Getting beyond natural resources

Natural resource industries will continue to play an important role in New Brunswick but will likely never be as important to the economy as in the past.   This idea of loosening up the rules around mining exploration and crossing our fingers – is not particularly encouraging.

No, we need to get beyond natural resources as an economic development engine.  Miramichi Bay du Vin MLA Bill Fraser nailed it in this article in the T&T today.  Fraser said “he’s excited about the future of Miramichi, pointing out that the presence of Norwegian solar energy firm Umoe Solar, which purchased the provincial assets of UPM-Kymmene in January, along with the continued development of manufacturers like DEW Engineering, Sunny Corner Enterprises, Dolphin Steel, and Atcon Development.”  What is the common thread through all these companies?  None are based on the local natural resources.  

That is the future, boys & girls.  Figuring out how we get a value proposition that is beyond just what’s in or on top of the ground or in the water off our shores.  We have a number of good examples and need to figure out how to multiply that many times over.

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19 Responses to Getting beyond natural resources

  1. Anonymous says:

    “What is the common thread through all these companies?”

    L:ike UPM, their business plans writes in government funding 9i.e. corp[orate welfare9

    DEW engineering (http://cms.acoa-apeca.gc.ca/disclosure/content/gnc/period/List/List.htm?brpersist=true&fiscalyear=2006-2007&quarter=Q1)
    Dolphin Steel (http://mediaroom.acoa-apeca.gc.ca/e/media/press/press.shtml?3593)

    Sunny Corner enterprises “Gagnon says ACOA has also had success in supporting jobs at companies in the Miramichi area like FatKat, an animation studio that now has 80 employees, and Sunny Corner Enterprises, a custom metal manufacturer that’s hiring 90 people.”

    Atcon Development (http://nbtaxpayers.blogspot.com/2007/09/corporate-welfare-on-march-again-in.html)

  2. Quite frankly that is not particularly insightful. Virtually every major export oriented sector in Quebec and Ontario have also used government funding and the oil & gas sector in Alberta benefitted from billions in tax and royalty incentives to expand drillin there. The question is whether or not a company is getting a one time incentive to help with some training or upfront costs of expansion or whether the government is subsidizing the company’s ongoing business model. UPS got $8 million from the province to help pay for recruiting, training and set up costs when they first put 900 jobs in New Brunswick back in 1994. That was a pittance compared to the company’s economic activity in New Brunswick and could not in even the smallest way be considered a subsidization of the company’s operations.

    My final point – and I feel this has become a coda for all my discussions around incentives – is that if all other provinces and states agree to disarm – I think New Brunswick should as well. As long as Quebec companies in Aluminum Valley are getting 40% payroll tax credits why shouldn’t NB compete?

  3. Anonymous says:

    Compete with Quebec? Much like your confusion on the subject in New Brunswick, Quebecers are equally naive in their view that they are God’s gift to small and medium size business. You take away those TPC, DIPP and CIDA grants from Bombardier and Lavalin and just see how great their commerce would be. If hydro Quebec couldn’t float another bond, which I’m sure would happen after any type of federal government scale back of subsidies, grants and assistance, then you would have a whole different perspective on Quebec’s ability to export electricity.

    They’re seriously government dependent, and they know it.

  4. Anonymous says:

    “-is that if all other provinces and states agree to disarm – I think New Brunswick should as well.”

    If Johnny Smith shoplifts is is okay for me to shoplift? Anyway, I guess I’ll have to agree to disagree on the value of government intervention in private business.

  5. That’s an interesting little analogy about Johnny Smith. You equate a private business receiving funds from a legislatively approved government fund (sanctioned by the people through election) with shoplifting. You must be able to come up with a better analogy than that.

    You mention Quebec. As you say it is known for government incentive programs. So is Alberta. So is BC (forestry, film, new media). So is Ontario (the list would be too long). So is Nova Scotia. So is PEI. So is Newfoundland and Labrador. Don’t forget about Manitoba – they have been known to serve up the gravy. Saskatechwan. Yes.

    It is perfectly legitimate to disagree with the value of government intervention in private business but you can’t agree with the fact that it is a pervasive reality across North America (there are over 2,000 U.S. federal grant programs targeting businesses).

  6. mikel says:

    Uh, guys, if you haven’t noticed, EVERY industry is on the hook from government-in one form or another. Resources made money because our military and police make sure that natives can’t access their own land, and the courts make sure that treaties are left unresolved.

    Meanwhile, in the US, well, that goes without saying, but in the Fortune 100 companies, 80 were saved from bankruptcy at one point or another, and ALL were heavily dependant on government subsidies. And that doesn’t even include the point that the entire US ‘free market’ sector is highly dependant on the Pentagon system at one point or another. In Canada, the only intact money makers are the banks, and thats because they’ve been given a protected market for decades. The only reason we aren’t bailing them out is because canadians practically revolted the last time bank mergers were discussed. Meanwhile, although accidents continue to decrease, insurance companies here in ontario (who also do most of the business in NB) are saying that premiums have got to rise by over 20%, all because just like five years ago, they got into trouble with their investments.

    The ONLY real crime is that government ponies up the dough, and investors make the profit, then bolt when there are losses. The question of ‘subsidies’ is NOT whether to partake in them, its how much OWNERSHIP taxpayers should be entitled to with their investment. Taxpayers are every much entitled to ownership as investors, in fact taxpayers often fund more than almost all the investors, who get their assets protected, even in bankruptcy.

    The idea that ANY market can operate without government is this generations pipe dream, pushed by the conservatives since the middle of the nineties. It is pushed nowadays simply because its useful because otherwise people start asking basic questions like : What is the value of a free market anyway? Ontario has privatized most of its health services, and I just got a blood test done that I needed simply to show my blood type-a test that takes five minutes when I donate blood. It took TWO WEEKS for those results to come in.

  7. George Miller says:

    Libertarians tend to get caught up in the argument of the dangers of government intervention, forgetting that government subsidies also come in the form of intelligence from Statistics Canada, assistance from EDC, our embassy and consulate network, sector financing from BDC, licencing from CATSA, IP protection from CIPO and on and on.

    Furthermore, Canadian firms are not alone in deriving real benefits from bankruptcy laws, support from the Bank Act, not to mention preferential treatment via property law.

    The likelihood that governments will abandon subsidies to business is precisely zero. The argument that these subsidies are not always effective, or that they unfairly favor one proponent over another, is also indisputable. The real question is: what combination of subsidies, both visible and less transparent, is effective enough to warrant citizens’ support as well as business interests?

  8. I ain’t much for fancy book learnin’ but that sounds just about right to me.

  9. Anonymous says:

    What New Brunswick needs to do with their business incentive strategy is follow the lead of Quebec and Ontario and figure out how to get the Feds to pay for the majority of their incentive programs (e.g. aerospace and automotive). We won’t last long trying to do it on our own with provincial ‘resources’ (i.e. credit).

    We definitely need to move beyond chopping down trees and digging up dirt. However, unless we think we can compete solely on price, which is not an appetizing prospect, we need to identify competitive advantages to exploit else there will have to be a sustained gravy train for these new businesses to survive.

  10. Bill says:

    As far as government subsidies go, I personally don’t care how much a company or companies get as long as it’s viewed as an investment with a return in mind. Viewed that way, and since it is my money/investment as a taxpayer, I expect transparency, benchmarks and regular monitoring of performance and adjustments made depending on how the company/companies are performing. (Just a note: return doesn’t necessarily mean dollars, it could be a social benefit but, even so, it needs a target set and monitoring.)

    I know there are oodles of reasons of why government in NB can’t/won’t do this and oodles of examples of wasted money. They recur in these threads like tenacious relatives. At this point, however, I don’t see they are of any use. The litany is long and dull and everyone has heard it time and again. Some consensus would be of much more value now.

    I definitely agree that the importance of natural resource industries has lessened and continues to lessen so the need for alternatives is of immediate importance. Energy, in its many varieties, tends to be considered the saviour, or on of them, as in this case (Miramichi). But I wonder what some of the others might be, and for what parts of the province? They have been mentioned in spotty fashion in these threads, but what about making a grocery list of them? Then debating the merits to whittle it down?

  11. mikel says:

    The feds don’t pay the majority of their incentive programs, so that’s as likely as seeing government get out of business. But for resources, again, this is a SMALL province with not many people, forestry is a big industry that makes a lot of money-however, that money goes out of the province. The potash example is again apt, the province offered a royalty free ride to Saskatchewan Potash in exchange for their expansion. Now, either they would expand anyway because they have the market (it gets shipped to south america from st.john), OR its another example of that ‘bad’ corporate welfare where a product only makes money because its being given away for free. Go ask any small business person how much of their inventory they got for nothing.

    For forestry, I’ll again mention the community forest model. There is absolutely NO reason why a town the size of, say, McAdam or Kedgewick, can’t be sustained by the immense forestry resources around them. That ‘could’ just include lumber, but of course there are tons of other potential uses available from forests. And as we’ve seen, if you change the economic outlook of northern New Brunswick, that changes everything, the province doesn’t look nearly so bleak.

    People tend to forget that solar power and wind power are also ‘natural resources’, the BEST way to run any province is through natural resources, just SMART uses of resources.

  12. Anonymous says:

    Wow Mikel, this is the best news I’ve heard in ages. Could you send a memo to Jim and let him know he should sign over the $10B bailout check to BNB? And the $100 or so billion they but into TPC for the auto and aerospace sectors can be retracted and injected into ACOA. We’ll make room for the head offices of the autopact trade negotiation team in Moncton.

  13. mikel says:

    Why? Sign over 10 billion to BNB and all they’ll do is go around fixing bridges and highways that serve no economic uses except to the trucking companies.

    But seriously natural resources have NOTHING to do with auto bailouts-and how much was the Atlantic Yarn bailout? Relative to the size of the acadian peninsula that was huge.

    The federal government has nothing to do with natural resources, those are governed by the province. For the threads on federal economic policies you can go back through the blog and find lots of them, but this one isn’t it.

    When we talk about use of natural resources we are talking about provincial policies, which New Brunswickers can affect-can affect EASILY when they get organized. Federally its a different ballgame, want to change federal provincial relations to give the maritimes the same economic incentives as more populous regions, that’s great, but thats a different issue than the New Brunswick governments use of natural resources (which this thread is about).

  14. Anonymous says:

    @mikel

    “Sign over 10 billion to BNB and all they’ll do is go around fixing bridges and highways that serve no economic uses except to the trucking companies.”
    > What you just said has nothing to do with BNB’s mandate. Bridges and highways are under the jurisdiction of a different department.

    “we are talking about provincial policies, which New Brunswickers can affect-can affect EASILY when they get organized”
    > That is if you don’t step on the toes of somebody important 😉

  15. mikel says:

    That was a joke (mostly, BNB is almost even more ineffective than ACOA). If you want to see toe stepping just enter the federal arena. Fredericton is a kid’s park compared to Ottawa. The provincial government refuses to enact federal laws on abortion because its terrified of a very small yet very vocal protest group. It takes surprisingly little to make change, that’s why Irving bought out all the media. People forget that little Louis and Tommy Douglas made big changes all with very little support-neither of them got huge mandates but barely squeaked in a majority.

  16. richard says:

    There remains a great deal of potential in natural resources, but we need R&D investment to add value to those resources. Even when those resource industries are ‘healthy’, they do not (based as they are on extraction and minimal processing) create sufficient high-income jobs to add a lot of value for NBers.

    Having said that, industries that are not based on natural resources are fine, but the key thing has to be that they are creating a sufficient number of high-income jobs.

  17. richard says:

    “I needed simply to show my blood type-a test that takes five minutes when I donate blood. It took TWO WEEKS for those results to come in.”

    I’ve never had my blood typed when making a donation. They check for iron levels – perhaps that’s what you mean.

    In the end, private labs probably cost more (depending upon local labor costs) but (in my experience anyway) they have provided faster service to clients. That’s often the trade off, but it depends on the technology and the particular service.

  18. mikel says:

    When you first donate they need to type you for your blood donor card-otherwise they don’t know what blood type you are. Determining blood type is extremely simple, they had my blood type by the time my donation was complete. In fact, I can purchase a bed side blood test, or if I just have access to Anti-A and B serum antibodies in a hospital setting I can have it done in five minutes. Even my doctor was surprised, and said that in his past experience-when it WAS public, he usually had the test results in two days.

  19. Anonymous says:

    @mikel

    “he usually had the test results in two days”
    > And we are still proud of the Canadian health care system? Do you guys know how long it takes to do a blood type test? Less than a minute! (I used to be a clinical lab scientist before coming to Canada)

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