Soft touch for hit-and-run companies

ADECADE ago, Scotland's Silicon Glen was hailed as the bright shining

future for an economy dying from under-investment and over-dependence on

heavy engineering.

But economic salvation via the microchip has proved elusive. While the

Scottish Office turned somersaults to create custom-built, low-rent

factories for foreign investors, the multinationals smelled blood in the

water.

The bottom line, despite all Locate in Scotland, Scottish Development

Agency and Scottish Enterprise propaganda to the contrary, was that

foreign companies were given carte blanche to cash in on grants,

soft-interest loans and prime sites. It is little wonder that fins began

breaking the surface off the Scottish coast as the corporate predators

gathered for the feast.

The short-term result was a handful of new jobs in recession-blighted

blackspots, and an opportunity to test future markets at UK taxpayers'

expense before the inward investors leapfrogged on to greener and

cheaper pastures.

For Scotland, the cost has been high. The electronics industry remains

the worst offender, but there are other offenders on the list. The Wangs

of this world are well known. Caterpillar's pull-out in 1987 with the

loss of 1200 jobs was another story.

The US-based multinational opted to concentrate its European

tractor-building operations in Belgium at the expense of Tannochside. It

was not a decision based on quality or production standards.

The closure of the Scottish plant came down to the least expensive

alternative. Belgium, with a far more inefficient factory and a poor

production record, survived because the Belgian government had taken the

precaution of passing punitive laws against foreign companies who

decided to move on without a by-your-leave.

Britain has no effective restraints on incoming firms. Competing

Government agencies are only too eager to encourage the arrival of new

overseas companies in the short-term pursuit of lowering the

unemployment rate and raising their own profiles. The name of that game

is personal survival.

Until the collapse of communism, Scotland remained the soft option. It

had workers afraid of industrial disputes after more than a decade of

Thatcherist policy, skills required by hi-tech firms, and organisations

willing to bend over backwards to offer ready-made accommodation and

infrastructure.

Now the profile has changed. Most of the former Warsaw Pact bloc has

workers skilled in electronics. Their wage levels and expectations are

manna to multinationals in search of bigger profits and expanding

markets.

The average Russian earns about #6 a week. And he or she has the

advantage of being European, reasonably smart, and probably a former

employee of the Soviet Union's huge arms industry. A personal computer

is child's play to people used to producing microchips for defence.

A confidential US report from the Monitor consultancy last week warned

that Scotland's electronics base is in danger of shrinking by 18,000

jobs -- a drop of nearly 40% -- in the next few years because of both

Government and home-grown industry's failure to grasp the new reality.

Eastern Europe has suddenly become a potential Klondyke for both the

location of cheap-labour businesses and the sale of products such as

computers, light engineering products, and expertise in effective

management. The export of know-how is at least as important as the sale

of goods.

As revealed in Monday's Herald, fears are growing that computer giant

IBM, based at Greenock since 1951, is about to up sticks and shift to a

site north of Moscow.

The US corporation suffered a $5 billion trading loss last year, and

is now under growing pressure from competitors in the personal computer

market at home and abroad.

IBM has already started an experimental assembly line of 200 PCs a

week at Zelenograd, the ''lost city'' of 170,000 technicians and their

families 30 miles from the Russian capital. Its existence was

contingent, until now, on military microchips.

The 2300 staff at Greenock are supplying the PCs to Russia in kit

form. They may live to regret the generosity of that gesture. Senior

Scottish Office industrial officials are concerned that they may be

helping to export their own jobs in the medium term.

If IBM can obtain components locally around Zelenograd it makes no

economic sense to continue producing the self-same computers in Scotland

for export to the East. Lucrative markets in Hungary and Czechoslovakia

are on Russia's doorstep.

Staff costs in wages, not to mention insurance and other payments,

would fall by a factor of at least 20. And despite a 43-year connection

with Scotland, IBM is unlikely to be influenced by tradition or

''family'' ties. The Spango Valley plant is also non-union, and has no

ready means of exerting industrial pressure

Other companies, notably from Germany and Japan, are already assessing

the possibilities inside Russia, although the country's political

instability and economic chaos make large-scale investment risky.

Scotland and its Government-sponsored job creation organisations have

already seen the writing on the wall. Scottish Enterprise is trying to

persuade oil and gas industry support companies to launch joint ventures

in Russia for hard-currency guarantees.

But such a policy in itself will not compensate for the hit-and-run

multinationals if they cancel thousands of jobs at a stroke. Scottish

Enterprise's efforts have so far concentrated on trading and raiding

with support and advisory firms in penny-ante deals.

What is required is firm Government legislation along the lines of

that passed by both Norway and Belgium to make conditions attractive for

incoming foreign employers, but difficult to the point of financial

impossibility if they decide to opt for cheap labour elsewhere. It may

already be too late.