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Report: Michigan Business Climate Ticks Up, But Still Lags

A new "economic competitiveness benchmarking report" released Monday by a group that backed many of Gov. Rick Snyder's early economic moves finds that the state's climate for doing business has improved.

However, Business Leaders for Michigan, the expanded statewide version of the CEO group Detroit Renaissance, contends that Michigan's competitiveness with other states requires more work.

Findings of the study were unveiled Monday before a gathering of more than 300 Michigan business, civic and community leaders convened in Lansing for a half-day session specifically focused on Michigan's position relative to key economic benchmarks. Nationally recognized experts and local business executives provided context on the measurements and insight on the steps Michigan needs to take to propel its economy forward.

The annual report offers a robust assessment of Michigan's economic position relative to other states and nations, and is used by BLM to prepare and update its Michigan Turnaround Plan, which contains strategies aimed at making Michigan a top 10 state for economic growth and job creation.

"Our benchmarking data shows that Michigan is starting to recover from our decade-long and deep recession, but we have a long way to go to reach our goal of being a Top 10 state for job and economic growth," said Doug Rothwell, president & CEO of BLM. "Benchmarking shows how we compare to our peers based on actions taken in the past.  This year's report doesn't reflect recently enacted state tax and regulatory reforms or changes being made to grow entrepreneurism and improve Michigan's position in the future.  The report is evidence that Michigan's turnaround will take years of hard work and we need to build on recent state progress."

The 2011 Benchmarking Report shows:
* Michigan's economic performance has started to show modest improvement in GDP and per capita income growth, but the long-term trend of growing less than the national average continues.
* The cost of doing business in Michigan continues to remain higher than the national average, driven by corporate taxes and labor costs. These costs exacerbate Michigan's relatively weak rankings on economic development efforts, regulatory environment and infrastructure. (Note: The benchmarking data does not reflect recently enacted state tax reforms which are expected to significantly improve Michigan's rankings in the future.)
* Michigan's innovation and entrepreneurial environment has strong assets that continue to be underleveraged compared to new economy peers, but the number of high growth companies and overall level of venture capital is relatively low.
* Michigan has strong quality of life assets, yet negative attributes -- below-average K-12 student test scores, a relatively high crime rate in some major Michigan cities and negative image -- detract.

"Michigan has tremendous potential," said Ron Starner, general manager of Site Selection magazine and Conway Data Inc. "Site Selection magazine consistently ranks Michigan as a top 10 state for corporate plant investments. Michigan's university system ranks second in the country in total federal R&D expenditures. And in 2010, Wayne County EDGE in Wayne County ranked as a top ten performing economic development organization, based on jobs and capital investment created in its service area. Couple these types of accomplishments with additional reforms, effective marketing strategies and a collaborative regional approach to economic development, and you have a compelling case for locating businesses in Michigan."

The benchmarking report reaffirmed the core elements included in the Michigan Turnaround Plan, BLM's proposals to improve the state's economic climate and attracting new business growth.

"The governor and legislature have already acted to address many key elements of the Michigan Turnaround Plan, including fiscal, tax and budget reforms," said BLM board chair David Joos, who is chairman of the Jackson-based utility holding company CMS Energy. "But a turnaround doesn't happen overnight, so we need to remain vigilant and build on this recent success by continuing these reforms. Concurrently, we need to move forward on other aspects of the Plan that would prioritize investments in higher education and infrastructure and begin building the foundation of the New Michigan."

The 2011 Benchmarking Report was prepared by BLM with assistance from McKinsey & Co., a management consulting firm, and the Anderson Economic Group, a research and consulting firm. The full report is available at www.businessleadersformichigan.com/research-and-reports.

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