government a decade ago. The end of the WDA brought other changes too and quite a few high-profile people have mourned its demise.
It can’t be any surprise, in light of this, to see politicians talking once again about the WDA. Indeed, Plaid Cymru recently said they’d resurrect the brand and make it fit for the 21st century. Andrew RT Davies, leader of the Welsh Conservatives, has also called for an arms-length body to lead on inward investment, but says Plaid’s plan is little more than a “retro re-brand”, noting the Conservatives blueprint for inward investment published two years ago entitled “Destination Cymru”. As Labour closed the WDA, they’re certainly not talking of its resurrection: on the BBC’s “The Wales Report”, Carwyn Jones derided Plaid’s plan as “the creation of another quango”.
The broad political support for inward investment no doubt exists partly because it tends to yield good job-creation figures, which in turn make for good headlines – always a plus for the incumbents in the Bay. As an example, the recent news about Aston Martin coming to St Athan was hailed as it will result in the creation of hundreds of highly-skilled jobs. All inward investment needs a reality check though: with 2014 losses over three times those of a year earlier, Aston Martin faces challenges. One hopes their success in Wales is greater than that of their cars in Bond films, which all too often come to a premature end.
FDI does attract criticism, with good reason. The presence of companies encouraged to come to Wales through a golden hello from the state may be ephemeral. The hubris around the establishment of a presence is followed by the reality of departure: FDI can create economic fragility. History has shown Wales this, so it’s not a surprise that today’s politicians are also talking up the creation and development of indigenous businesses.
Tomorrow, we’ll look more at this in the context of the Cardiff Capital Region, the rural economy, infrastructure – and the economic divides across Wales.