Hundreds of Miles From Ocean, Utah Banks on Shipping Industry

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November 4, 2015


By Jennifer Oldham and Matthew Winkler

(Bloomberg) — Seven hundred miles from the nearest ocean in Utah, the nation’s second-most arid state, Orient Overseas Container Line Inc. manages shipments through Pacific and Atlantic gateways.

A subsidiary of Hong Kong-based Orient Overseas International Ltd., OOCL opened an office in Salt Lake City in November 2013 to plumb a cheaper, highly educated labor pool that includes Mormon missionaries who speak 130 languages. Other companies are joining OOCL, lured by a gross domestic product that’s expected to grow by 4 percent in the next year, about double that of the U.S.

“They like the time zone, they like the work ethic, they like the quality of life,” Governor Gary Herbert, a Republican, said Oct. 27 in an interview in the capitol’s historic Gold Room. “Oracle came here about 12 years ago with some apprehension — all those Mormons nestled in the Rocky Mountains. Now they’ve told me it’s the No. 1 most-requested transfer location for their worldwide operations,” he said of the world’s biggest database company.

OOCL’s move to Utah is part of a national trend. From Arizona to New Mexico to Kansas City, competition among states and cities to establish inland ports is accelerating as globalization forces companies to find less expensive and faster means of transporting agricultural commodities, electronics, minerals and other goods to overseas markets.

Desert Port

From 2000 through the first quarter of 2014, 30 inland ports opened or were announced, according to a 2014 report by Chicago-based real estate company Jones Lang LaSalle Inc. Utah is looking to create an inland port with OOCL that would ferry goods from the Mountain States to the coasts.

OOCL’s decision to add 300 jobs to the desert reflects Utah’s booming economy. Pick a superlative and the state lays claim to it: highest job-creation rate since 2012; best- performing state for personal income in the past year; highest fertility rate and youngest population in the nation. The addition of its 3 millionth resident in October — making Utah as large as Chicago — garnered major headlines.

“It’s a little counterintuitive that a company like OOCL would choose an inland state without a seaport as its North American headquarters,” said Derek Miller, chief executive officer of Salt Lake City-based World Trade Center Utah, a membership organization that promotes trade. “North, south, east and west the freeway system intersects in Utah, as well as rail lines, and they wanted to take advantage of that.”

Utah’s lower tax rates prompted Lloyd Blankfein, chief executive officer of Goldman Sachs Group Inc., to expand its Salt Lake City office, the bank’s fourth-largest behind New York, New Jersey and London, Herbert said.

Unlike other state economies that center largely on a single industry, such as Alaska and Wyoming, where stagnant oil prices led to plunging tax receipts, Utah’s diverse business climate is fueling an unprecedented expansion. The state created jobs faster than any other since 2012, adding 126,400 positions, according to data compiled by Bloomberg.

Recruitment Dilemma

Since 2009, when Herbert took office, the number of jobs has increased 17.6 percent, making Utah the best performer after energy-rich North Dakota, the data show. The state now faces a recruitment dilemma, said A. Scott Anderson, CEO of Salt Lake City-based Zions Bank.

“We are getting into a bottleneck where companies here can’t find enough employees,” he said. “It’s driving up salaries, especially in high tech, medical devices, our financial industry and in health care.”

Goods manufactured in Utah, along with gold, silver and copper from its mines, are increasingly being sent overseas, ranking the state ninth in export growth, according to the U.S. Chamber of Commerce. The dollar value of its exports doubled in the last decade to $12.3 billion in 2014, according to World Trade Center Utah.

To attract OOCL, the state provided $4.7 million in tax credits to the company, which is expected to pay $500 million in wages and $19 million in taxes, said Val Hale, executive director of the state Office of Economic Development. Officials say they expect that the company’s presence, coupled with a $1.8 billion overhaul of the Salt Lake City International Airport, will attract other firms.

“We realize that 95 percent of our customers live outside America,” Hale said. “About 85 percent of our economic growth potential is outside this country. If our economy is really going to take off the way we would like it to, exporting will be a critical part.”

–With assistance from Shin Pei in New York.

©2015 Bloomberg News


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