It's The Economy, Stupid

KPMG has just published its government funded Competitive Alternatives Report. The study is an expansion and update of previous KPMG publications, and measures the combined impact of 27 significant business cost components that are most likely to vary by location. The study covers 17 industry operations in nine industrialized countries: Canada, France, Germany, Italy, Japan, the Netherlands, Singapore, the United Kingdom and the United States.

In the 12 operation average costs, Moncton ranks #1 among its peer cities in the New England/Atlantic Canada region and 2nd overall among the G8 countries (Sherbrooke, QC was the lowest cost location.

Note: Moncton is the only New Brunswick city in the study. Truro, Sydney and Pictou join Halifax as Nova Scotia cities in the comparison (the first three only in the online version) but as I recall, they paid to be included in the study.

Canada the cheapest place to do business
Toronto Sun, Canada

Vancouver priciest for business
Vancouver Sun

Town shines in international survey of top business locations
ChronicleHerald.ca

Canada still lowest-cost G7 country to do business
VietNamNet Bridge, Vietnam -

Canada easy on businesses
Calgary Sun, Canada

Rising dollar cuts business advantage
Hamilton Spectator

Canada’s cost advantage second only to Singapore
Toronto Star, Canada

KPMG study ranks Saskatoon Number One
Saskatoonhomepage.ca

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Edith Robb’s column today is on Donald Savoie’s new book Visiting Grandchildren: Economic Development in the Maritimes which is pegged as a manifesto of sorts for the future economic development of the region. I will be going out at lunch today to buy this book at Chapters so if you get there first and it’s the last copy – leave it please.

I have ocassionally interacted with Donald Savoie and expect that this book will be a good read.

Edith Robb makes some interesting points:

Savoie says our situation “will not be helped by moaning about how Confederation dealt the region a bad hand. Such complaints just create despair and ultimately serve to disempower the region. Nurturing a sense of betrayal suggests that the region can never succeed, can never compete with other regions at home or abroad, and that it should simply accept its place in the Canadian family as being “below the salt.

“While acknowledging that past attempts by the federal government to foster regional development here in the east have largely been well-intentioned and based on logic, the economist nonetheless shows that they didn’t work.Instead he calls for a radically new approach, one that recognizes that what is good for the Maritime provinces is good for Canada, no less than what is good for Ontario is good for Canada.

“The goal should be to integrate the Maritime economy better into already thriving economies, whether in Canada’s national economy or in the regional economies of New England and the eastern seaboard of the United States.”While acknowledging the general impatience at the pace of economic development in the Maritime provinces and the strong appetite for solutions, Savoie does not give in to the temptation of a quick fix, but hopes instead his book will serve to generate comprehensive debate.

I sincerely hope it does. I’ll go so far as to suggest it should serve as the foundation for an Atlantic “Thinker’s Conference” that would bring our most agile minds together to work out ways that our region can resolutely break away from Ottawa’s guilt money and stand solidly on our own two feet.

This is, quite honestly, a book that needs to be read and discussed by all of us who care about the Maritime future.

Now, you know what I am going to say before I say it. Edith Robb wants another ‘Thinker’s Conference’. Bernard Lord has hosted a dozen of these during his six years and there have been countless others. These little get togethers do nothing more than give the appearance of government actually doing something.

I propose a slightly different approach.

Do something.

Bernard Lord has cut economic development funding. He did not renegotiate the REDA with the Feds and in fact left REDA money in the pot that could have been spent. He openly brags about spending ‘all new money’ on health care and education.

Rome is burning but the Moncton Hospital gets another MRI.

New Brunswick has not even matched the national level of popuation growth any decade since Confederation. That’s 140 years, folks. Probably since 1867 there have been a million ‘thinkers conferences’ in various shapes and sizes.

Here’s the deal:

New Brunswick has not attracted its share of global business investment for decades. Period. Go get it.

New Brunswick has almost no access to the global capital markets (except outward – all of our government employee pensions are invested outside New Brunswick). Go get it.

New Brunswick has exported most if its top ‘thinkers’ since at least the 1950s. Turn that equation to import, please.

New Brunswick has become, in my opinion, the least innovative province in Canada – if not North America. Change this. Seek out and support innovation across the board.

New Brunswick’s media doesn’t give a rat’s behind about telling us the stories that matter about the economy. Change this. Pound us over the head. Daily. Stalk us. Chase us around. Everytime we pick up the paper, turn on the news or try and do a darn web search, we should have annoying popup Windows reminding us. Do something. Change something. Make things better for your kids.

And then, maybe then, when we are all old and gray (that day is rapidly approaching for some of us), we will see Granny’s and Grampy’s coming here to see their kids who moved here from Toronto, Waterloo, Winnipeg, Boston, Vancouver, etc.

In the interim, read Savoie’s book.

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The CBC had a student on this evening talking about the Belarus election where President Alexander Lukashenko was re-elected with about 82% of the vote. She spoke passionately about the need for Lukashenko to be defeated to bring democracy and freedom to the country. The astute As-It-Happens interviewer, however; suggested that even without any supposed shenanigans, Lukashenko still would have between 50% and 60% popular support. The student reacted indignantly to this by saying that was because Lukashenko controlled the TV, radio and newspapers watched, listened to and read by the country’s older and rural population.

Now, I have been rebuked for drawing parallels in this manner but I can’t resist. In New Brunswick, we have the lowest rates of literacy, education, health, Internet access, job creation, etc. and we are in population decline. However, when I raise these issue among folks in general conversation they are either unaware or vaguely aware or they shrug their shoulders and say that’s always been the case in New Brunswick. Occasionally, particularly in the urban areas, I’ll get someone that will rant on and on about what needs to be done (like some fellow bloggers).

So, back to my constant refrain. I think the local media – particularly the Moncton English language paper – does very little to raise awareness of these issues among the general public. Hence, we get lethargy (figuratively, and it seems literally). Other than the occasional Alec Bruce piece, there is almost nothing in the T&T about the challenges facing this province.

So Belarus is the backwater of Eastern Europe. It is among the least developed countries among the former Soviet Union. And the leader pumps out messaging through the media about how great things are – and the public, by in large, acquiesces.

Backwater, least developed, ultra positive messaging out of government (prosperity for all, et. al) and complacent media.

I can’t help but draw parallels.

But, on a strangely positive note, that wild man Charles Leblanc is a one man wrecking crew. He must write a half dozen blogs a day specifically focused on bringing down the Conservatives. I wonder if there is such a character in any other province?

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The Columbus Ledger-Enquirer has published a time line of activities associated with the decision of KIA to establish a 1,2001,500 person auto manufacturing plant in Georgia. A few neat observations for you hard core economic development fans out there:

1. The Georgia Governor went to South Korea to pitch the firm in 2003. The decision was made in 2006. Sometimes it takes a while to get these big deals done. Lesson? Don’t call on KIA in 2005 when they started planning in 2003 or earlier. Sales efforts need to start upstream – several years before the decision is actually made.

2. The friggin’ site is 2,194 acres. That’s 3.5 square miles for one company. That is larger than all but 2-3 of all the industrial parks in New Brunswick. Lesson here? Take a page out of Tennessee, Georgia, Louisiana, Mississippi, etc. and identify those megasites in advance. Have them in hand when visiting potential clients.

3. Shut up, Hailey Barbour, Governor of Mississippi. He announced KIA was looking at Mississippi. Never go public during a site selection process. Period.

4. It’s a team effort. In addition to the Governor’s office and the Department of Economic Development, the Department of Transportation and the Department of Technical and Adult Education were part of the Georgia team. Top officials from relevant departments must be part of the sales process.

5. Feb 24: Chairman Chung blesses the site and goes on to the new Hyundai plant near Montgomery, Ala. Kia is a subsidiary of Hyundai. Georgia Economic Development folks and Kia officials go to dinner at the Atlanta Fish Market in Buckhead. Before dinner, Lesser and Ahn work out the final details of the deal. They negotiate terms on the back of an old receipt. When the deal is done, the two men shake hands, sign the receipt and have dinner. Ah, the old ‘back of the napkin’ dealing, I get tingles just thinking about it.

6. Terms of the deal have not been made public, yet but I have heard it will be north of $200 million USD.

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Hey, read this blog a little more, could’ve saved ya a few research bucks. The main reason immigrants don’t come to or stay in Atlantic Canada is that there is limited economic opportunity for them. It’s not the lack of ‘community’, or the ‘social networks’ or the ‘integration’ or the culture or the 99 things that non economic developers think when they look at this issue.

I am a little annoyed because I have been to four ‘immigration’ discussions in the past few years and the issue of employment is hardly raised. Lots of talk about cultural sensitivity, though.

Why don’t you go and ask the seven or so immigrants that are actually here (I have two in my office). The job is the base – the primary reason – the rest is important but not as critical.

Get our economy humming and in-migrants and immigrants will come. We will still have to go out and get them in a proactive way – but they will come.

Don’t get me wrong. I’m not discounting our xenophobic tendancies, I know they exist. From the report:

According to the study, many immigrant found Islanders to be friendly but in a superficial way and they did feel as though they were treated as outsiders.

Baldacchino said one immigrant told him that she changed her name on her work tag to fit in better. “She put on an island name and that seemed to make a big difference because people started relating to her as if she were an islander.”

Don’t laugh. This is the second time I have heard this. An immigrant on CBC with a last name like Al Maoudi or something sent out something like 300 resumes in Atlantic Canada and didn’t get a call back. His friend casually told him to resent as someone like Bob Smith – he got 30 call backs.

But to repeat:
-Economic growth is needed first – if you build it they will come and some such rot.

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My father used to say that Guy Lafleur was a great dipsy doodler (he also talked about the Savard ‘spinorama’ to describe Serge Savard’s legendary fake a slapshot, spin around and shoot again). In those days, I understood dipsy doodling to be a skill akin to being about the skate delicately around an issue.

So get ready for some dipsy doodling next Tuesday. That’s when KPMG releases their 2006 version of the Canadian government funded study showing the lowest costs to do business in the G-7 (I think they leave ’8′ – Russia – out of the mix). The Feds pay hundreds of thousands and KPMG conveniently shows that Canada has the lowest costs in the G-7. The problem is that in the 2004 version, KPMG boldly stated that Canada’s cost advantage against the US would hold all the way to a $0.74 CDN = $1.00 US conversion rate – at the time that would be quite a feat. Of course, I found their methodology to be quite flawed and in many cased based on bad source data.

Anyhoo, we are now at $0.82 CDN = $1.00 US. You have to appreciate that Canada has been the lowest cost location in the world in this study since the mid 1990s when it was started. Governments in Canada have paid millions to prove this.

Will the study on Tuesday confirm Canada’s cost advantage? Will we see Lafleur-esque dipsy doodling? Will the reknowned KPMG still find Canada the cheapest in light of their bold statement in 2004? Will Brad return to Jennifer?

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I can’t help it. I know a lot of you are growing weary of my negativism but I just can’t help it. Here are a few quotes from a recent Telegraph-Journal article on New Brunswick’s export performance in 2005:

Naive Journalist: New Brunswick soared to new trade heights last year by exporting more than $10.7 billion worth of goods internationally – a new record for Canada’s most export-dependent province.

“It’s proof positive that New Brunswickers can and do compete in a global marketplace,” said Kirk MacDonald, the minister of Business New Brunswick. [Can I get an amen to that brother?, yee haw]

The numbers are in line with 10-year competitiveness targets set out by Premier Bernard Lord in his government’s prosperity plan.

The proportion of exporting firms increased from 45 per cent in 2001, two years after Mr. Lord’s Tories took office, to 49 per cent last year, and the government expects New Brunswick’s percentage of exporting firms to grow to 55 per cent by 2012.

Non-resource exports have grown by $25 million per year since 2001 [Note to Ms. Naive: how much is $25 million as a percentage of $10 billion]. The proportion of the province’s non-resource based exports is expected to climb to 40 per cent of total exports by 2012 as well.

So, to read this all – you would be bowled over with how good things are. Okay, now for the facts:

-Exports from New Brunswick are down $818 million since 2000 (excluding the Irving Refinery) – the first full year the Tories were in office.

-All of these categories have seen major declines in exports since 2000: Seafood Product Preparation and Packaging, Paper Mills, Sawmills and Wood Preservation, Pulp Mills, Electric Power Generation, Animal Aquaculture, Paperboard Mills, Nursery and Floriculture Production, and Ornamental and Architectural Metal Products Manufacturing.

Three of our traditionally strong manufacturing sectors forestry, seafood and electricity are all down substantially since 2000 and the friggin’ Minister of Business New Brunswick says this means “New Brunswickers can compete in the global marketplace”. And apparently, losing $800 million of jobs intensive exports like seafood preparation and wood production means we are on target to hit the friggin’ Prosperity Plan targets. Which page of the PP says that losing $800 million core exports (not including oil) is the target?

So, for all of you that are telling me to stop my whining – just read on a bit more. PEI’s exports from 2000 to 2005 are up 16% (not including oil). Nova Scotia’s exports (not including oil or gas) are the same in 2005 compared to 2000.

I am sorry. I usually am a little more polite. I speak tongue-in-cheek when the Training Minister says every month about how encouraged they are about the labour market figures. I giggle a bit when someone talks about the Prosperity Plan. But these export figures are no laughing matter. None whatsoever. And any Minister or Premier or Journalist that could look at the 2000 and 2005 figures and then spew forth nonsense about being globally competitive is nothing but either completely ignorant or supremely cynical.

Somebody needs to tell the public that our traditional industries forestry, fishing, mining are going down and we are doing nothing to replace them.

And the public is never going to know about it because the government does its best to hide behind distorted and manipulated statistics and the pimply, underpaid media writes up what they are told.

Cripes.

I’ll be nicer tomorrow, promise.

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For everyone of you cheese-eating, just-in-time inventory, integrated logistics, cluster-loving negative, uncreative economic developers out there, this one’s for you.

I would be a millionaire today if I got a dollar for every time an economic developer, politician or Joe Q. Public said to me “why would company X ever locate in a place like New Brunswick?”.

The naysayers creed looks like this (why company x would never locate in NB):
-We are too far from major markets
-We don’t have the transportation infrastructure
-We are not a ‘right to work’ province as a place like Alabama
-We don’t have access to high end engineering and management talent
-Shipping costs are too high for manufactured goods
-Americans don’t like investing ‘nearshore’ – it’s China or inside the USA
-We don’t have other firms in that sector here (the cluster effect)

Well, Wellington, Florida-based B/E Aerospace has their global manufacturing and R&D for aircraft seats in Northern Ireland – they moved it from Connecticut. Now, which of those naysayer points above does a Northern Ireland location address? None.

B/E is in Northern Ireland because the UK government pursued them and got them to go there. Period. There were incentives on the table (there almost always are). Who knows, may be the British Airways contract was somewhere in the mix. But the bottom line is that you can throw out all that crap (above). Companies will locate in provinces that have a good business environment and that are really, really, really interested in them going there.

You can take that Michael Porter crap and stick it where the sun don’t shine.

And to all the folks that say company x would never locate in New Brunswick, have you ever asked nicely?

Thanks.

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This is not about economic development, but I think a worthy blog topic. Here’s the top headline from the Globe & Mail today:

Passport saved Canadian hostage

Held hostage at gunpoint by Palestinian extremists in the Gaza Strip, Mark Budzanowski feared for his life – until his captors discovered his passport and declared ‘We love Canada’.

Now I don’t know about you but I consider myself a pretty moderate guy – sort of in the ‘Sorry Centrist’ kind of moderation – but are there any Canadian’s that would be happy about the fact that terrorists ‘love Canada’?

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I am reading the Pulitzer Prize winning biography of Harry Truman these days. I like to read the bios of transformational political leaders – either for good or bad – because I still think that transformational leadership is what we require of our politicians here in New Brunswick and because I really have a hard time reading fiction – always have – my wife thinks it contributes to my boring and bookish persona.

But I digress.

Anyway, I am about 300 pages in (out of 1,000) and I just getting to the part where Truman is in the Senate and is starting to pull together his convictions and become the kind of politican that would end up in the White House and making what could be the single most impactful decision of any President in history.

Here’s a couple of interesting excerpts from the book:

“He saw the country’s unemployment and unrest as the fault of too much concentration of power and population, too much bigness in everything. The country would be better off if 60 percent of all the assets of all insurance companies were not concentrated in four companies. A thousand insurance companies, with $4 million each in assets, would be a thousand times better for the country than the Metropolitan Life, with its $4 billion in assets. Just as a thousand towns of 7,000 people were of more value than one city of 7 million.”

“We worship money instead of honor. A billionaire, in our estimation, is much greater in the eyes of the people than the public servant who works for public interest. It makes no difference if the billionaire rode to wealth on the sweat of little children and the blood of underpaid labor. No one ever considered the Carnegie libraries steeped in the blood of Homestead steelworkers, but they are. We do not remember that the Rockefeller Foundation is founded on the dead miners of the Colorado Fuel & Iron company.”

Couple of comments here:

I am starting to think that a thousand towns of 7,000 people would be preferencial to one of 7 million. Don’t get me wrong. You need a couple of large urban areas within a 2-3 hour car drive of small towns. Large urban areas have things like international airports, specialized hospitals and other regional services that wouldn’t make sense in small towns. But take the case of New Brunswick. Why can’t we have a 30-40 vibrant small communities spread around the province anchored by two or three larger urban areas? What is the benefit of emptying out all of New Brunswick except Moncton and Fredericton? As I study and analyze these things, I am coming around to Harry’s viewpoint. Small towns can engender the sense of community not found in large cities. Small towns can be helpful places and places with strong values and commitment. I would even argue there would be better potential for economic development in a distributed model as costs would not spiral through the roof as they do in larger urban centres (land costs, wages, taxes, etc.).

Now, for those of you that see small town New Brunswick as dying communities with undereducated citizens, working in deadend jobs, with above average use of prescription drugs – that most of the youth are dying to leave – you may be somewhat right. There is statistical data that provides some support for all of these points.

But that’s because the 21st century reality of small town New Brunswick is that it is a place that is being boiled down to some core reality (someone once said to me “those with any ‘get up and go’ already got up and went”) that is not overly positive. For small communities to be vibrant and dynamic they need strong economies with new industries and opportunities. They need to be (or should be) situated within 1-2 hours of a larger urban centre so that kids can have educational opportunities and other big city benefits but still be anchored in their small town. Somebody recently told me that there are many in government that believe that a lot of small towns in New Brunswick just need to die or be severely downsized. They say it costs way too much to maintain small towns. Why should urbanites pay for ruralites to live their lazy lives?

But that is again another reflection of how far we have come in the past 100 years. In the old days, we built roads to open up communities for development. We were proactive about using transportation infrastructure to stimulate economic development. Now, in order for a road to be considered for expansion, there needs to be a minimum amount of traffic. Consider the irony. A four lane highway from Moncton to the Acadian Peninsula might be the single most important piece of infrastructure to support long term development, but the highway will never be twinned becuase the traffic counts are declining.

In the old days, we spent millions on rural electrification – this is considered to be one of the great contributions of government in the early to mid part of the 20th century. Now, in the era of broadband, how much money do you think the New Brunswick government has spent rolling out broadband in rural New Brunswick? Alberta spent $400 million. I think NB announced something a few years ago – all I know is that the vast majority of rural NBers have no access to broadband and many ruralites just don’t even bother. New Brunswick has the lowest percentage of households using the Internet in Canada.

We used to invest in growing our rural communities. Now, we grit our teeth and spend because we have to. And we get what we want (or deserve) – 7o% of our rural communiites are in population decline as of 2001 and I suspect (looking at some of the forecast data) that the number might increase to 80% or more in the 2006 Census.

I just realized that this rant was getting long so I won’t be commenting on Truman’s characterization of billionaires and the concentration of power. I’ll just say what I have said all along. It doesn’t seem that this movement to concentration (the sexy variant of this in the 1990s was the ‘cluster’ effect) has been overly beneficial to New Brunswick…

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