Narragansett_Bay_Cluster

					   The Marine Cluster
An Investment Agenda for Rhode Island’s
        Marine Related Economy




                 July 2002
                Prepared by the
        Rhode Island Senate Policy Office
2




    Many of the photographs in this document are courtesy of Billy Black Photography
                                  www.billyblack.com
                                                                                                                                       3


Table of Contents



Precis for Action................................................................................................................. 4
Sector Goals........................................................................................................................ 5
Introduction........................................................................................................................ 6
Methods & Theory to Examine the Marine Cluster ......................................................... 8
Sector by Sector Analysis................................................................................................. 13
Recreation and Tourism .................................................................................................. 15
Marine Events .................................................................................................................. 21
Fisheries and Aquaculture .............................................................................................. 26
Boatbuilding, Boat Servicing and Boating Related........................................................ 30
Shipbuilding ..................................................................................................................... 38
Marine Transportation .................................................................................................... 44
Military ............................................................................................................................. 50
Research, Technology Development and Education ...................................................... 54
Suggestions for Future Research .................................................................................... 62
Key Sources ...................................................................................................................... 63
4


Precis for Action
Rhode Island hosts one of the world's most competitive marine clusters. The Rhode Island
Marine Cluster is defined as an interconnected grouping of firms, institutions, and people all
relying directly or indirectly on Narragansett Bay and the marine resources of Rhode Island. The
Rhode Island Marine Cluster is comprised of eight sectors: marine recreation, tourism & events,
fisheries & aquaculture, boatbuilding, boating-related businesses, shipbuilding, marine
transportation, military, and marine research, technology development
and education.                                                               The goal of this plan is to give
                                                                                           context and direction to
                                                                                           future state efforts to develop
Rhode Island's marine resource have always been central to its                             the marine economy.
economic development, yet resource managers and policy makers have
insufficient guidance to fully coordinate the relationship between marine
resources, the marine related economy, and the overall economic development strategy of Rhode
Island. As a result, Rhode Island's marine economy shows signs of neglect. The configuration of
relevant government agencies is inadequate. Economic data and analysis are scarce. Underlying
statutes are antiquated. Coordination among entities is poor.

The goal of the plan is to give context and direction to future state efforts in marine related
economic development. The plan describes each sector of the marine economy and offers
recommendations to stimulate growth in the respective sectors. This plan will contribute to a better
understanding of the marine economy, however, it is not sufficient to guarantee progress in
economic planning and development. Progress will require partnership and effort from all
elements of the cluster, public and private. A coherent and collective cluster initiative will ensure
that Rhode Island maintains its regional, national, and international prominence.

A role for Government…
    •   To coordinate the relevant government programs and agencies, industry sectors, and
        multiple public and private entities of the marine cluster

    •   To create an organizational infrastructure to implement the recommendations contained
        in this report, establish an ongoing policy context for undertaking investments in the
        marine economy, and carry out future planning efforts

    •   To advance and integrate marine economic development policy and planning at the local,
        state and regional level

    •   To ensure more routine and systematic analysis of the cluster, and of projects with
        potential impact for the cluster

                                Estimated Revenues Associated With Narragansett Bay
                                             (Rorholm and Farrell, 1992)
                       700000                                          Navy (excluding edu)

                       600000
                                                                       Marine Education, R & D
                       500000

                       400000                                          Marine Transportation

                       300000
                                                                       Commercial Fishing
                       200000

                       100000                                          Marine Industry

                           0
                                                                       Marine Recreation
                                1967      1979        1989
                                                                                                  5



Sector Goals
This plan proposes goals and strategies for each sector to guide future investment:

Invest in policies, programs and infrastructure that…
Marine Recreation & Tourism
   • enhance marine recreational offerings and highlight the ecology and maritime heritage
       of Narragansett Bay for residents and visitors
                                                                              A coherent and collective
Marine Events                                                                 marine cluster initiative will
                                                                              ensure that Rhode Island
   • make Narragansett Bay a world leader in hosting nationally               maintains    its     regional,
       and internationally significant marine events                          national, and international
                                                                              prominence.
Fisheries & Aquaculture
    • ensure the long term viability of the fishing industry by
        developing a fisheries management system that provides for fair and equitable access to
        the fishery while preserving the health of the ecosystem and the associated infrastructure
        and service;
    • establish Rhode Island a world leader in the export of aquaculture knowledge.

Boatbuilding & Boating Related Businesses
   • secure Rhode Island's position as a world leader in marine trades by developing and
       maintaining competitive advantages across the industry sector diamond

Shipbuilding
   • maintain the viability of the shipbuilding industry in Rhode Island by ameliorating
       competitive disadvantages across the industry sector diamond

Marine Transportation
   • provide for the efficient marine transportation of people and goods to, from and within
       Rhode Island

Military
    • maintain or provide opportunities for an expanded presence of the military in Rhode
        Island.

Research, Technology Development & Education
   • maximize the economic development potential of marine research, technology
       development and education
6



Introduction

Background
This plan is a strategic document, developed by the Senate Policy Office to give context and direction for
state investments in marine economic development. The state is continually making policy and program
investments in or that have a bearing on marine economic development.
Recent examples include upgrades in wastewater treatment infrastructure,
improvements at state piers, and a new system for fisheries management.            Rhode Island hosts one of
However, there are signs that some necessary investments are not being made:       the world's most significant
marinas struggle with expansion and lack of adequate depth, foreign factory        marine    related    economic
                                                                                   clusters.     Promoting the
ships operate within state waters, and boatbuilding firms compete for a limited    growth and development of
supply of suitable land. The good news is that demand for marina space is          this cluster should be a state
high, opportunities exist to process fish locally, and boatbuilding, unlike other  economic          development
areas of manufacturing, has been on the upswing for the past decade.               priority.


Investments in or that have a bearing on marine economic development are often evaluated on a case by
case      basis,     without
guidance        from       an
economic        development
planning         framework.
Traditionally,       specific
projects or programs are
discussed                   in
environmental terms with
limited analysis of the
potential          economic
development implications.
For       example,        the
discussion      of     habitat
restoration funding in
recent years has been
limited         to        the
environmental benefits of
restored habitat without
making explicit linkages to
economic       development.
In reality, the economic
development benefits of           Narragansett Bay, the dominant geographic feature in southern
habitat restoration could be      New England, is enclosed in Rhode Island, yet the watershed is
quite     significant,    and     primarily in Massachusetts
might include better yields
for the commercial and recreational fishery, increased value of waterfront property, enhanced opportunities
for recreation, and mitigated vulnerability to flooding and other natural hazards. In other examples,
environmental and economic considerations in a given program or project are evaluated in economic terms
to explore fiscal impact or cost benefit formulas, but seldom in terms of the economic development
impacts. Such was the case in the discussions of combined sewer overflow upgrades by the Narragansett
Bay Commission. The approach to this project was command and control environmental regulation and
finance with little more than peripheral discussion of the implications for economic development. In other
instances, economic analysis is stunted by a lack of reliable, longitudinal data. In each example, the
absence of an economic development planning context within which to discuss investments leads to an
incomplete attempt to link each investment decision with the larger picture. There is no such context and
direction for the larger picture, and without it, the individual investment analysis is myopic.
                                                                                                            7



In recent years, elected officials, environmental managers, and key decision-makers from the public and
private sectors have expressed an interest in some kind of economic development planning for the bay.
The idea of a "bay business plan" was supported by some environmental groups and culminated in a
sustainable communities grant submitted to the US Environmental Protection Agency by the Economic
Policy Council. While the grant was not received, the idea took root. The Economic Policy Council
continues to champion the concept of coordinated bay economic development planning and recently
included among its ten strategies for Rhode Island's economy to "promote sustainable use of Narragansett
Bay."1

The 2000 Bay Summit made several key observations regarding stewardship of Rhode Island's marine
resources. Bay Summit participants articulated the economic importance of the bay, the interrelationship
between economy and environment, the paucity of usable marine economic data, and the need for
sustainable economic development. Among the Legislative Recommendations of the Narragansett Bay
Summit report dated May 2000 was to "Realize the Bay's Sustainable Economic Potential." That report
goes on to say:

        The economic role of Narragansett Bay is declining, although the reasons for this trend
        are not fully understood. Summit participants concluded that opportunities exist to make
        better economic use of the Bay while improving the quality and productivity of its
        ecosystem.2

The Rhode Island Senate leadership asked the Senate Policy Office to devise a plan to respond to the
general opportunities for environmentally sound economic development identified at the Bay Summit and
to provide a context for decision-making around future marine related investments. The Senate Policy
Office then initiated an atypical exercise in large system planning that is more characteristic of work that
would be performed by a Department or Agency of the state.

Rhode Island has never undertaken a comprehensive economic development planning exercise for all
marine related industries. Thus, this plan differs significantly from past efforts to describe, in economic
terms, Rhode Island's marine resources. Rhode Island has produced several economic characterizations of
Narragansett Bay or particular marine industries. For example, University of Rhode Island resource
economist Niels Rorholm produced many such studies over several decades. These economic studies
continue to be of great value to resource managers and policy makers, however, they are not easily
replicable and readily accessible. Indeed, much of the work done for the Bay Summit relied upon and
referenced the work of Rorholm because more recent information was not
available. These economic studies are necessary but not sufficient for
economic development planning; economics is not economic development.                 The Research Question:
                                                                                     What   capital   and   program
Marine economic development planning is not without precedent in Rhode              investments should Rhode
                                                                                    Island be making to ensure
Island. The State has done some strategic planning for the growth of specific       the long term productivity of
marine industries. One examples is the Strategic Plan for Aquaculture in            its marine resources?
Rhode Island. Other examples include Statewide Planning's look at marine
manufacturing in 1980, and the Greenhouse Compact, a comprehensive look at
Rhode Island's economy done in the mid-1980s. The most recent discussion of strategic marine economic
development using current economic development theory can be found in the Economic Policy Council's
1997 Meeting the Challenges of the New Economy document. However, this effort was restricted to only a
few sectors of the marine economy, and thus falls short of what is required to make decisions affecting the
entire marine economic system.


1
  A Rhode Island Economic Strategy: 10 Ways to Succeed Without Losing Our Soul. The Rhode Island
Economic Policy Council (September 2001).
2
  http://www.nbep.org/summit/legrec.html
8


Methods & Theory to Examine the Marine Cluster
The research underlying this plan was loosely guided by a grounded theory research design.3 The research
question was: What capital and program investments should Rhode Island be making to ensure the long
term productivity of its marine resources? This plan is built upon the important work done in the
Narragansett Bay Summit whitepapers, which provided baseline data for many uses and user groups of the
Bay. Starting from this data we proceeded to a literature review - augmenting that work with review of
other significant works related to planning, coastal management, marine economic planning and
development, including Rhode Island, national and international perspectives. The bulk of the project is
based on key informant interviews and semi-structured focus groups, reaching over one hundred members
of the business, government, non-governmental organization, and academic communities. Interviews were
used to understand and define the cluster, relationships between and among entities, infrastructure needs,
labor needs, capital needs, etc. The research did not assume user conflict. There was a bias towards
looking at what can be done, as opposed to what should not be done. The research intends to be useful and
contextually complete. The researchers were aware of the importance of having a neutral research position
to the greatest extent practical; every attempt was made to be neutral and unbiased. While previous work
and the work of the Bay Summit provided some important data, overall, marine specific economic data is
scarce. Data that is available is disjointed and does not lend itself to easy comparison of trends over time.4


Economic Development
This is a plan for economic development, so it is appropriate to spend a moment defining what it meant by
economic development. Outside of academic circles, there seems to be no clear and commonly accepted
specific definition of economic development despite the increasing use of this term. Some think of
economic development as an outcome or objective, such as more jobs, higher incomes, expanded tax base,
good business climate, expanded tax revenues, or a redistribution of income.5 Others consider economic
development as a process, such as industrial recruitment, business retention, or regional development. The
most commonly accepted definition is used in this plan: economic development is the process of creating
wealth through the mobilization of human, financial, capital, physical and natural resources to generate
marketable goods and services.6

A common thread is that economic development is often considered synonymous to economic growth.
While growth is a quantitative change in the scale of the economy, economic development is a qualitative
change, which entails changes in the structure of the economy, including innovations in institutions,



3
  See: Strauss, A., & Corbin, J. (1990). Basics of qualitative research: Grounded theory procedures and
techniques. Newbury Park, CA: Sage, or Strauss, A., & Corbin, J. (1994). Grounded theory methodology:
An overview. In N.K. Denzin & Y. S. Lincoln (Eds.), Handbook of qualitative research (pp. 273-285).
Thousand Oaks, CA: Sage.
4
  Every attempt was made to collate accurate and complete data to discern status and trends of the sectors in
this study. In many cases, the best available economic information is found in ES202 data provided by the
Department of Labor and Training. However, the Standard Industry Classification (SIC) coding system
employed in ES202 data does not lend itself easily this type of analysis because few of the SIC codes are
marine specific. To develop a more complete and accurate measure of marine economy impacts will
require 1) the development of original data sets through a direct survey (see Rorholm, 1967), or 2)
estimates / assumptions about the percentage of marine activity in each less specific SIC (Georgianna,
2001) or other data source (Georgianna, Rorholm). Efforts, however, are underway to analyze the size and
composition of the coast and ocean economy at the national level (see Kildow, et al, 2000) which may
prove useful to Rhode Island's data needs.
5
  Philip M. Burgess and Delore Zimmerman, "High Performance Communities: New Economy Ideas Into
Action," Center for the New West. 1996.
6
  American Economic Development Council, 1984.
                                                                                                            9

behavior, and technology.7 Economic development produces changes in the economy "as are not forced
upon it from without but arise by its own initiative from within… By this we should mean that economic
development is not a phenomena to be explained economically."8

The practice and expected role of the government in economic development has changed over time.
Economic Development as a public function only became accepted in the latter half of the twentieth
century. During the 1970's, economic development theory and practice consisted primarily of industrial
facility location or "smoke stack chasing." To attract industry, localities
would prepare suitable land for development and offer significant tax              The numerous examples of
advantages for site relocation. During the 1980s, economic development             regional clustering provide
theory migrated into national industrial policy debates with an emphasis on        evidence     that    even    as
private sector entrepreneurs. As power devolved to state and local                 competition and economic
                                                                                   activity globalize, competitive
governments, the function of economic development became increasingly              advantage can be localized.
important. The 1990s saw the emergence of several important theories which         -Enright & Roberts
influenced government; together these theories can be called the
entrepreneurial government movement. Under this view, which continues to
dominate current thinking, local and state government can and must become a player in economic
development. The public sector is expected to participate in setting the stage for economic development.
Three important concepts emerged:

             •   linked agents of innovation -firms, research institutions, end users- often concentrate in
                 geographic areas known as clusters;
             •   workforce skills are essential for a strong economy;
             •   command and control systems are dysfunctional.

Michael Porter articulated the cluster concept in his 1990 work, The Competitive Advantage of Nations.
Described by Porter, a cluster is “a geographically proximate group of interconnected companies and
associated institutions in a particular field, linked by commonalities and complementarities.”9 Subsequent
work provided a more basic definition for a cluster offered by Doeringer and Terkla as “a geographical
concentrations of industries that gain performance advantages through co-location.” Some of the more
prominent examples of industry clustering include the northern Italian ski boot industry, or the Silicon
Valley computer and electronics industry.

While Porter set out to examine the elements of national competitiveness, he acknowledged that clusters
are often local or regional in scope and are thus applicable to city and regional economic development. The
cluster concept provides a useful explanation for the manner in which industries grow and become
competitive, and establishes a context for local and regional economic development policy and planning.
As one author put it, "the numerous examples of regional clustering provide evidence that even as
competition and economic activity globalize, competitive advantage can be localized."10

The policy implications for cluster growth flow from an understanding of the function of clusters.11 Porter,
for example, in discussing Canada argues:


7
  Roger Vaughn and Peter Bearse, "Federal Economic Development Programs: A Framework for Design
and Evaluation," in Robert Friedman and William Schweke (eds), Expanding the opportunity to produce:
revitalizing the american economy through new enterprise development (Washington, DC, 1981).
8
  See: Schumpeter, The Theory of Economic Development: An inquiry into profits, capital, credit, interest
and the business cycle , 1911, and Economic Doctrine and Method: An historical sketch, 1914.
9
  http://www.msmec.com/cit/part1/citpartone_files/slide0761.htm
10
   Michael J. Enright and Brian H. Roberts, "Regional Clustering in Australia," Australian Journal of
Management, Vol. 26 (Special Issue, August 2001).
11
   Clifford Bekar and Richard G. Lipsey, "Clusters and Economic Policy," revised version of a paper
presented at Policies for the New Economy, Montreal, June 26-27, 2001.
10

        There is room for governments to… support clusters, whether in providing specialized
        training and research institutions, specialized infrastructure, or incentives for related and
        supporting industries to co-locate. Governments should seek out cluster participants and
        proactively understand their needs at a time when early action can have a transformative
        impact…[G]overnments can and do promote the health and development of clusters by
        understanding their specialized factor requirements, determining which have such high
        levels of externalities involved that individual firms will not invest to create them, and
        proactively invest on behalf of the industry. Such investments can include specialized
        educational programs, specialized infrastructure, or special regulatory regimes.12

Since the publication of two of the most recent and influential Rhode Island specific economic
development documents (the “Greenhouse Compact” and the “Meeting the Challenges of the New
Economy”), Rhode Island has been referring to clusters and applying some cluster centric strategies. The
Economic Policy Council has also recommended using the industry cluster strategy to guide state
development efforts in a way that recognizes the state’s connection to the
Boston Metro.13 The cluster framework applied to Narragansett Bay is thus         The      emerging     network
consistent with the current theories and practices in Rhode Island’s economic     economy leads toward more
                                                                                  tightly coupled, more intense,
development efforts.                                                              more persistent and more
                                                                                       intimate    relations   among
The industry cluster approach is also used in this plan for pragmatic reasons:         firms and between firms and
cluster analysis provides a good foundation for understanding the                      governmental organizations.
interrelationship of the marine industries in Rhode Island which has not been          The cluster concept embraces
                                                                                       this new paradigm and helps
adequately addressed in existing work. For example, the boatbuilding sector            us to understand it in a
includes more than boat building companies, it also includes marinas and               coherent and systematic way.
related suppliers and facilities. Spin-off industries of boat building, including      -Roelandt
many small, specialized firms have emerged with products that lead the market
in design and innovation. Several significant yacht designers have offices in
Rhode Island. Non-production entities also contribute to the cluster in Rhode Island. The national
governing body for the sport of sailing, for example, is located in the state. The influence of these boating
related businesses on the competitiveness of the boatbuilding sector is not accounted for in traditional
analysis.


The Rhode Island Marine Cluster: A System Assessment
The Rhode Island Marine Cluster is a concentration of firms, institutions, and end users all relying directly
or indirectly on the marine resources of Rhode Island, with strong formal and informal linkages among
themselves and to other units in the supporting technological, business, and research infrastructure. The
Marine Cluster can be divided into eight sectors: 1) Tourism, Recreation & Events, 2) Boatbuilding, 3)
Boating Related Business, 4) Marine Transportation, 5) Fisheries &
Aquaculture, 6) Military, 7) Shipbuilding, 8) Research, Technology                   Not all firms in the coastal
Development & Education. Within each sector are the various elements of the          zone are marine related, and
cluster that have a bearing on its competitiveness.                                  not all marine related firms
                                                                                       are located in the coastal
Rhode Island's Marine Cluster is what Porter describes as a horizontal cluster,       zone.
or one in which a natural resource provides the connection. The geographic
concentration of particular industries involves the presence of unique natural resources, economies of scale
in production, proximity to markets, labor pooling, the presence of local input or equipment suppliers,




12
   Roger L. Martin and Michael E. Porter, "Canadian Competitiveness: A Decade After the Crossroads,"
March 2001.
13
   Clusters, not niches, urged for future RI Development. Providence Business News, 5/7/01.
                                                                                                                                                                                       11

shared infrastructure, reduced transaction costs, and other localized externalities.14 Accordingly, the
marine resources of Rhode Island are the common natural resource that sparked the development of the
earliest entities of the cluster (e.g. shipbuilding) and continue to support and link the cluster, albeit in a
constantly evolving manner.


                                                                                    Bait          Design    Fiberglass & plastics
                                                                     Nets & gear
                                                                                                                          Fine Woodworking
                                               Cold Storage
                                 RI Seafood Council                                                                                 Metalworking
                              Fishers
                                                                                                                                               Mags & publishing
                       EDC/DEM
                                                                                                                                                    Brokerage & charter
                                                                          Fisheries and
                      Growers                                                                      Boatbuilding
                                                                           Aquaculture
                                                                                                                                                      Spars & rigging
                 Processors
                                                                                                                                                          Engine Repair
              URI

            RWU                                Research &                                                                                                      Mooring & dockage
                                                                                                                            Boat-Related
                                              Development
            Brown                                                                                                                                                   Sails and canvas

            Slater                                                                                                                                                     Yacht Clubs

              NUWC                                                                                                            Tourism,
                                                 Military                                                                    Recreation
                                                                                                                                                                       Marine Retail
                SWOS                                                                                                          & Events                                 Boating
                     NWC
                                                                                                                                                               Rec fishing
                 Naval Station
                                                                                                                                                              Diving
                                                                              Marine
                       Naval Education                                                            Shipbuilding
                                                                           Transportation
                       & Training Center                                                                                                                  US Sailing
                                                                                                                                                    Waterfrnt Attrns
                                  Suppliers
                                           Congress. Del.                                                                                   Waterfrnt Fod & Lodng
                                                                                                                                    Beach
                                                            Pilots
                                                                                                                   Cruiseships
                                                                           Terminal operators   Ship Equipment




Not all of the industries and institutions that comprise the Marine Cluster are located within the coastal
zone, but all can attribute their existence, growth and continued success to the existence of the Bay. While
some elements of the cluster no longer require direct access or use of the Bay (boatbuilding), the presence
of the Bay continues to provide a competitive advantage, and the absence of the Bay would certainly result
in diminished competitiveness if not complete collapse. Other elements of the cluster, such as fishing,
continue to require direct access.

The boundaries to the cluster do not necessarily reflect the political (state) or environmental (watershed,
ecosystem) delineation. The earliest evidence of the regional nature of the Marine Cluster can be seen in
the work of Rorholm, who studied and defined the Southeastern New England Marine Resource Region, or
an economic region spanning Eastern Connecticut, some of Southeastern Massachusetts, and all of Rhode
Island.15 This work articulated a region bound by similar geography, resources, labor and market forces,
and called for planning and development of this region as an economic system. Perhaps somewhat ahead
of his time, this scholar’s observations in many ways remain valid today. While the same region contains
important elements of the cluster, and indeed warrants treatment of the whole, the limited resources for this
study restrict consideration to Rhode Island. It should be noted, however, that given the convergence of
transportation, economic and environmental concerns, the concept of the marine resource region remains
valid and could provide a framework for understanding the marine cluster and advocating for programs and
policies at a regional level.



14
   Michael J. Enright and Brian H. Roberts, "Regional Clustering in Australia," Australian Journal of
Management, Vol. 26 (Special Issue, August 2001).
15
   Rorholm, Niels.
12

Application of the cluster concept to marine industries within a geographic area is not a unique approach.
Connecticut recently completed a similar exercise, as did the Maritime Development Center of Europe.16


General Findings on the Rhode Island Marine Cluster:

•    Marine related firms are linked by a connection to marine resources, and this connection is best
     understood using the concept of the horizontal industry cluster.

•    To understand the marine cluster you must understand the complex systems that influence the cluster,
     including the regional economic system (marine resource region), the larger environmental systems of
     the watershed and Rhode Island Sound, and the local, state and national political system.

•    Marine economic development must complement the economic development needs and goals of local
     communities and be consistent with the overall state economic development needs and goals.

•    The current configuration of state economic development policy and planning is ill suited to plan for
     and execute a multifaceted marine cluster strategy.

•    Cluster specific economic information is limited.

•    Formal linkages between the cluster and institutions of higher education are, in aggregate, quite weak.

•    Markets and competition are global for certain sectors of the marine cluster, such as boatbuilding and
     fisheries & aquaculture.

•    Firms and sectors do not identify themselves as part of the cluster, yet many have an implicit
     understanding of the interrelationships that


The Cluster Strategy:
A Role for Government
Future planning and development of the Rhode Island Marine Cluster will require full governmental
participation. To carry out a complex cluster strategy Rhode Island must configure state economic
development programs to complement the marine cluster concept. The foremost challenge is to provide
leadership capacity for cluster development and coordination. Similarly, government must play a leading
role in establishing an organizational infrastructure that:

•    …coordinates the relevant government programs and agencies, industry sectors, and multiple public
     and private entities of the marine cluster

•    …implements the recommendations contained in this report, establishes an ongoing policy context for
     undertaking investments in the marine economy, and carries out future planning efforts

•    …advances and integrates marine economic development policy and planning at the local, state, and
     regional level




16
  See Connecticut Maritime Coalition Strategic Cluster Initiative, Final Report, July 2000, and
http:www.maritimt-udviklingscenter.dk.html, respectively.
                                                                                                       13




Sector by Sector Analysis
Each sector of the Rhode Island Marine Cluster is analyzed and presented using the following format:

Element                   Essential Questions
Sector Description        What companies and other entities are considered a part of this sector,
                          and what is the relationship between and among them? What are
                          important considerations for demand, firm strategy, structure and rivalry,
                          and other inputs or factor conditions?
Status and Trends         What qualitative and quantitative indicators can be used to measure the
                          sector? What are the observable trends? What are the overall market
                          trends, and how might RI’s share of the market be affected by those
                          changes?
SWOT Analysis             Strengths: What gives competitive advantage to this sector?
                          Weaknesses: What are impediments to competitive advantage?
                          Opportunities: What could be done to improve competitive advantage?
                          Threats: What are the risks to maintaining competitive advantage?
Strategy                  What capital, program, or policy investments could be made to ensure
                          the long term productivity of this sector?
14
                                                                                                                    15



      Recreation and Tourism

      Cluster Description
      Marine enhanced or dependent recreation and tourism activities include visits to coastal parks and beaches,
      boating, fishing and other water related sporting activities, and marine and water related historical and
      cultural sites. These activities and attractions in the Narragansett Bay coastal zone support related tourism
      industries such as restaurants, hotels, retail stores, museums, and transportation providers. Regional
      tourism councils and the state tourism division of the Economic Development Corporation (EDC) provide
      an important marketing and promotion function. The EDC, URI, and Johnson and Wales University are
      important areas for research, with JWU supplying management expertise. Demand for recreation and
      tourism is local, regional, national and international. Firms range from small, independent operators to
      large, international corporations. Most of the activity in marine related tourism is concentrated in the lower
      Bay, with Newport and South County beaches being the primary attraction. However, upper-bay
      communities are beginning to attract and promote marine related tourism.

                                                                                           RISWA

                                                  Museums & Attractions
                           Transportation                                                             charter & tour boats
                                                                                  Marine Events
tourism
                     Promotion                                                                        marinas / yacht clubs
councils
                    Development             Marine Recreation
                     Research                                                             historic preservation groups
    EDC                                        & Tourism
     URI                                                                            Boating & Fishing
    JWU
    RISG                                                                                        parks (DEM)
                              Hospitality Industry     Coastal Recreation Facilities
                                                                                                bikeways/ferries (DOT)
                                                                                                navigation (USCG)
             food & lodging                                                                     harbor management (cities/towns)
                                    RIHTA    RITDAC



      Status and Trends
      Tourism is often claimed to be the state’s
      second largest, and fastest growing                            Annual Visitors to Rhode Island (Millions)
      industry.17     The EDC Rhode Island                 20
      Tourism Division reports that the state's
      travel and tourism industry set a record in          15
      2000 sales revenues of $3.26 billion,
      representing a 16.4% increase over 1999.             10
      The state's travel and tourism industry has           5
      increased its sales in the past several years,
      generating total sales receipts of $1.87              0
      billion in 1996, $2.26 billion in 1997, $2.5                         1975                    2000
      billion in 1998, and $2.7 billion in 1999.

      While it is difficult to segregate marine related tourism from general tourism figures, marine activities and
      attractions likely contribute directly or indirectly to a significant portion of the overall tourism revenues,
      not to mention the marine image of the state that is a crucial element of Rhode Island’s unique “brand”.
      Statistics gathered from Rhode Island’s state parks and beaches are an indication of the intensity of tourist
      activity in the state.


      17
           EDC based this on the number of firms in this industry.
16

         Marine Recreational Fishing Trips in RI (Source: NMFS MRFSS)         •   The Rhode Island parks and beaches
                                                                                  currently have the highest park visit
 1,800,000
 1,600,000
                                                                                  per acre ratio in the country of
 1,400,000                                                                        approximately 750 visitors per acre.
 1,200,000                                                                    •   The annual revenue generated in 2000
 1,000,000
   800,000
                                                                                  from the Division of Parks and
   600,000                                                                        Recreation (from entrance fees,
   400,000                                                                        camping fees, etc.) was $3,126,037.
   200,000
         0
                                                                              •   In 2000, 4,050,801 people visited
                                                                                  Rhode Island State Parks and Beaches
          81

                 83

                        85

                               87

                                      89

                                             91

                                                    93

                                                           95

                                                                  97

                                                                         99
                                                                                  on Narragansett Bay. (based on car
        19

               19

                      19

                             19

                                    19

                                           19

                                                  19

                                                         19

                                                                19

                                                                       19
                                                                                  count data for Colt, Fishermen’s, Fort
Despite the importance of recreational fishing and the limited size               Adams, Goddard, Roger Wheeler,
of Rhode Island, the state continues to rely on NMFS telephone                    Scarborough N and Scarborough S.)
survey data.
The annual value to the state’s economy generated by recreational activity was estimated in the Bay
Summit Whitepaper on Tourism and Recreation to be:
• outdoor recreational activities in the state: $6.7 billion
• outdoor recreational activities and shoreline areas: $4.3 billion
• Bay-related outdoor recreation activities: $2.0 billion18

Rhode Island Department of Labor and Training Labor Market Information projects increases in
employment in all tourism related sectors in the ten year period from 1998-2008:
• Water transportation: 17%
• Transportation by air: 30%
• Eating/Drinking establishments: 14%
• Hotels/lodging: 33%
• Museums/gardens: 25%

Rhode Island is part of the New England tourism market, a market that has been growing faster than the
national average. Within the New England market, Rhode Island continues to do well. According to a
1999 report from the Travel Industry Association of America (TIA), the number of visitors to Rhode Island
increased at a rate nearly double that of the national average in recent years.




18
     Narragansett Bay Summit 2000 White Paper, p. 10
                                                               17




    2000 RI Boat Registrations by Length (Source: DEM)

23866                               9,800

                                                 Under 20'
                                                 20'-29'
                                                 30'-39'
         83                     2705
                                                 40'-49'
        38                  605                  50'-59'
                  25                             60'-69'
                Total: 37,122                    70 and over
18


SWOT Analysis
Strengths:                                                  Opportunities:
•    Location between Boston and New York with good         •   Expand linkages between Providence and Newport
     transportation linkages                                •   Increase market share of nationally and
•    Deep bay, sheltered harbors                                internationally significant marine events
•    Fair seasonable climate                                •   Improve development, linkages, and packaging of
•    Rich historical, cultural and natural attractions in       marine attractions, events, and resources
     close proximity                                        •   Capture a larger share of the New England tourism
•    International recognition of maritime heritage             market

Weaknesses:                                                 Threats:
•  Adverse winter climate                                   •   Sudden or gradual degradation of environmental
•  Seasonal overcrowding                                        quality, or change in perceptions of environmental
•  Lack of cohesiveness and public understanding of             quality19
   the industry                                             •   Exceeding the carrying capacity of coastal areas
•  Poor public understanding of importance of marine-           results in a reduction in the quality of life for
   related tourism and the maritime tradition as critical       impacted communities and attractions
   to Rhode Island’s brand
•  Lack of planning, coordination, support, and public
   awareness for marine events



Goal
Invest in policies, programs, and infrastructure that enhance marine recreational offerings and highlight
the ecology and maritime heritage of Narragansett Bay for residents and visitors.

Recommended Strategies & Actions
Set the policy context for marine recreation and tourism
• Foster recognition of marine recreation and tourism as 1) a key component of the tourism industry that
     contributes to the economic wellbeing of Rhode Island, and 2) a key component of the quality of life
     that Rhode Islander's enjoy. As such, this sector requires appropriate investment in infrastructure and
     management.

Promote public access and participation
• Invest in infrastructure (such as boat
   ramps, waterfront trails and bikepaths)
   and programs (such as Sail Newport,
   Providence Community Boating Center)
   that provide active and passive marine
   recreational opportunities.
• Promote the dedication and use of public
   rights of way to the shore.
• Support school and university sailing
   programs, recognizing the importance of
   local talent to the long term competitive
   advantage of the marine industry.

Create ecotourism opportunities
• Improve interpretation of               natural


19
  For example, perceptions of water quality may have a profound impact on tourism: events such as oil
spills or toxic algae blooms may deter tourists from visiting Rhode Island.
                                                                                                 19

    resources at State parks and beaches (both through signage and through ranger or volunteer
    interpretation programs).

Establish better tourist transportation systems
• Encourage alternative transportation schemes for moving tourists to tourist destinations.
• Support the development of a viable commuter ferry system, funded by revenues generated from
    continued and increased service to tourists.

Develop linkages
• Develop linkages between cultural tourist attractions and marine recreational uses.
• Develop linkages between tourism and other sectors.
• Develop products and programs that link marine recreational offerings to promote increased use and
   understanding of the system as a whole.

Include the upper Bay
• Encourage recreation and tourism in the upper bay.

Ensure federal recognition and support
• Work with the congressional delegation to support programs beneficial to the development of marine
   recreation and tourism planning, development, and management.




                          Bike paths—usually financed through transportation funding—
                          serve as coastal paths that provide significant recreational
                          opportunities for residents and visitors.
20
                                                                                                         21


Marine Events

Description
Marine events are water dependent sporting or cultural events, conventions, or trade shows. For example,
the America’s Cup, a famous yacht racing event, clearly falls within the category of a sporting event, while
the Newport International Boat Show or a specific boat rendezvous might fall into the category of trade
show. However, both events demand similar marine infrastructure and can stimulate economic
development in the tourism and marine trades industries.

The impacts of marine events have long been recognized for the associated benefits to the tourism and
marine trades sectors in localities that host such events. Some studies on past Rhode Island events
demonstrate substantial economic impacts, including:
• $9 million gross economic impact - 1989
    International Boat Show;
• $6.5 million gross economic impact - 1992
                            20
    Newport-Bermuda Race.

A recent report estimating the economic impact of
the 1999-2000 America’s Cup Event in New
Zealand resulted in:
• $640 million of value added to the New
    Zealand economy
• $473 million in value added to the Auckland
    economy
• 10,620 full time equivalent years of
                  21
    employment.

The estimated impact on the Baltimore-Annapolis stopover of the last Whitbread Around the World Race
estimate:
• $26.2 million in direct economic impact;
• Over 200,000 spectators;
                                                   22
• American press coverage valued at over $370,000.

The University of Florida conducted a joint study with an expert consultant to examine the economic
impacts of the 1997 Annual Fort Lauderdale International Boat Show. According to this research report,
the Fort Lauderdale show yielded:
• $436 million in sales;
                                                                                           23
• $406.9 million of that was attributed to economic output throughout the state of Florida.

One press article accompanying the figures stated:

Although long thought of as an important sales vehicle for boat dealers and manufacturers, boat shows
also have a major economic impact on the areas in which they are held. According to one research group


20
   Tyrrell, Tim. “The Rhode Island Framework for Evaluating the Economic Impact of a Tourism Event,”
University of Rhode Island Office of Travel, Tourism and Recreation. 1997.
21
   The Economic Impact of the America’s Cup Regatta Auckland 1999-2000, p. iv. McDermott Fairgray
Group and Ernst & Young. October 2000.
22
   Whitbread Round the World Race for the Volvo Trophy, Sports Marketing Surveys Ltd., 1998.
23
   http://www.boatbiz.com/article.asp?indexid=6610905 – Boat shows beat bowl games for economic
impact, by Michael Farrell.
22

in Florida, the financial impact of a major consumer boat show can even dwarf that of the granddaddy of
                                 24
sporting events, the Super Bowl.

Regardless of the methodology applied, the results indicate that marine events have positive economic
impacts both through expenditures and labor. This says nothing, however, to the desirability of hosting
such events. It would be naïve to conclude that because of the positive economic impact such events are
desirable. Outside of the academic discourse there are few examples of cost benefit analysis to assess the
attractiveness of such events. Such an analysis for Rhode Island would need to be locally specific and
include qualitative assessment of community impacts, both positive and negative.

Marine events can have significant secondary impacts for economic development; both with tourism and
more generally within the marine industry cluster. Secondary impacts are less tangible and therefore harder
to assess qualitatively and quantitatively. Nevertheless, to understand the potential economic impact of
marine events it is important to attempt to understand the secondary benefits. Secondary benefits include:
             • “Advertising equivalent” global, national, and/or regional media exposure;
             • Opportunity for leveraging the economic energy of events to
                   stimulate investment in, and development of, marine
                   infrastructure planning and projects;                                It is essential to recognize
                                                                                        that    the    strength and
             • Impacts on host community quality of life;
                                                                                        competitiveness      of  the
             • Impacts to the marine cluster.                                           marine trades industries in
                                                                                      Rhode      Island      can   be
Regarding the impact to the marine industry, it is essential to recognize that the     correlated with the presence
strength and competitiveness of the marine trades industries in Rhode Island can       of past and present marine
                                                                                       events.
be correlated with the presence of past and present marine events. Many of
today's marine industry innovators and leaders came to Rhode Island to compete in
events such as the America's Cup. Ongoing exposure to and connection with marine events continuously
upgrades local demand conditions and points to industry trends and opportunities. The attraction of future,
nationally and internationally significant marine events will continue this positive feedback loop. The
failure to do so could break this virtuous cycle.

Status and Trends
During the middle 1990s Rhode Island failed to attract, or otherwise lost market share as a host for many
stopover marine events such as the Around Alone (formerly the BOC), the Volvo Ocean Race, and the EDS
Atlantic Challenge. However, each year Rhode Island continues to host many nationally and
internationally significant marine events. Success in attracting and developing these events is due to the
work of Yacht Clubs (such as the New York Yacht Club) and organizations such as Sail Newport. The RI
State Yachting Committee, whose mission is to facilitate the attraction of yachting events, has been
constrained by a lack of financial resources and limited power to negotiate contracts and participate in
creative financing schemes. However, a new non-profit corporation was formed recently to provide a
vehicle to accept and expend funds in support of the State Yachting Committee. This entity could
reenergize the Committee and alleviate some of limits to its effectiveness.

With the formation of the Partnership for Rhode Island Marine Event Development during the 2001
legislative session, the State recognized the importance of a legislatively chartered vehicle to attract,
coordinate, bid, develop, promote, and otherwise facilitate the growth of marine events in Rhode Island.
The success of this entity will depend upon the:
  • interest and willingness of the private sector (marine & tourism industries) to participate
  • access to preliminary funding to hire at least one FTE to carry out initial objectives
  • ability to increase awareness of the importance of marine events to economic development
  • ability to change the perception of marine events as providing benefit only to the affluent
  • willingness of state and municipal leaders to embrace the necessary actions and contribute resources

24
     ibid.
23
24



SWOT Analysis
Strengths:                                                      Opportunities:
•    Natural assets: good sailing conditions; deep bay,         •  Expand linkages between Providence and Newport
     sheltered harbors, easy access to offshore sailing            through co-location of stopover marine events.
     from lower bay, scenic coastline, and clean water.         •  Exploit the extant industry knowledge and influence
•    Human Resources: some strong local fleets, good               of Rhode Island residents to bring nationally and
     race committees,                                              internationally significant marine events to the State.
•    Support Industries: world-renowned marine trades           •  Promote collaboration among communities and
     industries to service boats, established tourism              yacht clubs to increase bidding capacity.
     infrastructure to host associated visitors.                •  Focus planning efforts on larger scale facilities on
•    Yacht Clubs (such as the New York Yacht Club) and             Narragansett Bay available to host marine events
     Community Boating Centers (such as Sail Newport)              (Providence waterfront and the West side of
     provide access to the sport for youth and attract/host        Aquidneck Island).
     most marine events.                                        •  Connect schools and community groups to marine
                                                                   events.

Weaknesses:                                                     Threats:
•  Infrastructure: many cities and towns have                   •   Local demand could become less sophisticated or
   inadequate facilities to host marine events due to               diverge from international trends.
   lack of investment or failure to respond to industry         •   Other national and international ports could more
   trends (e.g. deep draft and wide berth vessels).                 aggressively pursue marine events.
•  Gentrification of waterfronts has resulted in less           •   Marine event owners/promoters attempt to "game"
   flexibility to configure dockage and upland areas to             ports for more lucrative deals (leading to a
   host events.                                                     disadvantage for smaller states).
•  Resources: there has been little state and local
   investment in attracting marine events.
•  Poor public understanding of importance of marine
   events
•  Lack of planning, coordination, support and public
   awareness for marine events




Goal
Invest in policies, programs, and infrastructure to guarantee that Narragansett Bay is a world leader in
hosting nationally and internationally significant marine events.

Recommended Strategies & Actions
Enhance and expand Marine Events
• Achieve a more even distribution of events
   throughout Narragansett Bay.
• Recognize and articulate the connection
   between marine events and the evolution of
   the marine trades industry.
• Attract future marine events based on the
   input of local communities and the marine
   trades and tourism industries.
• Invest in policies and infrastructure that
   support the development of major national
   and international marine events.
•    Provide access to state parks and properties             Marine events require public access and dockage for boats,
     and commit the resources of state                        which when not used for events, can provide recreational
     departments and agencies to support the                  amenities for residents.
                                                                                                      25

    development of marine events.
•   Recognize marine events as critical to Rhode Island's unique brand of tourism and promote these
    events using the state tourism budget (especially in the European market).
•   Conduct a resource inventory to assess the State’s capacity to attract and host events. The inventory
    would address such issues as:
        Infrastructure – what are the essential facilities, transportation links, etc.?
        Economic – what is the corporate and public interest in marine events?
        Personnel – who has the expertise to successfully produce events and manage infrastructure?
•   Be proactive in searching out, attracting, and/or stimulating the creation of new events, especially
    events of actual or potential importance to Rhode Island firms or development opportunities.
26



Fisheries and Aquaculture
Cluster Description
The seafood and aquaculture sector in Rhode Island is comprised of commercial fisheries, seafood
processors, wholesale distributors, seafood packaging, and aquaculture. The majority of firms in this sector
are small and located near the state’s two largest fishing ports, Point Judith and
Newport. While the seafood industry is heavily clustered in Rhode Island, the
aquaculture component is relatively small. Research capacity for aquaculture in             Seafood processing is over
Rhode Island is quite large, and most firms in the state have some present or past          three       times       more
connection with one of these programs.25 The Policy Council estimates that seafood          concentrated in Rhode
processing is over three times more concentrated in Rhode Island than in the U.S.,          Island than in the U.S.
and that wholesale fish and seafood firms are over four times more concentrated. The
Policy Council characterizes this cluster as more vertically integrated than other
industries, with blurred boundaries between producers, distributors, and retailers, as many wholesalers, for
example, have become involved in manufacturing raw product. Linkages to the research institutions,
marketing and export efforts (e.g. Seafood Council), and regulatory entities (National Marine Fisheries
Service) are critical.

            ship repair / maintenance     fishers     equipment suppliers

                                                               aquaculture             RI Seafood Council
  URI
 RISG
                 Research                Fishing &              processors          marketing & export
                 & Design
 Slater
 RWU
                                        Aquaculture
                                                               wholesalers
                                        regulatory
                    NMFS          resource management                                 EDC
                                      infrastructure


                                        CRMC   DEM


Status and Trends
Statistics gathered from the Rhode Island Department of Labor and Training indicate significant shifts in
the seafood industry cluster during the 1990’s. The number of commercial fishing companies increased
slightly, as did the total employment in the industry. The average wage for finfish increased steadily over
the last ten years, from $19,128 in 1990 to $44,015 in 1999. The average annual wage in the shellfish
industry, however, decreased from 1990 to 1995, from $35,236 to $29,707 and has remained hovering
around $30,000 per year. Annual wages for fish processors for both canned and cured seafood and fresh or
frozen seafood increased steadily during the 1990’s. However, the wages for canned and cured seafood
processors increased significantly from $21,457 to $37,460, while the wages for fresh or frozen seafood
processors increased only slightly from $21,797 to $25,134. It is interesting to note that the number of
processors engaged in canning and curing seafood decreased from 5 in 1995 to only 1 in 1999. The firms
may have consolidated into one larger firm. The number of seafood processors preparing fresh or frozen
seafood increased by 35%, while the number of firms remained consistent over the last decade at 10. For
the wholesale sector of the industry, both the number of firms and employees decreased gradually during
the 1990’s, while the average wage rose steadily from $23,226 in 1990 to $38,728 in 1999. The Policy
Council reports that over 25 Rhode Island companies store over 8.5 million pounds of seafood in cold
storage facilities outside of Rhode Island each month, representing $1.2 million of investment leaving the
state.

25
  Patrick Healy, "RI aquaculture company luring out-of-state business," Providence Business News, March
27, 2002.
                                                                                   27




      Total Commercial Fishery Landings: Pt. Judity, RI (Source: NMFS)


                                                   100
                                                   90
                                                   80
                                                   70
                                                   60        Millions of Pounds
                                                   50
                                                   40        Millions of Dollars
                                                   30
                                                   20
                                                   10
                                                   0
 82

      84

           86

                88

                     90

                          92

                               94

                                    96

                                         98

                                              00
19

     19

          19

               19

                    19

                         19

                              19

                                   19

                                        19

                                             20
28



SWOT Analysis
Strengths:                                                 Opportunities:
•    Research and Design programs at URI/RWU have          •  Use of state owned land for aquaculture (EPC
     great potential.                                         document),
                                                           •  Improvements and flexibilities to state fishing piers
                                                              and facilities to allow for multiple use and more
                                                              direct retailing – harness the economic power of
                                                              tourism to preserve fishing,
                                                           •  Develop Quonset Aquaculture Technology Park
                                                              concept, further development of aquaculture siting
                                                              map developed by CRMC, shellfish transplant pilot
                                                              project

Weaknesses:                                                Threats:
•  Lack of cooperation among industry segments—little      •   Increased pollution, failure of management
   cooperation between the commercial fishing and
   aquaculture industries.
•  Regulatory      inconsistencies     and    burdens—
   inconsistencies among the state and local health,
   environmental, and land and water use zoning
   regulations.    Some of the primary issues are:
   wastewater from seafood processing plants and
   aquaculture facilities, zoning and permitting issues,
   multiple use conflicts, and the general lack of
   understanding and knowledge of local officials about
   the requirements of businesses in the seafood and
   aquaculture industry.
•  Increased Competition—further development and
   expansion of export markets is essential to the
   overall Northeast industry. Lack of Cold
•  Storage Facilities—cold storage is required by every
   type of seafood company and the lack of cold storage
   facilities puts Rhode Island at a competitive
   disadvantage. Local processors and wholesalers
   must ship their products out of state for storage,
   adding additional costs for transportation




Goal
Ensure the long term viability of the fishing industry by developing a fisheries management system that
provides for fair and equitable access to the fishery while preserving the health of the ecosystem and the
associated infrastructure and services. Make Rhode Island a world leader in the export of aquaculture
knowledge.
                                                                                                            29



Recommended Strategies & Actions

                                                         Improve Fisheries management
                                                         • Provide opportunities for present and future Rhode
                                                            Islanders to participate in the fishery.
                                                         • Develop management systems that promote
                                                            sustainable fishing.

                                                         Ensure adequate Federal cooperation
                                                         • Work with the congressional delegation to ensure
                                                            that the interests of Rhode Island fishermen are
                                                            respected in federal fisheries management efforts.
                                                         • Ensure that Rhode Island experts are included in
                                                            congressional research panels or other national
                                                            research initiatives.

                                                         Develop infrastructure & marketing
                                                         • Assess present and future infrastructure needs for
                                                            maintaining a vibrant fishery.
                                                         • Develop entrepreneurial and creative uses for state
                                                            ports and piers that provide fishers with necessary
                                                            infrastructure while maximizing complementary
                                                            uses.
                                                         • Stimulate value-added processes that increase
                                                            employment in fishing related industry.
                                                         • Support local, national, and international marketing
                                                            efforts for Rhode Island products.

Enhance ecosystems and stocks
• Invest in programs to enhance stocks of both commercial and non-commercial value.
• Invest in habitat protection and/or enhancement that contributes to the health of commercial stocks.

Establish Rhode Island as a world leader in the knowledge of aquaculture
• Create an aquaculture research and technology facility on Narragansett Bay.
• Promote inter-university and inter-departmental cooperation on research and development of
    aquaculture.
• Provide a regulatory environment that allows for the growth of aquaculture.

                                Total Commercial Fishery Landings: Newport, RI (Source: NMFS)


                                                                           20
                                                                           18
                                                                           16
                                                                           14
                                                                           12         Millions of Pounds
                                                                           10
                                                                           8          Millions of Dollars
                                                                           6
                                                                           4
                                                                           2
                                                                           0
                             19 5
                             19 6
                             19 7
                             19 0
                             19 1
                                92

                             19 3
                             19 4
                             19 5
                             19 6
                                97
                                98
                                8
                                8
                                8
                                9
                                9


                                9
                                9
                                9
                                9
                           19




                             19




                             19
30


Boatbuilding, Boat Servicing and Boating Related

Cluster Description
For decades, Rhode Island has considered itself the recreational boating
capital of the US East Coast. Certainly, the state’s geophysical attributes
have played an important role in the development of the marine industry
cluster. Recognizing this connection, the 1997 Economic Policy Council’s
report states that “given the state’s reputation for a quality sailing
environment, it was only natural that a flourishing boat building industry
develop.”26

The boating industry can be considered in three distinct yet interrelated components:
boat building, boat servicing, and boating-related businesses.

           •     Boat manufacturing businesses include manufacturers of both boats and specialized,
                 ancillary components such as sails, cordage, and electronics, many are nationally and
                 internationally competitive. As the primary exporters, these businesses are at the center of the
                 boating cluster.
           •     Boat servicing businesses are engaged in boat repair and maintenance or service, including
                 marinas and boatyards (often one in the same). It would be possible to include in this
                 category but difficult to quantify the hundreds of seasonal and year round jobs provided by
                 professional yacht managers, captains, and crew, many of whom receive unreported salary or
                 salary from foreign accounts.
           •     Boating related businesses include the myriad businesses that are engaged in activities that
                 are related to, and enhanced by, the boating industry such as magazines, crew services, marine
                 insurance and brokerage companies, the national governing body of the Sport of sailing etc.


                                                                             RIMTA
                           CRMC                                              Slater
                                    Research, Regulatory, Advocacy            EBEI
                           DEM
                                                                              EDC
                          US Sailing
                          yacht clubs                                       Plastics/resins
               Retail     Sail Newport

                             Boating         Boatbuilding /            Boat Manufacturing            Electronics
     Magazines               Related        Boating Industry
                                                                                                  Metalworking
            Insurance &
            Brokerage                         Boat Servicing
                                                                                      Sails and Canvas
                        Professional Crew                          Design
                                                                            Rigging
                         Maintenance & Repair

                                             Marinas & dockage




26
     Meeting the Challenge of the New Economy, The Economic Policy Council, 1997, p. 117.
                                                                                                                                            31

Rhode Island's niche in the boatbuilding industry appears to be                     RI Employment in Boatbuilding SIC 3732 - Source RIDLT

in high value, custom, racing one design, and cruising boats
                                                                           1,400
(e.g. Hood, Alden, TPI, and Carroll). Some competition is                  1,200

found in the Northeast Region, especially in Maine. Demand                 1,000
                                                                            800
for products in the boat building industry varies from firm to              600

firm. For custom, high-end boat building, especially racing                 400
                                                                            200
boats, firms must be among the best in the world (e.g. Goertz                   0
                                                                                    1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
and New England Boatworks). Some firms in Rhode Island
have started to move into power craft in response to a market
demand for popular "picnic boats."
                                                                                        RI Boatbuilding Firms SIC 3732 - Source RIDLT
Many of the outfitting businesses and specialized component
manufacturers compete on an international level as well,                   60
                                                                           50
especially in the sailing industry. The production boat                    40
industry (higher volume) are forced to compete with oversees               30

production that offers cheaper labor. Production of high                   20


performance small sailing (organized sailing) craft seems to be            10
                                                                            0
an area that Rhode Island dominates, with one firm having a                     1990 1991 1992 1993 1994 1995 1996 1997 1998 1999

significant portion of this market (Vanguard).




     High-end boats, frequent design innovation, and continuous retooling characterize the boatbuilding industry.

Boat servicing businesses compete on a regional basis; the New England climate and relative safety from
tropical storms attracts many seasonal boats that winter in the tropical climates. Here, Rhode Island’s
scenic, cultural, and historic amenities are important. The marina industry appears to remain strong, with
reports for 2001 indicating that many have completely sold out for the season.27 Boats, especially charter
and luxury yachts, are attracted to the areas that offer proximity to good coastal cruising, safe harbors and
anchorages, necessary services, and appealing amenities. Yachts that come to Rhode Island for these
amenities and attributes remain here to be serviced and vice versa. Boat servicing of mega-yachts has a
particularly large economic impact, but requires specific infrastructure. There are only a few locations on
the East Coast that can accommodate these yachts and Rhode Island has been successful in capturing a
portion of this business in recent years. Together, the boating cluster is a globally competitive vertical
marine cluster in the context of Michael Porter’s work. The evolution of the cluster over time, the related
and supporting industries, the frequent innovations and design changes, and many other variables fit
perfectly to the Porter Diamond.28




27
     Providence Journal, March 2, 2001. Sitting on the dock of the Bay.
28
  The boating cluster is reasonably addressed in Chapter 6 –Marine: Boat Building and Marinas - of the 1997
Economic Policy Council document, Meeting the Challenge of the New Economy.
32


Status and Trends
Boat sales in the United States declined 1% from 1999 to 2000,           Value of Product Shipments ($1000) for NAICS 3366127 (excluding military

selling a total of 578,000 boats.29 However, the value of new               commercial and power) source: US Census Bureau, 1997 Economic
                                                                                                      Census, 8/99

boats continued a 10-year expansion in discretionary spending,                                Cal.   Flor.   Maine   RI   SC

and showed a 15% gain from 1999-2000, with a total value of         120000

$25.5 billion.30 It is difficult to gauge the growth in boating     100000
                                                                     80000
related businesses because specific data is generally                60000
unavailable because the SIC descriptions group these                 40000
                                                                     20000
businesses into larger, more general categories. However, a              0
database maintained by the Economic Development                                           1992                              1997

Corporation lists a number of businesses that might fit into the
boating-related business section.        Industry members are
                                                                                    RI Boat Registrations - Source: DEM
cautiously optimistic that demand for their products (many
build to order and do not carry inventory) will continue despite     39,000

the near term economic slowdown.31 Companies that supply             37,000
                                                                     35,000
products overseas may actually experience an increase in             33,000
overseas demand if the dollar weakens against foreign                31,000

currencies, especially in selling to the European market.32 The
                                                                     29,000
                                                                     27,000
marina industry appears to remain strong, with reports from          25,000

2001 indicating that many sold out for the season.33 Some




                                                                               93


                                                                                        94


                                                                                                   95


                                                                                                               96


                                                                                                                       97


                                                                                                                                 98


                                                                                                                                           99
                                                                             19


                                                                                      19


                                                                                                 19


                                                                                                             19


                                                                                                                     19


                                                                                                                               19


                                                                                                                                         19
informal estimates indicate that there is a backlog of demand of
approximately 3000 slips in Rhode Island.34

In general, Rhode Island has done a good job in bringing the industry the national market share for
sailboats and boats otherwise not classified (NAICS 3366127) back to where it was in the 1980s. The
favorable tax climate for buying and keeping boats in Rhode Island has helped to
stimulate demand for products and services. Rhode Island’s share of US            Contrary to the general
sailboats product shipment values increased from $20,025,000 in 1992 (about       trend in manufacturing
7.7% of the US total) to $46,104,000 in 1997 (about 12.4% of US total). The       employment, boatbuilding
total US value of product shipments in NAICS 3366127 grew during this period      jobs have been increasing
from $259,095,000 to $376,515,000. During this period California declined         since a slump in the early
                                                                                  90s.
significantly in terms of the percent contribution to national total; Maine lost,
Florida maintained its position, and Rhode Island and South Carolina gained
significantly.

Recently, Escape, the manufacturer of a popular line of small sailboats, announced that it will be closing its
Rhode Island facility and moving operations to the parent company facility located in the Western United
States.35 The loss of this company should yield lower numbers for product volume in subsequent years
because it was one of the highest volume producers in Rhode Island.




29
   NMMA: Annual Retail Boat Sales 2000 Statistics.
30
   Providence Journal, January 1, 2001, Boat Sales Weathering Economic Uncertainty.
31
   Providence Business News, March 5, 2001, Boat businesses backlog may provide recession proof base
for Rhode Island.
32
   Ibid.
33
   Providence Journal, March 2, 2001. Sitting on the dock of the Bay.
34
   Personal Communication.
35
   Johnson Outdoors Inc. to Consolidate Escape Sailboat Manufacturing with New Watercraft Facility. June
18. 2001 PR Newswire.
                                                                         33




         Estimated U.S. Recreational Boats Owned (Source: NMMA)

18,000,000
16,000,000
14,000,000
12,000,000
10,000,000
 8,000,000
 6,000,000
 4,000,000
 2,000,000
         0
        13

              50

                    70

                          85

                                88

                                      90

                                            92

                                                  94

                                                        96

                                                              98

                                                                    00
       19

             19

                   19

                         19

                               19

                                     19

                                           19

                                                 19

                                                       19

                                                             19

                                                                   20
34
                                                                                                                   35


SWOT Analysis
Strengths:                                                      Opportunities:
•    Maritime tradition, many sheltered harbors, a deep         •  Expand boat storage space and marina capacity to
     bay, close proximity to the urban centers of New              grow the domestic market.
     York and Boston, a seasonal climate that is                •  Study the use of the West Side of Aquidneck Island
     conducive to marine recreation, and the area is               for an expansion of the marine trades.
     relatively protected from the tropical storm zone that     •  Reposition Rhode Island's unique natural attributes
     more directly threatens the southeastern United               and maritime history to attract national and
     States.                                                       internationally significant marine events.
•    Vertical cluster has high order advantage which            •  Connect marine events to the industry.
     gives competitive advantage. While the products
     from many boat builders are sold on the international
     level, the home demand for these products is highly
     sophisticated.
•    Local demand is fueled in part because of Rhode
     Island’s summer climate that attracts many boating
     enthusiasts.
•    Availability of national and internationally
     significant regattas also leads to a continuous flow of
     sophisticated demand that forces local industry,
     especially the services sector, to be high quality.
•    Another closely related element is the professional
     sailing talent that congregates in Rhode Island either
     seasonally or permanently. Over the years, the
     quality of life, availability of work, local level of
     competition, etc have resulted in many of the world’s
     leading competitors relocating to Rhode Island. This
     brain trust of sailing expertise fuels the boat building
     and servicing industry with new ideas, labor and
     demand for products.          The sophisticated local
     demand has been of central importance to the
     evolution of the cluster over time. Many of the most
     prominent and successful businesses are owned and
     operated by people who came here for the America’s
     Cup, or other key events.
Weaknesses:                                                     Threats:
•    Labor not in synch with market,                            •   Subsidies in competitor nations such as France.
•    Lack of space: There is presently a need for more              Continued growth of foreign competitors such as
     space for many boat building businesses that are               New Zealand.
     trying to expand in Rhode Island, but they all desire      •   Inability to expand in Rhode Island due to lack of
     to be located in the same general area.                        available industrial space.
•    Facilities in the Melville Complex are limited in          •   Regional competitors develop equally advantageous
     growth by restricted water supplies that drive up the          tax policies that erode Rhode Island's advantage.
     price of the fire systems that are required by state       •   Neighboring states supply marina space that Rhode
     building codes.                                                Island can't provide due to lack of dredging.
36



Goal
Invest in policies, programs, and infrastructure that secure Rhode Island's position as a world leader in
marine trades by developing and securing competitive advantages across the industry sector diamond.

Recommended Strategies & Actions
Establish the necessary policy context
• Recognize the direct and indirect importance of the boatbuilding and boating related industries sector;
    establish an appreciation for the vertical integration and global competitiveness of the sector.

Connect the related and supporting industries and activities
• Define the specific firms that comprise the boatbuilding, boat servicing and boating related industry
   and promote better linkages among related and supporting industries.
• Recognize firms within this sector as a unified cluster and develop policies and programs that reinforce
   the identity of this cluster.
• Reestablish a dedicated, full time marine sector Account Executive at the Economic Development
   Corporation to galvanize the cluster and act as the central government point of contact for the industry.

Improve factor conditions that impede growth
• Undertake a systematic analysis of available properties within the "boatbuilding triangle" and develop
   suitable space for expansion.
• Supply workforce training and development.
• Guarantee a more "business friendly" environment recognizing that many firms in this sector compete
   on an international basis (e.g. problems with workers compensation).
• Work with the congressional delegation to ensure trade policies at the national level that support
   domestic boatbuilders.

Maintain sophisticated demand
• Support competitive sailing programs and infrastructure, including community and collegiate sailing.
• Attract and promote marine events of national and international significance.
• Reinvigorate the East Bay Economic Initiative (EBEI) and provide for a coordinated approach to
    marketing at major national and international trade shows for local marine industries.
• Establish better connections between the East Bay Economic Initiative and the Economic
    Development Corporation, Export Assistance Center, and other institutions and programs.
• Rather than trying to establish a Rhode Island Brand, focus the East Bay Economic Initiative's efforts
    on establishing market power from scale:
        1) use the EBEI to help firms create and promote their own brands (e.g. marketing materials
        assistance); and
        2) use the EBEI to ensure representation at major boats shows and events worldwide, especially
        for companies that might not otherwise be able to establish a presence at such events.

Promote a local context that encourages investment in upgrading and innovation
• Develop tax incentives to promote innovation and constant retooling within the boatbuilding
   industries.
• Simplify existing tax incentives or other forms of business assistance to make it easier for companies
   to reap the associated benefits.
• Foster linkages between events, competitors, and firms within the industry to promote "cross-
   fertilization."
37
38



Shipbuilding

Cluster Description
The shipbuilding sector in Rhode Island consists
of those companies and entities engaged in either
the construction of ships or the structural repair of
ships. For our purposes we will distinguish
between ships and boats by defining ships as large
ocean-going vessels with steel hull and deck
construction. We will include barges as ships. It
should be noted that this cluster is heavily
dependent both on government shipping
regulations and, in the case of electric boat,
defense contracts, making the congressional
delegation particularly important for this sector.      Once considered an undesirable industry by some, the
Demand conditions in the shipbuilding cluster do        ship repair firm of today is a clean and welcome addition
                                                        to the waterfront landscape, even in scenic areas like
have some characteristics that depend on
                                                        Newport Harbor.
localization. For instance, the Quonset Point
operations of Electric Boat are in effect a supplier to the main Electric Boat plant some 40 miles away in
Groton, Connecticut. Certainly, the Quonset site was desirable due to it proximity to the “mother ship”.
Likewise, SENESCO’s barges are sold almost exclusively to companies in the northeast US. Interestingly,
Blount creates its own demand for the cruise ships it builds through its subsidiary American Canadian
Caribbean Line.

Demand conditions in this shipbuilding cluster are also strongly related to government-driven requirements.
The most important federal government demand in our cluster arises from the US military’s need to
maintain the health of General Dynamics / Electric Boat, our nation’s only submarine manufacturer.36 The
firm structure differs dramatically between the extant shipbuilders of Rhode Island. There is the submarine
monopoly of Electric Boat, a division of a corporation that now owns four of the six largest shipyards in the
United States (Groton, CT; Bath, ME; Newport News, VA; and San Diego, CA) and is completely
dependent upon the largesse of the federal government. Then there are SENESCO and Blount, small,
almost-boutique operations that seek to meet the needs of niche markets and, as a consequence, there is no
competitive tension between SENESCO and Blount.


                                     American Shipyard
                   PROMET

                                 Shipbuilding                Slater
                    Blount
                                                                           Congressional       USCG
                                                     Electric Boat
                                                                            Delegation         Navy

                                      SENESCO             EDC




The best illustration of how this requirement manifests itself can be seen in the ill-fated Seawolf program.
Despite the end of the Cold War, and President Bush’s request to cancel the original thirty submarine
program, the US Congress went ahead with construction of three Seawolf-class subs at a cost of over $14
billion primarily because a decision not to would have put Electric Boat into “mothball” status, a difficult
condition to reverse should an urgent need have developed. Center for Defense Information publication:
http://www.cdi.org/adm/Transcripts/1106/.
                                                                                                          39


Status and Trends

Global Industry Status and Trends
Because the demand for ships is predicated on the demand for world trade in manufactures and
commodities, it is useful at this initial stage to quantify the recent growth in world trade activity. World
goods trade went from $2.9 trillion in 1988 to $3.7 trillion in 1992 and to $6.2 trillion in 200037. While
economic troubles in Asia in 1998 and slowdowns in the developed world during 2000 were cause for
concern, over the past 15 years, the dollar value of global trade has grown at the vigorous annual rate of
roughly 6%. Likewise, growth in tonnage shipped was rapid, about 4% annually from 1993 and 1997, with
a total of about 5.5 billion metric tons now being shipped every year around the globe38.

To service this ocean transportation network is the current world inventory of large, commercial, merchant
vessels (those vessels heavier than 1,000 gross tons), numbering 28,000 ships with a total of 745 million
DWT39. Within this fleet of 28,000 are about 6,600 tankers; 5,800 dry bulk ships; 2,200 container ships
and 13,000 “other”. Significantly for the shipbuilding industry, more than half of these vessels are more
than 15 years old and will need replacing over the next decade40. Accelerating the demand for new ships
are United Nations – International Maritime Organization safety requirements being phased in over the
next decade requiring double hulls on tankers as well as other structural improvements necessary for crew
safety.

Annual world shipbuilding deliveries went from about 10 million GT in the mid-1960’s rising to 34 million
GT in the 1975 (a spike in tanker construction due to the OPEC oil shock), steadying at about 17 million
GT through most of the 1980s and early-1990’s but rising steadily for the past eight years to a total of 30
million GT in the year 200041. Virtually all of the increase since 1988 has been met by expanded East Asian
production. Four countries: Japan, Korea, China and Taiwan now account for 84% of world shipbuilding
output. In 1964, these countries had collective market shares only in the 30%-ile range but since 1985 have
never had less than 70% of the world market.

The decade of the 1990’s has also witnessed a dramatic shift in the type of ships being built. In 1989,
container ships were only 10% of world deliveries while in 2000 they constituted over 28%42. A ship of
5,500 TEU capacity currently costs about $60 million43.

National Industry Status and Trends
Over the past forty years, the US share of world output has averaged 1.7%, but since the US Congress
unilaterally discontinued the Construction Differential Subsidy Program in 1981, this share has been lower
than 0.6%44. This has led a recent blue-ribbon panel to conclude “the US shipbuilding industry is not yet

37
   Figures not adjusted for inflation. Data available from Appleyard and Field, Trade Theory and Policy,
Irwin, 2nd, 1995 and WTO 2000 annual report: http://www.wto.org/english/news_e/pres01_e/pr226_e.htm
38
   USDOT, An Assessment of the US Marine Transportation System: A Report to Congress, September
1999.
39
   The alternating usage of the units DWT (deadweight tonnage) and GT (gross tonnage) seem confusingly
arbitrary to the uninitiated. DWT is a measure of cargo capacity (water displacement) whereas GT is more
representative of the volume of the ship’s hold – and thus of the ship’s size.
40
   USDOT, MARAD, Maritime Trade and Transportation, 1999, pp 6 – 8.
41
   See Lloyd’s World Fleet Statistics data excerpt at
http://www.coltoncompany.com/index/shipbldg/world.htm
42
   See “2000 Taiwan Industrial Outlook: Shipbuilding Industry”, Industrial Technology Information
Service, 2001, http://www.itis.org.tw/english/rep0015.html
43
   See Container Ship Review and Forecast; http://www.fairplay.co.uk/markets/MFContain.htm
44
   The CDS was implemented by the Merchant Marine Act of 1936 and paid-out about $4 billion in
subsidies to ship operators who bought their ships in the US. The subsidy could be as large as half the cost
of the ship. See American Shipbuilding Association document
http://www.americanshipbuilding.com/stats-commhist.html
40

able to compete internationally”45. The reasons for this apparent lack of success are variously ascribed to
the higher costs of doing business in the US: primarily stricter labor, safety, and environmental regulations.
Indeed, the US share of the world market has continued to shrink despite a continuing (though reduced)
influx of Navy shipbuilding dollars and three other significant federal assistance programs:

          •    Title XI Maritime Guarantee Loan Subsidy Program, established in the 1930’s, that
               provides government-subsidized loans for ship construction;
          •    Cabotage or coastwise laws mandating that all passengers (the Passenger Vessel Services
               Act of 1886) and cargo (the Jones Act of 1920) shipped between two US ports be done so
               only on US-built, US-owned, US-flagged, and US-crewed vessels; and the
          •    Cargo Preference Acts of 1904 and 1954 that mandate that at least half of all non-defense
               government-owned cargoes and 100% of all defense-related cargoes be carried on US-
               flagged vessels.




     SENESCO facility at Quonset

The US Maritime Administration has identified 19 active major US shipbuilders that it refers to as the
Major Shipbuilding Base (MSB): five companies on the East Coast; three on the West Coast; three on the
Great Lakes; and eight on the Gulf Coast46. There are another 73 shipyards classified by MARAD as major
repair yards. As of January 1, 1999, a total of 100,300 employees worked in the private shipbuilding /
repair sector (SIC code 3731) plus another 14,500 working for the five government-operated shipyards
(four Navy and one Coast Guard) for a total payroll of 114,800.

The US is ranked #11 in the world for merchant vessel registrations and #3 in the world for vessel
ownership, reflecting the popular practice of “flag of convenience” or “open registries” (Panama, Liberia,
Malta, etc.). In the US-flagged fleet, there are 160 tankers, 14 dry bulk ships, and 85 container ships and
217 other for a total of 447 ships with 16 million DWT. This makes up the Jones-Act fleet.

There are currently forty active shipbuilders in the United States: only ten of which build ships over 400
feet (four of those are now divisions of General Dynamics – EB, Bath, NASSCO, and Newport News).
The total revenue of this sector is about $10 billion annually, of which ¾ is new ship orders (the remainder
being repair). While the US Navy and US Coast Guard continue to be supporters of the domestic
shipbuilding industry, orders from the US Merchant Marine, those cargo vessels sailing under the US flag,
has dwindled and now handles only 1.8% of the world’s cargo tonnage.

The talk in the early-1980’s of a 600-ship Navy has now butted against the 21st century reality of a 325-ship
force. Since 1977, the Navy has consistently purchased between 10 and 20 ships per year. The merchant
marine, however, has taken delivery of only 38 ships since 1984.


45
   See “Maritech Program Impacts on Global Competitiveness of the US Shipbuilding Industry and Navy
Ship Construction”, The Potomac Institute for Policy Studies, July 1998.
http://www.potomacinstitute.org/pubs/pubs.htm
46
   See Maritime Trade & Transportation, 1999, p. 36.
41
42


SWOT Analysis
Strengths:                                                  Opportunities:
•    Rhode Island shipbuilders have been good at finding    •   Welfare to work to get employees.
     and using market niches within the industry.           •   Apprenticeship programs might provide a labor
•    Manufacturing equipment tax credit, ISO 9000, and          supply.
     HRIC training tax credits are all helpful to the       •   Opportunity to sneak away some of the Gulf market
     industry.                                                  which dominates shipbuilding, especially in barge
•    Narragansett Bay and its location and access to the        industry. Northeast companies want to build product
     sea are an advantage.                                      in northeast.
                                                            •   Direct HRIC monies to upgrading mid-level
                                                                managerial skills.
                                                            •   Labor shortage could force these companies to
                                                                become technology users to overcome labor shortage
                                                                and become more productive.
                                                            •   New CCRI Training facility at Quonset.
Weaknesses:                                                 Threats:
•  Electricity prices higher than for competitors.          •   Become regressive manufacturers – must keep pace
•  Workers comp system is burdensome; people game               with lean manufacturing practices. Must capture
   the system to get both federal and state advantage.          market niches faster and better than other companies
•  Persistent shortage of skilled or even interested            or will lose opportunity.
   labor. Failure of training programs to direct labor to   •   No solution to labor supply may continue to drive up
   this industry.                                               costs.
•  Depth at bulkhead is restricting ability to capture      •   Government funded big construction projects in the
   emerging markets for larger products;                        northeast could further restrict labor supply.
•  Regulatory process at ACOE level is burdensome,          •   Shifts in Jones Act could crush industry.
   cost prohibitive (over 1 million for sampling alone),    •   Neighboring states, if they invest in infrastructure,
   limited dredging window.                                     could grow at our expense.
•  Federal construction projects in northeast siphon off
   employees.



Goal
Invest in policies, programs, and infrastructure that maintain the viability of shipbuilding in Rhode Island.




Recommended Strategies & Actions
Ensure Federal support
• Employ the congressional delegation to support Electric Boat contracts.
• Work with the congressional delegation to ensure that modifications to the Jones Act are favorable for
   local shipbuilders.

Improve the regulatory environment
• Provide timely and cost effective regulatory processes to allow for dredging in suitable areas.

Improve workforce conditions
• Facilitate the development of mid-level management skills.
• Establish workforce development strategies that fulfill the industry demand for workers.

Develop regional strategies
• Work with neighboring states to develop policies and programs that support shipbuilding on a regional
   basis.
• Link research and development needs of industry to Rhode Island research institutions.
43
44



Marine Transportation

Cluster Description
The Marine Transportation cluster consists of those activities surrounding the commercial transportation of
cargo and passengers on Narragansett Bay. This includes:

• International and domestic tanker and barge transportation
• Ferries, lighterage, towing and tugboat service, and sightseeing boats
• Dock facilities and cargo handling
Commercial marine transportation on Narragansett Bay relies on an infrastructure that consists of two
channels and three public ports. The two channels are the Providence River Channel and the
Quonset/Davisville channel.


                                                    Pilots

                           tankers              Marine                           firms
                           barges                                             consumers
                            ferries         Transportation                  support systems


                Ports &            Infrastructure       Regulatory and
               Waterways                                Policy Entities:            Congressional
                                                      USCG, USACE, USDOT             Delegation
                                    Intermodal
                                    Connections



Currently, the Port of Providence is more active than either the ports of Fall River or Quonset/Davisville.
This scenario may change in the future depending on the outcome of two proposed marine infrastructure
projects, the maintenance dredging of the Providence River Channel and the development of a container
port at Quonset/Davisville.

While there are no Rhode Island carriers actually involved in the ownership and operation of ships, tankers
or barges, the associated activities on shore still involve a large workforce. If it were not for the presence
of the Bay, it is unlikely that many of the activities listed above would be found in Rhode Island. A cluster
is strengthened to the extent that demand conditions                 Em ploym ent in Marine Transportation - RIDLT
within the local area contribute to a concentration of
companies. An example of this dynamic is the                    300

presence of oil tanker and barge traffic in Narragansett        250
Bay. The concentration of population in the Southern            200
New England region creates the demand for petroleum                                                                4489
                                                                150
products that is met by the tankers, barges, tugs, and oil                                                         4731
                                                                100
depots active in this cluster. Demand also plays a role
in the other types of cargo most-commonly shipped in             50

and out of Narragansett Bay. The sand and salt shipped            0

into Rhode Island reflects our winter requirements for
                                                                    90

                                                                    91

                                                                    92

                                                                    93

                                                                    94

                                                                    95

                                                                    96

                                                                    97

                                                                    98

                                                                    99

                                                                    00
                                                                  19

                                                                  19

                                                                  19

                                                                  19

                                                                  19

                                                                  19

                                                                  19

                                                                  19

                                                                  19

                                                                  19

                                                                  20




highway safety.

Ferry services provide another example of how local demand conditions can stimulate the marine
transportation cluster. Because of a high population density and the quirks of geography that have provided
us with a rich supply of attractive offshore islands to visit, several ferry operators have found a lucrative
market for their services. To the extent that tourism can be stimulated by State investment, the derived
demand for ferry services will also be increased.
                                                                                                                    45



It is important to note that the related and supporting industries are different for each of the different
segments of this cluster (cargo transport, tugs/ferries/sightseeing, and docks/ports). Supporting activities
for the Port of Providence include the shore-based oil distribution network, and the administrative services
that make processing of the cargo possible, such as insurance, freight forwarding, and US Customs
inspection. Shipbuilding and repair is another supporting industry. For example, Blount shipyard builds
small cruise ships used by their subsidiary, American and Canadian and Caribbean Lines, a component of
the marine transportation cluster. SENESCO builds the double-hulled barges used in the Atlantic coastwise
trades. Companies such as PROMET provide ship repair services for various segments of the marine
transportation cluster.


Status and Trends
In this section, our focus is on commercial marine transportation. Hence, fishing boats, pleasure craft, and
                                                         military vessels will not be discussed. The most readily
         Num ber of Firm s in Marine Transportation
                                                         available shipping data is for the Providence River and
  40
  35
                                                         Harbor, and our discussion emphasizes this area. Notably,
  30                                                     vessels periodically visit Quonset Point/Davisville to deliver
  25                                                     automobiles and for fish loading, and vessels also pass
  20
  15
                                                    4489
                                                    4731
                                                         through the Bay to service Brayton Point and Fall River in
  10                                                     Massachusetts. Though the information described herein
   5                                                     reasonably captures Rhode Island marine transportation
   0
                                                         activity on Narragansett Bay the omission of data for Fall
                                                         River, Brayton Point, and Quonset/Davisville understates total
    90

    91

    92

    93

    94

    95

    96

    97

    98

    99

    00
  19

  19

  19

  19

  19

  19

  19

  19

  19

  19

  20




                                                         vessel activity on the Bay.



1. Cargo Traffic

An analysis of cargo movements on Narragansett Bay was done. It relies on data supplied by the U.S.
Army Corps of Engineers' Waterborne Cargo Statistics. Data for harbor areas provided by the Corps
includes the combined traffic at both public and private terminals, and are reported in thousands of short
tons (2,000 lbs.)

Review of the data for the Providence River and Harbor suggests several trends:

    A. Marine transportation on Narragansett Bay primarily involves delivery of petroleum products,
       especially gasoline and distillate fuel.

    Of the 8,780 thousand metric tons of cargo delivered in 1997, fully 86 % by volume was petroleum or
    petroleum products (Figure 2). Of these cargoes, 60 % was gasoline and 28 % distillate fuel. Crude
    materials and primary manufactured products (e.g., cement, chemicals, preformed steel, lumber,
    asphalt, and bulk salt) made up 13 % of the volume

    B. Vessel traffic on the Bay has steadily declined over the past two decades, although cargo tonnage
       has increased.

    The number of inbound and outbound trips in the Providence River and Harbor fell from 5,614 in 1980
    to 2,893 in 1997 (Figure 3). With the exception of 1991 – 1993, the decline in vessel traffic has been
    continuous, with a smoothed rate of decline of about 3 percent from 1980 to 1997. Over the same
    period, however, cargo movement through the Bay has increased from 7.5 million tons in 1980 to 8.8
    million tons in 1997, a smoothed annual increase of about 1 % (Figure 4).
46



     C. Most of the vessels using the Bay are domestic, non-self propelled tankers

     In 1997, most of the vessels inbound to Providence River and Harbor were tankers (39 %) and tug and
     tow vessels (42 %). Most tankers (77 %) were non-self-propelled (i.e., they were barges). Only 5 %
     were non-self propelled dry cargo vessels. Most inbound vessels are domestic, reflecting the fact that
     the vast share of petroleum and petroleum product comes from domestic sources, and by law,
     coastwise shipments must be carried on domestic vessels.

     D.   Access by deep-draft vessels to the Providence River and Harbor is limited and has diminished
          with the decrease in depth and width of the federal channel.

Sediment buildup since the last major dredging project in 1976 generally limits access to vessels with a
draft of less than 35 feet. In 1988, for example, some 80 vessels with a draft of over 35 feet visited the
Providence River and Harbor; in 1997 that number was about 25.

Due to depth limits, deep-draft tankers (up to about 50 feet) must lighter onto smaller vessels before
entering the Bay, light load (i.e., carry less than full loads), or await a high tide in order to meet bottom
draft limits. Deliveries on deep-draft vessels (>35 feet) have diminished over time, and most vessels now
using the Providence River and Harbor have shallow drafts (73 % < 18 feet in 1997).


3. Passenger/Cruise Ship Traffic

Two ports, Newport and Providence, have historically served as ports-of-call to large cruise ships entering
Narragansett Bay. Newport is the primary port for cruise ships, since it is a destination site well known for
the mansions and other historical sites. In the recent past, few ships have visited Providence.

Twenty three different cruise ships greater than 100 dwt (deadweight tons) came to Narragansett Bay from
1992 to 1999. Overall, cruise ship activity has been growing since 1994. In the period under study there
were a total of 230 port visits. The depths of water in the channel of lower Narragansett Bay are sufficiently
deep to allow all cruise ships in service to enter the Bay, and anchor at Newport. However, if in the future
it becomes necessary to accommodate cruise ships at berths constructed at other sites (for example at
Providence), then minor dredging might have to be undertaken.


4. Passenger/Ferry Traffic

There are several year-round ferry
services in Rhode Island waters. Such
services are provided to Block Island and
Connecticut, with several vessels
departing from Point Judith. Another
service connects Bristol with Hog and
Prudence Islands. A ferry service began
in 2000 between Providence and
Newport.
There are currently three existing water
taxi operations on the Bay. A service is
                                              Marine transportation and tourism infrastructure should,
provided in the northern reaches of           where possible, be configured to provide recreational
Narragansett Bay, with two boats.             amenity for local residents. This waterfront path at Ft
Within Newport Harbor, one firm has           Adams, financed with TEA-21 funding, is accessible and
                                              well lit with ample space for parking.
                                                                                                                47

several water taxis available. A small ferry/water taxi service connects Jamestown with Newport.

Many metropolitan areas throughout the United States are
experiencing a resurgence in interest in passenger water
transportation. Two factors that have accelerated the
implementation of ferry plans are the increase in
waterfront real estate development in urban areas and the
inclusion of obsolete or underutilized maritime transport
facilities in development plans. Additionally, highways
have become increasingly crowded. The potential for the
provision of new ferry services on Narragansett Bay into
the 21st century will be dependent on future studies
identifying passenger transport demand.

SWOT Analysis
Strengths:                                                Opportunities:
•    No harbor maintenance tax is a strength for car      •  Improved marine transportation for commuters
     import business, most other east coast ports have    •  Expanded port uses at Davisville
     one,
•    Proximity to Europe on NA trade route,
•    Low rates of sedimentation,
•    Good intermodal linkage opportunities

Weaknesses:                                               Threats:
•  Shoaling in channels and at piers has limited draft    •   Lack of improvement in infrastructure may deplete
•  Failure to invest in infrastructure leaves RI behind       the commercial marine transportation system
   other ports,                                           •   Opposition to using industrially zoned waterfront for
•  ProvPort management structure problematic –                future marine industrial development.
   investment not being considered by private sector
   with signal from Providence being that water-
   dependent industry is unwanted




Goal
Invest in policies, programs, and infrastructure that allow for the efficient transportation of people and
goods to, from, and within Rhode Island.


Recommended Strategies & Actions
Assess infrastructure capacity and needs
• Undertake a comprehensive assessment of marine transportation infrastructure and develop a plan for
    the long-term development of marine transportation systems in Rhode Island.
• Coordinate waterfront redevelopment efforts in upper Narragansett Bay across communities.
• Further coordinate these redevelopment efforts in upper Narragansett Bay with state requirements for
    petroleum storage capacity.
• Relate marine transportation systems to economic develop opportunities.
• Recognize Rhode Island's connection to the northeast transportation corridor and assure adequate state
    participation in future planning and development of this system.

Research capacity
• Develop the capacity of the URI transportation center and other associated academic programs to
    provide research and development of innovative marine transportation solutions.
48




Public Forum
• Establish a public forum to discuss developments and opportunities in marine transportation with wide
   public involvement.

Commuter water transportation
• Continue to develop water-based transportation alternatives to alleviate congestion on roadways.
• Guide investments in water-based transportation by ensuring that such systems have the speed and
   frequency to comprise a viable commuter network.
49
50



Military

Cluster Description
The military cluster in Rhode Island, as it relates to the marine economy of the State, consists of the Rhode
Island National Guard and the active-duty and reserve military activities in and around US Naval Station
Newport (excluding the Naval Undersea Warfare Center (NUWC) which is covered under the Research
and Education cluster).

                                             Various factors continue to play a significant role in the
                                             military presence in Narragansett Bay. While changing
                                             political conditions and technological advances have made
                                             geography a less important factor, the nautical culture and
                                             traditions of Rhode Island have become even more important.
                                             In appreciating that the Navy presence here now revolves
                                             around its esteemed educational institutions, it is important to
                                             note that the sense of tradition that has both brought and kept
                                             these institutions in Rhode Island began during the US Civil
                                             War when the US Naval Academy was temporarily moved to
                                             Newport. Impressed by the USNA’s experience in Newport,
                                             Admiral Stephen B. Luce mounted a fifteen-year effort to re-
                                             establish a permanent Naval education here, culminating in
the 1883 – 1884 founding of the US Naval Training Station and the Naval War College. Since then, the
facilities and folklore that have grown up around these venerable institutions have further cemented the
connection between the Navy and Newport in the collective consciousness of our nation’s military
leadership.

Now, with the appropriate infrastructure to serve the existing student body already in place, the costs of
expanding educational programs at Newport are quite small. Because of the centralized administration
structure, economies of scale are possible when purchasing supplies and other inputs by buying in bulk
quantities for all of the institutions. The Navy has also realized savings in staff costs as functions can be
consolidated, avoiding staff duplication. Additionally, the wide variety of educational programs offered
here acts to provide faculty and staff with some degree of flexibility in their career paths; a strong selling
point when seeking to attract the best candidates.

Demand in this cluster comes almost exclusively from the federal government and, as such, it does not fit
the standard Porter cluster template. Yet, that does not mean that the State is powerless to affect demand
for the services of its military cluster. There is both vertical integration, with the base being almost a self-
sustaining community, as well as horizontal integration, as the seven educational units are similar enough
to be able to share many common resources. The only rivalry that might occur within the context of the
military cluster is competition from other States for the location of various Navy institutions. For instance,
the Defense Institute of International Legal Studies at Newport was recently, but unsuccessfully, targeted
for a move to Mississippi by a powerful senator from that state. The type of “Porter” competition that
would occur within a geographic locale, and would serve to improve the product produced by the cluster, is
not present in the military.


Status and Trends
After a dramatic spike in military spending that brought US armed forces to peacetime record strength
during the 1987 – 1989 period, the fortunes of the US military have dramatically changed. Seeking a
“peace dividend” after the end of the Cold War, US forces were trimmed substantially. Currently, the US
has 1.37 million active-duty personnel, down from a high of 2.18 million active-duty in 1987. This
                                                                                                          51

represents a 37% reduction in active-duty personnel in about 12 years47. The following table breaks down
the decreases by the armed services branch:

                    Army            Navy            Marine Corps       Air Force       Total
       1987         780,000         590,000         200,000            610,000         2,180,000
       2000         480,000         370,000         170,000            350,000         1,370,000
       Change       - 38%           - 37%           - 15%              - 43%           - 37%

     Likewise, over the same period, several measures of military spending have shown steep declines:

•    Civilian employees in the armed forces went from 1.1 million to 680,000, a reduction of 38%48.
•    Ready reserve forces have fallen from about 1.6 million to about 1.35 million, a 16% decline49.
•    Another measure, the number of active ships in the US Navy has decreased from a high of 594 in
     1987 to a sixty-five-year low of 317 in 2001, a 47% decline50.
•    Inflation-adjusted defense spending in constant 1992 dollars, shows that after the peak of 1989,
     budgets have decreased from $338 billion to $237 billion in 1998, a 30% decline.

While documenting all of the above declines is important in understanding the current state of affairs in the
military sector, it would appear, however, that the Bush administration is determined to solidify a recent
reversal of this decade-long downsizing trend. The most-recently published Bush defense budget requests
a total of $343.5 billion for FY2002, adding almost $20 billion to the FY2002 budget submitted by the
outgoing Clinton administration51. The Bush increase would act to further amplify the previous increase in
the defense budget, from about $280 billion in FY2000 to $300 billion in FY2001, which was the first
increment to outstrip inflation since the Persian Gulf War52. Along with the increase proposed by the Bush
budget, Defense Secretary Donald Rumsfeld has launched a Quadrennial Defense Review that is expected
to result in dramatic changes in the mission of the US armed forces and may result in dramatic reductions
in the almost 300,000 US troops stationed abroad53.


The Active-Duty US Navy In Rhode Island

During the years of World War II, at the height of the Navy presence in Rhode Island, over 162,000 people
worked for the Navy and over 100 “capital” ships (carriers, battleships and cruisers) were based here. As
recently as the early-1970s about 60 destroyers, attached to the Cruiser-Destroyer Force of the US Atlantic
Fleet, were based in Newport. When those ships were moved away as part of the Shore Establishment
Realignment Program in April 1973, the population of the base declined precipitously54. The current figure,

47
   The figures are from the DoD Directorate for Information Operations and Reports, Statistical Information
Analysis Division; “DoD Active Duty Military Personnel Strength Levels: Fiscal Years 1950-2000”, See
http://web1.whs.osd.mil/mmid/military/ms9.pdf
48
   Also from DoD Directorate for Information Operations and Reports, Statistical Information Analysis
Division; “Civilian Personnel Statistics”, See http://web1.whs.osd.mil/mmid/civilian/tab1.xls
49
   See the Statistical Abstract of the United States, Census Bureau, 1999; Section 11, Table 596, p. 378;
http://www.census.gov/prod/99pubs/99statab/
50
   See “U.S. Navy Active Ship Force Levels, 1917-1998” by the Naval Historical Center;
http://www.history.navy.mil/branches/org9-4.htm and “Status of the US Navy as of July, 2001”
http://www.chinfo.navy.mil/navpalib/news/.www/status.html
51
   Thom Shanker and James Dao, “Rumsfeld to Seek $33 billion Rise for Military”, The New York Times,
June 23, 2001.
52
   See DoD Press Release on budget: http://www.defenselink.mil/news/Feb2000/b02072000_bt045-00.html
53
   See military personnel report dated 12/31/2000 by Directorate for Information Operations and Reports,
http://web1.whs.osd.mil/mmid/m05/hst1200.pdf Also see New York Times article by Thom Shanker,
“Defense Chief Will Propose Military Change in Course”, June 15, 2001.
54
   See “The Navy & Rhode Island: A Shared History”, op. cit and “The Navy in Narragansett Bay”, op. cit.
52

according to the US Census Bureau, is about 7,800, (3,300 military and 4,500 civilian) the majority of
whom are stationed in Newport55. The latest accounting by the US Navy is 7,410, if employment at
NUWC is included. If NUWC is excluded, as is intended in this chapter, the figure is about 4,750 –
consisting of 3,000 permanent employees and a transient population of about 1,750 students56.

Naval Station Newport, NAVSTANPT, is
under the operational command of the US
Atlantic Fleet (CINCLANTFLT), also
known as the Second Fleet. Yet, in reality,
NAVSTANPT is only the administrative
shell that enables the base’s varied tenants to
meet their logistical (security, medical,
financial) needs. Less than 60% of the
base’s permanent employees actually work
for NAVSTANPT while the remainder work
for the other 31 administrative units housed
at the base, including the seven educational
institutions that serve the 1,750 students.

                                                                            The Naval War College attracts
                                                                            international     experts      and
                                                                            scholars to Aquidneck Island.
                                                                            Other Rhode Island institutions
                                                                            should tap this resource, where
                                                                            appropriate, to complement class
                                                                            offerings or areas of research.


                                                                         While      NAVSTANPT        was
                                                                         formally host to cruiser and
                                                                         destroyer commands, no surface
                                                                         ship operations have been based
                                                                         in Newport since the last dozen
ships left in May 1994. The loss of these guided-missile frigates and minesweepers resulted in an
employment decline from about 12,000 to the current 7,800. About fifty Navy ships still do call on
Newport each year, each staying for about a week while its crew attends one of the unique courses offered
here57. In fact, in May 1999 the USS Cole, prior to the devastating attack on it in Yemen, served as the
“school ship” at Newport58. Lessons learned by the crew at the Damage Control School here certainly
played a role in saving the ship. Currently there are two mothballed carriers docked at Coddington Cove’s
Pier One: the USS Forrestal (CV-59) and Saratoga (CV-60), both commissioned in the mid-1950s and
decommissioned in the mid-1990s. The three US Coast Guard cutters assigned to Newport are also based at
the Navy piers in Coddington Cove.

The current atmosphere in Newport most closely resembles that of a quiet and attractive oceanfront college
campus. In fact, there are seven institutions at Newport that specifically enroll students. Presented in order
of student enrollments:
         • Surface Warfare Officers School (640)
         • Naval War College (475)
         • Naval Education and Training Center (257)
         • Naval Academy Preparatory School (200)

55
   See Statistical Abstract of the United States, op. cit, p. 370, Table 580.
56
   These and the following figures come from to the US Naval Station Newport 2000 Annual Report.
57
   Personal conversation with David Sanders, Public Affairs Director, NAVSTANPT.
58
   See U.S.S. Cole home page at http://www.spear.navy.mil/ships/ddg67.
                                                                                                               53

         •    Naval Justice School (69)
         •    Senior Enlisted Academy (59)
         •    Command Leadership School (27)

There are also several other similar scholarly entities on-base that provide direct
academic and research support to the Naval War College and to the Naval Justice
School. The Department of Defense sends a little over $400 million to Rhode Island
annually in the form of salaries and wages: $160 million to active duty military
personnel, and another $240 million to civilian workers. Contracts let by the DoD in
Rhode Island exceed $300 million but these funds are not necessarily related to the
Navy or the base in Newport59. Neither of these figures accounts for the “multiplier”
effect of the indirect economic activity generated in surrounding communities by Navy employees.

SWOT Analysis
Strengths:                                              Opportunities:
•    Deep water port,                                   •  Capture active vessels to be stationed in Newport
•    High brac rating
•    History and prestige associated with Newport,
•    Desire for diversification
•    Land for expansion retained by Navy
•    Easy navigation
•    Good quality of life for high ranking officers

Weaknesses:                                             Threats:
•  Lack of public awareness of benefits of navy         •   Excise of Navy lands on West Side of Aquidneck
   presence across Rhode Island                             Island could limit future opportunity for expansion
•  Underutilized deep water port
•  Newport Bridge
•  Lack of outer anchorage




Goal
Work to guarantee the long-term presence of the military in Rhode Island at present or greater than
present levels.


Recommended Strategies & Actions
•    Work with Rhode Island’s Congressional delegation to ensure that the Department of Defense
     understands the importance of these facilities to our State.
•    Identify other potential Naval educational institutions that might also be sited here, focusing on those
     that would benefit from easy access to a bay.
•    Recognize that many of the Navy’s elite officer corps come to Newport for training at some point
     during their careers. The State should identify ways to make their experience here one that encourages
     a positive perception.
•    Work with colleges and universities in the State, especially URI, to reestablish a Navy ROTC program.



59
  It should be noted that both of these figures include NUWC-related activity. See the US Census Bureau
publication, Federal Expenditures by State for FY1997, Table 3, p. 15. See also report by Directorate for
Information Operations and Reports - Atlas/Data Abstract for the United States and Selected Areas - Fiscal
Year 1999 http://web1.whs.osd.mil/mmid/l03/fy99/99ri.htm.
54



Research, Technology Development and Education

Cluster Description
The cluster of industries and organizations engaged in bay related research, educational activities, and
technology development includes public and private sector institutions that develop, apply, and
communicate scientific information about the marine environment. Federal agencies, universities, private
companies, and non-profit agencies together contribute to bay related research and learning. Federal
laboratories that interact with the Bay include the Naval Undersea Warfare Center, (NUWC) the US EPA
Atlantic Ecology Division, National Health and Environmental Effects Research Laboratory, and the
Northeast Fisheries Science Center Narragansett Laboratory of the National Marine Fisheries Service.
Several university programs focus on bay related research such as the Brown University Center for
Environmental Studies, Geological and Environmental Sciences, Environmental Geophysics/Hydrology;
Roger Williams University, Department of Biology and Marine Biology; University of Rhode Island
College of Environmental and Life Sciences, Environmental Data Center, Coastal Institute; Graduate
School of Oceanography, Coastal Resources Center, Rhode Island Sea Grant, and the Office of Marine
Programs. Private firms such as Raytheon and ASA, Inc. and Rhode Island state agencies such as DEM
and CRMC also conduct Bay related research.

The types of research conducted include studies of the Bay itself, testing of equipment, and biological and
chemical studies. The Bay is also a great classroom for advanced training and academic research. The
non-profit sector also plays a critical role in this cluster. Organizations such as Save the Bay and the
Audubon Society provide an array of Bay related education and learning opportunities. There are many
interconnections in this marine cluster between state and federal agencies, universities and private
companies. These groups and individuals benefit from the concentrated cluster of marine related
education, research, and technology in Rhode Island. Graduates from marine related programs in state and
regional universities supply private companies and non-profit agencies with a skilled workforce, and
private companies benefit from working with university faculty member and students in the transfer of bay-
related knowledge and research into unique technologies and marketable products.60



                     Save the Bay                                                              Raytheon
         Audubon
                                                Research
                       Education          Technology Development               Technology       NUWC
                                                                               Development
                                                 Education
                                                                     Slater                       suppliers
                          URI:                                                         SAIC
                   GSO, CRC, EDC, CI                                           ASA
                                                   Research      NMFS
                   Marine Affairs, RISG

              Brown:
      Environmental Studies,
      Geo. and Env. Sciences,                EPA
     Geophysics/Hydrology Lab.                         DEM




Status and Trends
Federal military budgets and university budgets allocated to bay related research significantly impact the
economic health and viability of this cluster. The Naval Undersea Warfare Center (NUWC) is a key
contributor to Bay related education and research. NUWC’s mission is to operate the Navy’s full spectrum

60
 Narragansett Bay Summit 2000 White Paper: Research, Technology Development, and Education on
Narragansett Bay, 2000, p. 20.
                                                                                                        55

of research, development, test and evaluation, engineering and fleet support center for submarines,
autonomous underwater systems, undersea offensive and defensive weapons systems, and countermeasures
associated with undersea warfare. In the past five years, NUWC hired more than 500 employees, and
supports a number of businesses through government contracts.

                                                               In 1998, NUWC’s Newport Division
                                                               received more than $637 million of funds,
                                                               of which over $215 million was awarded to
                                                               private contractors in Rhode Island,
                                                               Massachusetts, and Connecticut.61 Another
                                                               important sector of this cluster are the
                                                               direct suppliers and contractors to NUWC
                                                               and to the university research entities.
                                                               These companies are sustained by the
                                                               cluster of demand provided by the
                                                               agencies, organizations and universities
                                                               whose efforts are concentrated in and
                                                               around Narragansett Bay.

                                                             In turn, the concentration of research and
                                                             development clustered around the bay spins
                                                             off new companies and technological
innovations that strengthen Rhode Island’s competitive advantage in several related industries. Between
1999 and May of 2001, NUWC reported contracts with 235 Rhode Island companies. The companies
range from engineering, manufacturing, construction, and research services to catering and hotel service.
The regional economy is also significantly bolstered by NUWC’s presence, as 315 Massachusetts
companies and 150 companies in Connecticut serve as direct suppliers.

The Bay-related research focus of several universities is also increasing. The URI Graduate School of
Oceanography’s research budget grew from $19,397,483 in 1997-1998 to $22,423,129 in 1999-2000. One
half of all URI grants and contracts are awarded to GSO. GSO offers degrees in the traditional disciplines
of oceanography and in interdisciplinary areas such as ocean engineering and atmospheric chemistry. Also
the new URI Coastal Institute, developed to address science and policy issues related to coastal zones, and
the marine biology infrastructure investments made by Roger Williams University add significant resources
to this cluster.

Another important university related contributor to this cluster is the Center for Economic and
Environmental Development at Roger Williams University, which promotes the development of
environmentally-compatible and economically-             Naval Undersea Warfare Center 1991-2001
sound, maritime industries. The Center also funds                       (millions)
and conducts research for sustainable uses of the
                                                   1,000
Bay. Rhode Island Sea Grant focuses on coastal
                                                     800
management, fisheries, aquaculture and seafood
                                                     600
science, and communications. URI Cooperative
                                                     400
extension is involved in marine and environmental
                                                     200
outreach that is specifically Bay related in two
                                                       0
programmatic areas: aquaculture and fisheries and                1991                     2001
natural resources and the environment.

The University of Connecticut is in the process of launching a new Marine Sciences and Technology
Center at Avery Point in Groton, CT, which will create linkages between the university and specific
industries. There is a similar concentration of military, universities, marine transportation, and marine

61
     Providence Business News, April 11, 2001.
56

related industries in the state of Connecticut, which adds significant resources, knowledge, and an
employment base to the region, and bolsters the regions competitive advantage. This cluster, however, is
also competition for companies and employees that comprise the marine cluster in Rhode Island. Similarly,
other universities in the region contribute to this cluster through supporting industries, and contributions of
a specialized workforce and technological innovations and research. A new Graduate School of Marine
Sciences and Technology will be initiated at UMASS in the fall of 2001.62 The Department of
Transportation’s Maritime Administration supports the Massachusetts Maritime Academy in Buzzard’s
Bay which offers Bachelor of Science programs in marine engineering, marine transportation, facilities and
environmental engineering and marine safety, environmental protection and international marine business.

                                                                                                            The research and learning efforts of non-
                                                                                                            profit   agencies    that    focus     on
                                            80                                                              Narragansett Bay are also increasing. In
                                                                                                            the Spring of 2000, Save the Bay
                                            60                                                              launched the ‘Explore the Bay’
                                                                                                            campaign. The $6.5 million campaign
                                            40
                                                                                                            includes an education center along the
                                            20                                                              Providence River, a satellite learning
                                                                                                            center on Aquidneck Island, two
                                               0                      N O A A /N
                                                                                                            specially designed education vessels,
                                                     NUW C   EPA                   URI    B ro w n   DEM
                                                                        M FS                                dock access on the East and West Bay
 B a y-D e p e n d e n t R e se a rch B u d g e ts
 (M illio n s)
                                                      75     1 .6 5      0 .3      7 .4     0 .3     0 .9
                                                                                                            and 2 million dedicated to an
                                                                                                            endowment.         Save The Bay’s
                                                                  Narragansett Bay Station in Newport has
NUWC is a sleeping giant. Few on Aquidneck Island or in Rhode
                                                                  been opened and a brownfield site for
Island understand the size of its research budget or its importance.
                                                                  the education center at Field’s Point has
been secured. In 2000, over 16,000 students, teachers and members of the public learned about and
experienced the Bay through Save the Bay’s educational programs. Save the Bay partners with the
National Estuarine Research Reserve on Prudence Island, URI’s Coastal Resources Center and the
Graduate School of Oceanography, Restore the Resources of the Bay, and URI Cooperative Extension.63
Also, the Audubon Society of Rhode Island’s Environmental Education Center in Bristol has served 20,000
students and teachers through classrooms visits, after-school programs, field trips, etc. Save the Bay and
the Audubon Society of Rhode Island also provide teacher resources.

Unique partnerships in the state have strengthened and will help to sustain bay related research and
learning. The Bay Company, for example, is a collaboration between Rhode Island Seafood Council,
Rhode Island Marine Trade Association, and
the East Bay Economic Initiative that creates
linkages between marine industries and
vocational and technical education. Their
current efforts include field trips, internships
and curricula development in aquaculture and
marine trades. Their projects include
curriculum development at Cranston West High
School and Cranston Area Career and
Technical Center, and developing lesson plans
focused on aquaculture and an aquaculture lab.
At Davisville Middle School, the Bay
Company initiated “What a Difference a Bay
Makes” program for 7th grade students and

62
   Narragansett Bay Summit 2000 White Paper: Research, Technology Development, and Education on
Narragansett Bay, 2000, p. 14.
63
   Save the Bay Annual Report, 2000.
                                                                                                       57

teachers. The program is a series of field trips and presentations focused on marine industries. The group
is also working with the Providence Maritime Heritage Foundation, Education Advisory Committee to
build industry standards and develop a standardized seafood and marine trade curriculum.

The Slater Center for Marine and Environmental Technology encourages industry and university
cooperation. The specific goals of the center are to encourage entrepreneurial enterprises, facilitate
technology transfer between the government sector, universities and the private sector, and nurture young
firms through a comprehensive program of research and development grants, marine enterprise loans, and
business development initiatives. The Slater Center’s $1.6 million Marine Enterprise Development
Program provides low-interest loans to startup companies. They have helped to launch three new RI
companies, provided grant funding to seven companies, and provided loans to six others. The center’s new
program, the Ocean Technology Transfer Initiative, fosters collaboration of research and development
between NUWC and URI.64

The Center’s building is also the home to a small but expanding business incubator site. The Slater Center
plans to convert additional space, including a CAD/CAE workspace, to accommodate new startups and
ideas. Center sponsored workshops and seminars will stimulate technology transfer from Rhode Island's
public and private centers of intellectual capital, giving Rhode Island's innovative ideas a start towards
business success.65 In May, 2001, six start-up companies were awarded Research and Development
Partnership grants. The innovative work of these companies ranges from hurricane forecasting technology,
sonar imagining and chemical sensors that measure the amount of nutrients in sea water to a solar-powered
shellfish feeder. Most of the companies that have been funded at the Slater Center for Marine and
Environmental Technology are start-ups and therefore small in size. Currently the Slater Center has funded
12 companies, which have a total of 156 employees in Rhode Island. However, a larger Massachusetts
based company recently bought one of these companies and another, SENESCO, has approximately 100
employees and is expanding.

The largest research and technology employers are the Naval Undersea Warfare Center in Newport with
3,000 employees, Electric Boat in North Kingstown with 1,032 employees and Raytheon in Portsmouth
with 950 employees. A survey of private companies, conducted by the Economic Policy Council in March,
2000, estimates that of the companies surveyed, 200 engage in research, technology development, or
education. Of the respondents, 37% are engaged in research, 60% are engaged in technology development,
and 11% are engaged in education activities. The majority of responding firms indicated that they are
increasing their use of the Bay.66




64
   Narragansett Bay Summit 2000 White Paper: Research, Technology Development, and Education on
Narragansett Bay, 2000, p. 14.
65
   For more information: www.slateroceantech.com.
66
   Narragansett Bay Summit 2000 White Paper: Research, Technology Development, and Education on
Narragansett Bay, 2000, p. 12.
58
                                                                                                                  59


SWOT Analysis
Strengths:                                                    Opportunities:
•    Competitive advantage over other regions and states      •  Increasing power of congressional delegation,
     because of the “evolved” nature and linkages             •  Key players understand importance of sector,
     between the entities and institutions involved.          •  EPC working actively on several issues, including
•    URI is known particularly for the quantity and              biotech and OSAT building,
     quality of graduate degrees issued in marine areas,      •  Need representation on federal commissions to
     and the depth of the myriad marine programs and             ensure our interests are represented, newly powerful
     research initiatives.                                       and interested federal delegation could be an
•    Much of the support for the current infrastructure          important voice in DC,
     and intellectual capacity in this sector is the legacy   •  New deans at URI, new SG director, new dean at
     of investments made decades ago using federal               GSO
     assistance.                                              •  Oceans and ocean development continue to be vast
•    Narragansett Bay is another element of                      global opportunity, while space everywhere limited;
     “infrastructure” that gives advantage to the sector in      if we can become the leader in maximizing use in
     Rhode Island, along with the strategic location             limited space we can export knowledge
     between UMASS and UCONN.
•    NUWC facilities and research partnerships are
     unique and largely underutilized.

Weaknesses:                                                   Threats:
•  Barriers to expansion and development – both rules         •   Competing programs continue to rise while we
   and mindset, poorly understood by decision-makers              remain neutral or decline,
   esp. research connected to economic development            •   Loss of NUWC to BRAC
•  Limited state investment in research, no champion or       •   Gradual chipping away at strengths of past – death
   leader willing this to happen,                                 by 1000 blows
•  FTE cap constraining growth, requires long term            •   Continue to neglect needed investments
   vision in short term budget cycle,
•  No single source of annual information/presentation
   of ROI to state from research
•  Poor understanding of navy and confused message of
   URI
•  Economic development not specifically part of the
   URI mission




Goal
Invest in policies, programs, and infrastructure that will promote the economic development potential of
marine research, technology development, and education.

Recommended Strategies & Actions
Establish the necessary policy context
• Work to give an identity to this sector
• Articulate the importance of this sector to the economic development goals of Rhode Island
• Recognize the regional context of this sector and strategize accordingly

Improve linkages between research institutions and firms
• Use the Slater Centers and the Economic Development Corporation as facilitators between the various
   elements in the sector

Ensure the necessary infrastructure and environmental conditions to support sector development
• Promote the development of a marine technology center
• Inventory available resources and establish a plan for maximum utilization
60

Develop a common strategy for marine research, technology development and education
• Encourage key players to work together to set a common strategy and agenda for the long term
   development of this sector

Promote an entrepreneurial culture at URI
• Work with the administration to establish policies and programs that encourage faculty participation in
   technology transfer and external business pursuits
• Encourage funding sources for faculty that allow students to participate in research, technology
   development, and education projects
61
62



Suggestions for Future Research
Continue to refine and research the Rhode Island Marine Cluster:

     •   Provide a greater understanding of the interrelationships among sectors through a systems
         dynamics approach

     •   Establish a locally specific database of marine economic indicators using a methodology
         consistent with that being developed at the national level in the Ocean Economics Project.

     •   Explore a cooperative and consistent program for the entire geographic span of the marine cluster,
         possibly including a formal interstate agreement with Massachusetts and Connecticut.

     •   Compile and analyze a list of coastal brownfield properties, and establish programs and policies to
         facilitate cleanup and reuse.

     •   Undertake a coastal land use analysis for Narragansett Bay to determine major trends in coastal
         land use.

     •   Develop an action plan to preserve working waterfronts statewide; channel development of marine
         related industries to working waterfronts.
                                                                                                      63



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