Odds, oddities, ends and endings

It’s late Sunday night but there are a few interesting end of week facts for you to chew on.

1. Dion and economic development in the Maritimes
I don’t know Dion’s position on regional economic development. He made some reference to ensuring regions’ don’t fall behind and some such boilerplate but no real specifics. Because he cut his teeth under Chretien, Martin and Manley, one would assume a similar approach, namely, talk a lot but do very little. When Chretien and Martin took power they said “no more mega projects” such as Hibernia. Then they proceeded to pour billions into the Ottawa/Montreal/Toronto triangle through the TPC and other Industry Canada programs. And one shouldn’t forget the hundreds of millions into the auto sector. The strategy for Atlantic Canada? Initially SME support and then the fabulously early 2000s theme of ‘innovation’. I suspect that in the absence of any real strategy, we can expect more of the same. Although Dion’s environmental focus may cause problems for the energy sector projects in Saint John.

2. Darrell Dexter, head of Nova Scotia’s NDP, was in Cape Breton last week complaining that Nova Scotia didn’t need any more ‘branch plants’ and that fostering small business was the right way to go. He was commenting on EDS’ plan to reduce the size of one of its call centres in Cape Breton. Interesting that when one multinational firm closes its doors, it’s a greedy multinational firm trying to pillage and exploit poor Maritimers and their tax dollars but when 10 local businesses close it’s a whole different story. Dexter should learn from Manitoba:

Hogs vs. BlackBerries Manitoba misses the call to develop high-tech industry
11/30/2006 05:08:16 AM EST
Winnipeg Free Press

STEVE DEMMINGS

ABOUT two years ago, Premier Gary Doer said he was putting an end to the use of subsidies to attract new business because he did not believe government handouts were a solid long-term economic strategy.

It’s “getting to the point where every job was costing $7,000,” Doer said, commenting on the cost of developing the customer contact centre business. “Our economic vision is broader than that.”

As the Winnipeg Free Press reported at the time: “It is not often that such a defined start and stop can be detected in an industry’s growth, as has occurred in the customer contact centre business in Manitoba.”

However, it appears that excessive subsidies are now the only tools that Doer and the NDP have left to attract business to Manitoba, while other jurisdictions offer compelling business environments to attract and retain educated youth.

Doer’s predecessor, Tory premier Gary Filmon, developed a strategic economic development plan that initially utilized financial incentives to create a customer contact centre industry. Filmon’s vision was to create a technology cluster that yielded 10,000 jobs, a strategy realized by 1999, the year the Progressive Conservatives were defeated and replaced by the NDP.

The Filmon government established such a strong reputation internationally (along with New Brunswick) for attracting technology business that it was in the process of weaning itself from the necessity of using incentives to attract companies. In fact, when the Tories announced the successful agreement to develop a new 53,000-square-foot facility to employ 600 employees for the RBC Royal Bank Customer Contact Centre in Winnipeg, the deal was negotiated without the necessity of incentives. Manitoba’s growing reputation in job creation and contact centre infrastructure had created a competitive advantage for Manitoba.

But both our reputation and our infrastructure have been squandered by Doer. Today, the customer-contact or call-centre industry in Manitoba has stalled at an estimated 11,000 jobs, while Nova Scotia (15,500 jobs) and New Brunswick (20,000 jobs) have surged ahead. The NDP has failed to optimize the potential to create more lucrative and fulfilling careers for Manitobans because of its abandonment of the sector.

In 2001, Manitoba had a wonderful economic development opportunity handed to it on a silver platter. That’s when the province successfully competed against its chief rival at the time (New Brunswick) for the right to create 1,200 new jobs with CanWest Global Communications. This came at a potential cost of $5,500 per job or $6.6 million. The jobs involved a customer contact centre, financial services centre and digital specialty television channels in Manitoba.

The CanWest expansion was great news for Manitobans. It offered enormous opportunity to leverage the existing customer contact initiative. It created the opportunity for Manitoba to go up the food chain. A cluster of new media businesses could have grown from CanWest’s expansion. It was an opportunity lost on the NDP.

Unfortunately, word has spread about Manitoba’s diminished interest in the industry. Specifically, we should ask ourselves why Research in Motion (developer of the BlackBerry) did not even consider Manitoba as an expansion option among 30 possible sites it considered. It located in Nova Scotia, instead. Only seven years ago, Manitoba would have been in the bull’s-eye for such an international competition, but not anymore.

Nova Scotia aggressively went after RIM, which represented the direction they wished to take their economy. RIM was the type of world-leading hi-tech firm that would help re-brand the province as a technology cluster and a perfect match for its educated, under-employed workforce. Their sales team “cold-called” RIM’s head offices in September 2005 in Waterloo, Ont., and delivered a compelling business case for bringing RIM to Nova Scotia.

In Nova Scotia, the recruitment process is well under way to staff the tech-support centre that will create 1,200 careers for graduates of the province’s universities and colleges. Nova Scotians are even more excited following RIM’s announcement last month in Bedford that it had purchased a site to build a 150,000 square-foot building on a new technology campus to be completed by the spring of 2008. One can only imagine how easily this sod turning could have occurred on the remaining undeveloped lands at the University of Manitoba’s Smart Park if Mr. Doer had had the vision and the marketing savvy to compete for the RIM business.

RIM will make a $230 million investment in the new project. In return, Nova Scotia expended $19 million in incentives. Salaries will be offered from $45,000 to $48,000 annually at a one-time cost of $15,833 per job.

Meanwhile, let’s consider the OlyWest pork processing plant deal in Manitoba. It reportedly represents one of the largest single private-sector job creation projects in the province’s history and will secure Manitoba as the third largest pork producer in Canada. It is estimated that once the plant is open, 16,000 Manitobans will be employed in the pork industry.

The media have reported that OlyWest will create 1,100 new jobs with annual wages ranging from $21,500 to $27,300 and that the province is contributing $27.5 million of $31 million of incentives — 89 per cent — to seal the deal.

The RIM deal cost Nova Scotians $15,833 per job versus $28,182 per job for Manitoba’s OlyWest deal, which will pay salaries that are 48 per cent to 57 per cent of those offered for Nova Scotia’s youth.

The hog industry is a significant part of Manitoba’s efforts to diversify its agricultural economy, but Doer has failed to realize the potential of the technology sector.

Doer said two years ago he was “committed to putting an end to government subsidies,” but the opposite has occurred and he lacks a coherent economic development strategy for their application.

The NDP has failed to capitalize on the momentum created by the CanWest expansion. Equally disappointing, it has failed to elevate Manitoba on the radar screen for other technology prospects, such as RIM.

Steve Demmings
is president of Site Selection Canada www.siteselectioncanada.com based in Winnipeg. Site Selection Canada advises technology firms seeking new Canadian locations for expansion. The company also advises communities on developing strategies to attain economic development.

Sorry for the long cut and paste but Demmings is right on the money. He’s an old 1990s fart like me that remembers a day when Manitoba was aggressively trying to grow new industries and develop a vibrant economy. Manitoba is the only province west of Ontario that is a ‘have not’ province and their have not position is getting worse. Is it any wonder that Doer and Lord were such good friends? No doubt they were exchanging strategies on how to bring down their respective economies. I’m only partially kidding. Manitoba under Doer and New Brunswick under Lord required the largest increases – by far – in Canada for Equalization payments.

Maybe Dexter, Doer and Lord should all go bowling together.

The truth is that I am tired of Canada’s richest provinces spending the most money on economic development while the have nots are supposed to sit back and hope that small businesses will rise up and grow the economy back into a strong position.

When Alberta and the Feds cut off the hundreds of millions in tax incentives to develop the oil sector, when Quebec and the Feds stop spending hundreds of millions to grow the high tech, aerospace and pharma sectors and when Ontario and the Feds stop spending billions to grow the auto, high tech and R&D sectors in that province, I’ll start listening to guys like Dexter, Lord and Doer (DLD).

Until that time, I will look for brave souls willing to stand up and say enough is enough. We are going to get our economy back on the rails. We are going to bring people back. We are going to ensure that our province gets its fair share of global business investment.

And until we get those brave souls, we can expect more of the same crap coming out of the DLD types of the world.

You would think that the friggin’ NDP would get it. They are the ones that want to spend taxpayer dollars like its going out of style. You would think they would see at the most basic level that they need to grow the taxes to pay for the social spending.

One of the greatest ironies of all is that the big unions in Ontario and Quebec (which are supposed to be the base of the NDP) are demanding more government investment in industry development and guys like Dexter are complaining about industrial development in Nova Scotia.

Tisk. Tisk. Tisk.

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0 Responses to Odds, oddities, ends and endings

  1. Anonymous says:

    Talk about ‘crazy’, let’s look at the facts. That article is such propaganda its really nauseating:

    “Canwest Global”-so in 2001 Manitoba was ‘competing against its then chief rival for over 1000 jobs’-thats utter lunacy of course. The Aspers come from Manitoba and have the province sewn up like Irving does here (although like Saskatchewan it still manages its own public broadcaster). IF that were true, then where is Canwest in New Brunswick? Hell, they don’t even keep a permament news team in the province!

    Manitoba, of course, suffers under many of the same problems as New Brunswick, except their industries aren’t fish and forests, but farming. That’s what people are trained at, which is why government invests far too heavily in pork processing-the same way New Brunswick invests WAY too much in forestry. One quarter of a billion was announced for the dying forestry sector, that’s almost 5 percent of the total budget.

    Companies like RIM want more tax dollars, they want educated workforces-and lots of them. Anybody that reastically thinks NB has a shot against Nova Scotia, which offers tax dollars and a region with more universities than in the entire province of NB is dreaming a dreamy dream.

    The Rim thing is being used in just about every province though. That is only one company, and if the past is any harbinger there is no real knowing how secure it will be in ten years. It already cost the federal government tens of millions, and was only barely saved from extinction.

    The branch plant theme is very serious and shouldn’t be laughed at. I posted before exactly what happened in the 1890’s when massive investment flowed into the region and industrial growth and populations were higher than southern ontario’s. However, it was all tied to BUYING existing firms or setting up branch plants to compete with local firms which then went under. Within that ten years the number of firms dropped from 10,000 to under 2000.

    And when companies hit hard times, and they ALL hit hard times at some point, the ones to suffer first are ALWAYS branch plants. It was only four years ago that RIM was laying people off. When that happens again it won’t be workers in Waterloo that will be first to go-it’ll be ones in Halifax.

    As has been posted at this website, hi tech knowledge workers are hard to come by, and the same is true in Manitoba. Agricultural jobs, like NB forestry ones, are protected and subsidized because thats where the votes are. That’s political reality, but the economic reality is even starker, that the populations simply aren’t even necessary.

    Far from being a rampant success, Filmon was tossed because all his right wing rhetoric never produced anything substancial. Unemployment had increased to new heights, and like other conservative parties high level staffers were embroiled in scandals.

    The reality is simple, and the OECD has said it over and over and over again. That Canada needs massive investment in knowledge training. That’s patently obvious, so when you haven’t got the training, no company is going to come near you when there are brighter shores next door. This is basic reverse capitalism, you have to supply what is most necessary to the company. I posted a poll from Maine business owners that showed labour forces were FAR more important even than taxes. So New Brunswick is simply way behind.

    It’s even beyond the case of wanting universities to rise to the challenge, because at this point hi tech wants experienced people, and experienced people are in demand, so they don’t just move anywhere.

    Interesting to note though that the NDP aren’t that different from their predecessors, and you are mistaking rhetoric for reality. Doer regularly travelled with Lord in trying to drum up business, and anybody that thinks they were telling large corporations “you’ll want to come here just becauase its a nice place to be” doesn’t know much about politics. Lord, and Doer, both plugged money into any corporation that would set up shop.

    You were on the right trail before though, tax rebates on payroll is a big thing now and brings in a different kind of employer. Like our hawkeye friend I’m suspicious that it is JUST that in Nova Scotia, but its certainly better than the Molson deals which go straight to shareholders, and of course Molson had just finished devastating Barrie, Ontario by closing its massive facilities, so those jobs are by no means secure.

  2. Freddy Beach says:

    Does anybody have a list of the 30 sites that were considered by RIM before setting up in Halifax. I remember that they were initially looking to the US but I haven’t seen any more specifics.

    Sorry anonymous, I have to disagree with you in that RIM is the perfect company to invest and subsidize. At a higher wages and hence higher tax revenues (and higher tax bracket), the subsidy gets paid back much faster. Besides the main reason that young people are leaving is not because there are no jobs, it is that there are no high paying jobs. I imagine that there are a lot of people who would love to jump on a $45000 job in NB.

  3. Anonymous says:

    I never said that RIM was a bad idea to subsidize, far from it. But it also depends what you mean by ‘paying it back’. Economics can’t be separated from politics. In Waterloo RIM holds extraordinary power, that’s not always, or even often, a good thing.

    However, they do make good local investments, the owner of RIM has set up several ‘think tanks’, which again are not ALWAYS a good idea, but it trains and employs hi tech people which is a hell of a lot more than can be said about Irving or McCains.

    The benefit of RIM is that people get experience which can be used elsewhere ‘if necessary’. As said, four years ago RIM was laying off people at the same rate as the forestry sector in NB, that makes it harder to defend as a subsidy pig. Its legal problems in the states COULD have put the company right out of business. If the terms had been more aggregious then ALL the workers might have been unemployed, and its doubtful we’d be here debating ‘what a great investment for government subsidies it is’.

    Any future problems will have those workers in Halifax the first for the chop because its a branch plant.

    So the point becomes, IF a government is going to subsidize a company so heavily, at what point should it assume an equity position, or even outright OWN it. As I’ve said numerous times, if the forestry industry were simply nationalized the province would be FAR better off by any measured criteria except right wing rhetoric. There’s no suprise that people in the cities don’t even TALK about it, because most people realize forestry for what it is, a simple transfer of wealth from New Brunswickers to foreign multi-nationals.

    The same goes for hi tech, and WORKERS were far better off under NBTel than they are under Aliant, that was once again a simple giveaway of public resources to the private sector. Massive numbers of IT workers who used to have secure steady jobs were given pink slips and told they could compete for ‘projects’ with Nortel, then even those dried up and Nortel handed out pink slips and now many IT jobs have zero security and few benefits.

    Thats very true about hi paying jobs, and that is the point. If you don’t pay the decent wages, why would anybody do the job? They’d go somewhere else or simply work as little as possible or join the underground economy. It’s no surprise that the only decent paying, decent condition jobs are ones either working for the government or heavily subsidized and regulated by government.

    So that’s where the chief point is. ‘Local’ companies have the political element, but too much, so that now virtually the only criteria for getting funding is how many people you employ. However, at the same time, becoming more of a ‘branch plant’ just makes you the slave of a different master. My view on which is better is known, people are free to disagree, but need to provide examples of how this is true. New Brunswick provides the opposite example as can be seen by government investments in multinational investments: a huge tax break for an LNG terminal that will provide eight long term jobs, Bennett which recieved massive funding as well as carte blanche on polluting the environment, Molson and Nackawic, which are still dubious, and the forestry companies who have literally been given permission to rape the land.

    So fostering ‘local’ companies doesn’t seem like such a bad idea. If you LIVE locally you are going to make far different decisions on how you interact with your environment than if you are simply dictating policy from Waterloo, Bermuda, or Norway. But anybody who thinks RIM wouldn’t be a better investment than Irving is simply out to lunch (I think)