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Business Incubator Seeks to Infuse State with Foreign Dollars

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The County Times Newspaper

The Southern Calvert Gazette Newspaper

Posted on October 09, 2009

By EMILY KIMBALL, Capital News Service/Maryland Newsline

COLLEGE PARK (October 8, 2009) -- Ruchita Singh, 21, sits alone among dozens of empty offices and cubicles at the site of Maryland's first international business incubator.

Just two months ago, she left her home in India to begin course work toward a master's degree in telecommunications at the University of Maryland, College Park. She now works as an administrative assistant helping to prepare the space for its official opening Oct. 16.

"We expect several starters to arrive shortly after its inauguration," said Singh, echoing officials at the university and the Maryland Department of Business and Economic Development.

The Maryland International Incubator, a joint operation of the university and DBED, will offer subsidized office space and research and development services to companies with foreign headquarters seeking to expand in Maryland.

The 30,000-square foot commercial space on Baltimore Avenue has the capability of housing between 10 and 25 company startups, said Dr. Kai Duh, director of the University of Maryland-China Joint Research Park, who helped plan the incubator and coordinate prospective business contracts.

But about a week before the incubator's official opening, no companies had signed contracts.

Duh said he is negotiating contracts with many prospective European and Asian companies that will soon reserve office space and services.

The incubator is just one component of Gov. Martin O'Malley's statewide initiative to strengthen political relationships with foreign countries and infuse the state's sluggish economy with foreign dollars and resources.

"It's a huge effort at driving economic revival," said Shaun Adamec, the governor's deputy press secretary.

"It's a recognition that our capacity for growth economically isn't contained to the borders of our state. Just as economic growth crosses state borders, it also crosses oceans," Adamec added.

Maryland's unemployment rate has more than doubled since O'Malley assumed office in January 2007, rising from 3.5 percent to 7.2 percent in 33 months, according to the U.S. Bureau of Labor Statistics.

State leaders project a budget shortfall of at least $2 billion in the current fiscal year.

Increasing the state's presence in the global market would attract much needed high-wage, high-knowledge jobs, said Dr. Brian Darmody, associate vice president of research and economic development at the university.

"We are trying to get more companies based in Maryland," he said. "We can either grow them, which we do, or we can import them, which is what we're trying to do."

The governor unveiled a plan for increasing Maryland's global footprint in March. Two integral components of his plan included the state's first International Advisory Council, a 16-member committee organized "to enhance Maryland's global profile," and the state's first international incubator.

The expected benefits of the international incubator include job creation, higher wages, increased income and property tax revenue, academic development and next-generation technological development, said Duh.

Exact figures of the incubator's projected impact are yet to be determined, Duh said.

Bob Walker, assistant secretary for business development in Maryland, said the international incubator will not pose any up-front costs to the university. For its first few years of operation, the state will provide an average of about $100,000 annually to cover the lease for the space, maintenance and staffers, he said.

"It's not much money," said Duh. "We are not going to waste money. We do not have much to waste."

As businesses purchase office space and services, the incubator will become fully sustainable without requiring any support from the state, Walker said.

"How much the businesses have to pay, of course, will be determined by how much space they lease, but I'm sure the rates will be very competitive since it is part of the university and the department's international efforts," he said.

University President C.D. Mote Jr. is expected to be joined at the incubator's Oct. 16 ribbon-cutting ceremony by Chinese Ambassador Zhoi Wenzhong, Chinese Minister of Science & Technology Wan Gang and Chinese Vice Minister of Finance Zhu Zhigang.

The anticipated presence of Chinese authorities underscores the university's international partnership with the People's Republic of China, a relationship cemented in 2002 when then-minister of Science & Technology, Xu Guanghua, selected the university as a site to develop a university-industry-government research park partnership, according to officials.

This relationship was strengthened further in 2007 when university officials actively recruited Chinese companies for the newly created University of Maryland-China Joint Research Park, according to a statement given by Mote in March 2008.

Two Chinese businesses, including a solar energy company and a pollution control company, are in the process of negotiating contracts at the international incubator, Duh said.

When asked if the state was targeting Chinese companies as part of the governor's initiative, 'Adamec said: "It really is a global outreach. I would say that it's targeted to industries more so than particular regions of the world. To the extent that those industries are stronger in some parts of the world than others, then I suppose you could say that our efforts are targeted to those areas."

The specific industries targeted by the governor's initiative, Adamec said, include the life sciences, bio-tech, renewable resources and energy conservation.

According to a DBED database obtained by Maryland Newsline, Maryland is home to nearly 600 businesses and their branch offices with foreign headquarters in 30 countries. They include household names like Trader Joe's, which is based in Germany, Unilever, based in the United Kingdom, and Godiva Chocolatier Inc., based in Belgium.

Foreign businesses register with DBED in order to apply for state-funded incentives. Eligibility is generally based on a company's job creation and capital expenditure, said Karen Glenn Hood, media relations manager of DBED.

Foreign companies now employ about 105,000 Marylanders, accounting for 3.5 percent of the workforce, according to DBED data.

Businesses at the international incubator are not contractually obligated to stay in Maryland after graduating from the incubator, said Duh. However, he cited a National Business Incubation Association statistic that an average of 75 percent of incubator-grown businesses stay near the incubator during the five years following graduation.

"My experience over the past 25 years is that most the companies stay here not because of a contract or because they were asked to, but rather because they want to stay here," said Duh.

Darmody agreed that businesses generally return on state investment by staying local.

"If they are going to come here, they likely will stay here," Darmody said. "You have to have a robust, good business climate. If they're moving out, it says something about why we're not attractive."

Capital News Service contributed to this report.

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