Wither ACOA

Alec Bruce has a good article in the T&T today about ACOA.  I zoomed in on a particular statement that he must have pulled from the organization’s annual report. 

According to its most recent five-year Report to Parliament, “each dollar invested directly in businesses through ACOA programming resulted in more than $7 in gains in Atlantic Canada’s GDP; total Atlantic GDP was estimated to be $1.2 billion higher in 2007 than it would have been without ACOA’s direct support to business; from 2003 to 2007, ACOA’s direct support to business of $622 million generated tax revenues of over $865 million; and total gross employment was almost 25,000 higher in 2007 than it would have been without ACOA’s direct support to business.”

I don’t doubt the veracity of these numbers – they are put together with a rigorous methodology but I wonder how much of this is economic growth versus just sloshing existing economic activity around.

Let me explain.

Exports from Atlantic Canada over the five year period – less oil & gas – are stagnant and down in some provinces (like New Brunswick).  Go back to the fundamental premise of economic development.  It only comes from basically three sources: 1) more new external investment into the economy, 2) more export activity from existing businesses and 3) import substitution activity.  It is important to keep this in mind.  Another small business that is fighting for the same pot of business activity within a certain sector of the Atlantic Canadian economy is not economic growth – rather one more business fighting for its share of a discrete amount of dollars.

We know that ACOA doesn’t fund investment attraction – or not much so they can’t claim much tax revenue and GDP growth from that side.  We know that exports in the aggregate are down.  Now, they can say it might have been worse without ACOA – i.e. the export decline would have been larger – but you certainly can’t say that overall exports are up.  And as for import substitution, that is again harder to track.

There are service exports (i.e. an IT firm selling a service to a US firm) but those are still relatively limited from Atlantic Canada and we don’t have recent data on that activity.

Total gross employment is up by 25,000 directly because of ACOA’s activity over the five year period.  According to Statistics Canada, there have been 43,000 net new jobs in Atlantic Canada from November 2003-November 2008. If you back off an estimate of public sector jobs (health care, etc.), you get a net private sector employment growth of under 30,000.  Therefore, ACOA was directly responsible for the creation of all net new jobs over the five years.

Again, impossible, but ACOA can say “there go Atl. Canada but for the grace of ACOA”.  In other words, they can say it would have been worse.

I could expand on this forever but I do have a day job.  I will say this in conclusion.  Whatever ACOA is doing, it is obviously not enough to stem the tide of declining exports, tepid job growth and limited business investment (outside of the megaprojects). 

I’d like to see ACOA do a whole lot more investment promotion and cluster development work.

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One Response to Wither ACOA

  1. Let me just make a caveat to that post. I like ACOA and in the interest of full disclosure I have done projects with them or funded by them in the past. There are good people in the organization. My only point is that if you take all the jobs and economic activity ‘generated’ by ACOA, BNB, the Enterprise Agencies, Industry Canada, etc. you would have three times as many jobs created as were created in the total economy. I think policy makers at both the provincial and federal level should step back and ask themselves if things are working as they should – at the highest level – and then work backwards to figure out what can be done. I can’t believe that ACOA or anyone else is happy with stagnant population, chronic net out-migration, declining exports and increasing reliance on Equalization (NB and PEI).

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