It's funny. I guess. When I heard about Danny Williams new campaign to personally slay the Harper government, I said here we go again.

And, of course, everyone has lambasted Williams from national commentators to politicians from all parties - even some pundits in his own province.

The funny part is that he is at 73% in the polls. I don't think I have ever seen a politician at 73%.

It seems to me that Danny Williams - wildly over the top behaviour and all - is a symbol for the biggest problem facing Canada today.

It's rarely talked about in the national discourse except for some vague references to demographic trends or the Alberta boom.

Newfoundland & Labrador lost 8% of its population from 1996 to 2006. New Brunswick lost population. Saskatchewan lost population. Manitoba, PEI and Nova Scotia barely held their own.

At a time of record national economic and population growth - 14 straight years without a single quarter of negative GDP growth - and yet whole swaths of this country are facing serious challenges.

Listen to Ibbitson and the like and this is just an inevitable urbanization. A good trend. Accelerate it, he says.

What I have found so ironic in my life is that it seems to be the role of government to provide health care, education, roads, police, social programs, etc. but it should be up to the 'market' to decide if any actual people live in the communities in which it's the role of government to provide health care, education......

I, as you know, have a little different point of view.

I think it should be the primary function to government to ensure that its community (narrowly or broadly defined) exists at all - and then worry about the kinds of government services you want to provide.

A bit like when we spent billions to settle Western Canada.

Newfoundlanders are worried and they should be. New Brunwickers should similarly be worried because on top of the population decline government spending is running more or less amok. At a time when population is declining you would think that goverment spending should be stable or at least only growing at the rate of inflation. But government spending in New Brunswick is on pace with provinces that have fast growing populations and that will lead eventually to serious trouble.

So back to Danny Williams.

If you strip away all the shtick, the central theme should be debated in the national discourse. Does the federal government have a role to play when whole regions of the country are in economic distress? If the national dialogue concludes that no - everyone (province) should fend for itself, then fine - I guess- that's democracy.

But ignoring it. Mission accomplished as it were - makes little sense.

Maybe Ibbitson is right. Maybe we need to urbanize. Maybe Atlantic Canada should become an outpost - with just a few mills, mines and fishing ports to send natural resources to upper Canada. Maybe they should close down northern Quebec. Maybe Manitoba should be retaken by the flies and the cold.

But maybe we should at least have a chat about it first.

One of the interesting things about reading Savoie's books on economic development is that you get the sense that in the 1950s through the 1980s or so that the Feds at least pretended to be interested in regional development.

But there's not even any discussion - really - about it anymore. Budget after budget barely mentions it. It's considered a huge win if ACOA just keeps the same level of funding - never mind it is a fraction of what it once was as a % of national government spending.

As I said before, I still blame John Manley as much as anyone for this. He was the one that first said screw regional development we need to focus on our big cities and our 'clusters' after the recession of the early 1990s. And maybe he was right, then.

But shouldn't we at least consider using the huge economic dividend from that success to rethink regional development?

Poor old Danny. It is likely going to get worse on the Rock (population wise) before it gets better. I have seen provincial government forecasts showing the population will decline into the mid 400k in the next 20 years.

I don't know why I still love to pick on old Jeannot Volpe. Maybe it's the Al Hogan tie in. I don't know but when I heard old Jeannot saying that the Tories were the defenders of low property taxes this a.m., I just had to check. You know I did.

So I checked. During the Tory reign (so fondly coddled by Al Hogan), total property tax revenue went up by 6.9% per year the fastest increase of any of the major taxes we pay. Under the new Lib budget, they are forecast to increase by 4.5% year over year. Sauce for the goose, Hogan. Why weren't you pushing tax revolts when Volpe was at the helm and property taxes were going up 40% faster?

Now, of course, this chart represents total taxes forecast in each budget and is not tied to specific tax rates or breaks. But there are some interesting other facts in this chart. Total property taxes collected are expected to go up by $16 million this year. Gas taxes will drop by $45 million (one presumes Al's Hummer makes up at least a good portion of that). The other thing that bothers me is that Lord's tax cuts were supposed to be stimulative - i.e. they will drive new economic growth over time. If so, how come corporate tax increases had the worst performance of any tax?

Total Tax Increases by Category:

Isn't Catherine Swift some form of economist? From today's TJ:

Merging Atlantic Canada a tax boon?
Telegraph-Journal
Published Friday March 30th, 2007
Appeared on page A1/A8

Amalgamating the four Atlantic provinces under a single government would significantly reduce the tax burden facing New Brunswick businesses, says the president of the Canadian Federation of Independent Business.

Catherine Swift, whose lobby group represents almost 2,000 New Brunswick businesses, has proposed the sweeping reform as a response to the high tax rates that have historically plagued the Atlantic provinces.

But she was recently convinced to revisit the well-travelled concept of regional amalgamation due to the small business tax increases in New Brunswick.


Someone should tell Ms. Swift that uder the current Equalization formula, efforts such as this would ultimately just result in less Equalization transferred from the Feds. That's the whole premise behind Equalization. If you generate more own source tax you get less Equalization. So, almost by definition, if the four governments merged, dropped overall government costs by say 30% - my guess is that Equalization would drop by similar rate.

Besides, the unsaid reality of any Maritime Union or Atlantic Union is this. Government workers are the highest paid workers in Atlantic Canada. If you consolidated government and cut away thousands of workers, would it help your desire to grow the population or hurt it?

Just asking.

Oh, and for the CFIB the same question applies. Public sector workers in New Brunswick are now close to 20% of the total workforce (health care included) and they are the best paid. What would it do to your (i.e. the CFIB's) clientele, if they lost a big chunk of their market? Sure, save a few hundred in taxes but...

I'm not a big fan of big government. Never have been. But when it's all you got, you had better think twice. If we could replace big government with big business, then maybe...

The dress code has been announced for this year's Atlantica conference. With style that that how could anyone think that the proponents have any malicious intent? Imagine Bob Manning in that outfit.

The TJ is reporting this morning on a series of focus groups held by the self sufficiency task force. Here are some conclusions:

The overwhelming majority of New Brunswickers who participated in a series of focus groups are ready to take risks to achieve economic self-sufficiency, as long as their health and environment are not sacrificed.

...eight of 10 participants in the focus groups agreed the province must take some risks to attain self-sufficiency by 2026.

"I was really impressed again with the individuals suggesting that self-sufficiency was a worthwhile goal, self-sufficiency was something that they would be willing to work with government, with industry, with commerce to move forward towards," Robichaud [the consultant] said in an interview.


Now, after reading this article, my first thought was what 'risk'? There is absolutely nothing in the article to state what 'risk' people are prepared for their government to take in the pursuit of self-sufficiency.

That's what I dislike about polls, surveys and focus groups. The ask open ended questions and devolve into generalities. A poll will ask, for example, what do you think the top priority of government should be? And the answers are 'health care', 'education', 'environment', etc.

If the question was "New Brunswick is going down fast. If the government doesn't stop the population decline, many of your communities will cease to exist within a generation. What do you think the top priority of government should be?

Of course, pollsters reading this post would scoff that this is not objective. But, is any poll, survey or focus group valid without context? If you took ten people in a room for a focus group and starting asking them what the 'priority of government' should be and while they were in the room a large war broke out in Canada, don't you think they would change their mind based on the context?

I won't belabor this point too much because I have in previous blogs except to cycle it back into the TJ article today.

What 'risk'?

Would they agree to 'risk' health care (they said no in the abstract)? If the government said they were freezing health care expenditures at the 2007 until 2010 and plowing that dough into 'self sufficiency' would they agree with that?

Would they agree to the 'risk' of tax increases (not if Al Hogan gets his way)? No pain no gain, folks.

Would they agree to the 'risk' of amalgamating small communities into one larger municipality? Based on the discussions I have had in these communities - that's a non-starter. Remember old Bernie said he was going to get rid of LSDs and dropped that promise like a hot potato when he realized there would be a little political heat.

Would they agree to the 'risk' of diverting funds from other spending areas into economic development? I'll believe it when I see it?

Would they agree to the 'risk', gasp, of running a small deficit in order to have funds for economic development? You would see heads rolling up and down Queen Street in Freddy Beach if one penny of red ink flowed out of the Leg.

So, what risk are New Brunswickers prepared for their government to take on? It's easy to say things like this but put your money where your mouth is.

No, I think the dopiness of the past almost a decade now has turned us into a state of comfortable numbness. I was told that Richard Hatfield was concerned about population trending in the 1970s! If this is true, imagine what old Tricky Dick would think today.

I was interested to read the results report from the Export Development Corporation yesterday. The EDC "is Canada's export credit agency, offering innovative commercial
solutions to help Canadian exporters and investors expand their international
business." In lay person's terms, they take a lot of the risk out of exporting to international markets. Essentially, it is a federal government agency designed to stimulate more exports from Canadian companies.

And we are not talking about pocket change or 'advice'. From the report:

Brazil, Russia, India, China and Mexico continue to be the priority markets for Canadian companies because of their growth rates, importance to global supply chains and alignment with Canadian strengths. EDC business volumes in these markets totaled more than $6.8 billion in 2006, up 26 per cent from $5.4 billion in 2005, with notable growth in Mexico at $2.6 billion (2005 - $1.6 billion), India at $730 million (2005 - $375 million) and Russia at $750 million (2005 - $502 million).

And you know where I am going with this, don't you.

The Atlantic provinces make up only 2.1% of the EDC's business volume. That means that of all the export insurance/finance deals done by the EDC, only 2.1% of the total volume was with Atl. companies. Even though the region still makes up 7.1% of the population.

They don't break out their New Brunswick figures, but odds are they are fractional.

Why I bring this up is simple. In this blog I try to explore the causes of chronic economic underperformance. This is another example.

You will recall, with me, for a moment, the glowing peacock of a man - Kirk MacDonald - former minister of Business New Brunswick getting up in the Leg last year and bragging at great lengths about the 'export performance' of New Brunswick. He even said billion with a 'b' to make his point.

What he forgot to mention (I am sure it just slipped his mind) was that without the Irving refinery, exports from New Brunswick in real terms were actually down since the Tories came to power - the second worst exports performance of all provinces in Canada.

Now, my disgust with that performance aside, the truth is that New Brunswick is not really an 'export' oriented province. Stuff all the reports in your toilet. When you extract commodities and look at value added exports - there is very little coming out of New Brunswick. I did a little analysis of this a few years ago and the difference is quite staggering. From Ontario, something like 80% of all exports were high value add (auto parts, manufactured goods) while something like 5% of New Brunswick's exports were high value (i.e. more than just commodities, paper, untreated fish or 2x4s).

And that is likely a main driver why the EDC does very little business in New Brunswick.

But back to a central theme of this blog. If you look at every program from the Federal government oriented to support economic development: Technology Partnerships Canada, federal R&D spending, EDC, etc. - New Brunswick gets well below its 'fair share' in a per capita sense and every program that is expense oriented (Equalization, social transfers, etc.) we get well above our 'fair share'.

And that, folks, in my opinion, is another reason why New Brunswick is third from last in North America for its standard of living, while we are one of only a handful of jurisdictions losing population (1996-2006) and continuing to need more and more Equalization just to get by.

The TJ is running a story this morning about a 'different' kind of side deal.

Rather than a "side deal" fully funded by Ottawa, Graham hopes to persuade Ottawa to share equally in the costs of an ambitious range of infrastructure improvements and programs meant to fuel his bid to wean the province off equalization within 20 years.

Now, here's the deal as I see it. The Feds aren't necessarily stupid. Bernard Lord's 'Accelerating Prosperity" plan was wrapped up as a 'side deal' for supporting prosperity. Elements included Petitcodiac River remediation, Saint John Harbour clean up, road improvements, etc.

These are worthy expenses - for sure - but they won't accelerate prosperity any more than help 'weal the province off Equalization'.

If Graham's 'ambitious range of infrastructure' and 'programs' includes quadrupling the ED budget, tripling R&D investments, setting up foreign offices, building aligned infrastructure like a world class animation hub in Miramichi, establishing a best-in-class repatriation/immigration program then maybe that would make sense. But more Federal dollars so that the provincial government doesn't have to make any tough fiscal decisions, in my opinion, won't cut any mustard.

Why is it that economists with all thier education and study can be so narrow minded?

An Atlantic Institute for Market Studies report grades Nova Scotia the lowest financial grade in Atlantic Canada. The report gave New Brunswick the highest grade with a C plus, while Newfoundland and Labrador jumped from last year’s D to a C/C plus and Prince Edward Island also improved from a D plus/C minus to a C.

The release said per-capita spending and government size are lower than the rest of the country "but interest payments on the province’s debt continue to rise as it is spending at too high a rate.


Now, here's the galling thing. AIMS, the bastion of free market ideology, craps on Nova Scotia and gives New Brunswick the best 'financial score'.

Funny stuff. Nova Scotia has significantly reduced its dependency on Equalization while New Brunswick has significantly increased its dependency on Equalization. Nova Scotia's population growth over the past 10 years is nothing to write home about but certainly better than New Brunswick's population decline and Nova Scotia has had a considerably higher rate of private sector job creation over the past 10 years.

So, here's what pisses me off. Nova Scotia politicians and taxpayers start reading this stuff and the catcalls start and Nova Scotia Business Inc. ends up getting cut. Or some other incredibly important program related to economic development.

AIMS, it seems, would like Nova Scotia to reduce its 'debt' and raise its dependence on Equalization like New Brunswick.

This is just madness. Maybe AIMS' 'hidden agenda' is to completely snuff out any innovative attempts to stimulate economic development. Maybe they would like Jeannot Volpe as Premier of Atlantica - shaving tax rates and raising Equalization for all.

Sure, a large provincial debt is a challenge and needs to be addressed. But scaring governments into cutting spending that is directed at growth-oriented activities is not the solution.

Isn't that funny. Let this d-i-g-e-s-t slowly. AIMS is applauding the province with the highest level of dependence on Equalization (and increasing) and slamming the province that has reduced its level of dependence.

Did AIMS hire Maude Barlow as it's new CEO?

Come on.

Maybe it's the NSCAD influence.

I don't know.

But I like it.

Delusional calgaria.

The director of Teenage Mutant Ninja Turtles is from Salisbury.

Who knew?

Can anyone say ambassador for the NB animation/digital media sector? Anyone? Anyone? Bueller?

Our old friend from Geeks on Ice sent me this. You should fill it out. Trevor is what you might call the 'grass roots'.

I am currently working on a university research project for my Bachelors Degree which examines whether New Brunswick's knowledge industry has an image problem. I would like to ask for your assistance by completing my online survey. The survey is just 10 question and will take approximately 5 minutes to complete. The results will help me report my findings and make recommendations. The survey is completely anonymous and I encourage you to forward this email to your friends, family and colleagues to get them to participate. We are looking for members of the knowledge industry community as well as individuals from the general public to participate.

To complete the survey, please go to the following link:

http://www.surveymonkey.com/s.asp?u=19833553727

Thanks you in advanced for your co-operation.

Cheers,

Trevor Macausland
Geeks on Ice Founder & 2007 Co-Chair

W: 506-855-0005
C: 506-872-2348
H: 506-852-8096
Email: tmacausland@gmail.com
www.GeeksonIce.com

Some have said that I am an 'apologist' for tax increases as I didn't completely go nutso when the Libs raised taxes in the last provincial budget.

Upon reflection, you are correct. I am an apologist for taxes.

More specifically, I believe that governments need taxes to pay for vital public services. As a result, I don't think the word 'tax' is - as my wife is fond of saying to the kids - a 'potty' word.

Ireland dropped its corporate tax to 12% - some say this has been a key part of its resurgence. Without being an economist, I can still see a straight line between some tax cuts and economic growth.

But let's not forget that Ireland tracks just how much new tax revenue is generated every year from its economic development - and it runs into the billions each year.

So that's why I am an apologist for taxes.

My position is that we need to have a 'competitive' tax environment and we need to ensure that those who should be paying taxes - do pay tax - i.e. provide funds to support vital public services.

Case in point. The Daily Gleaner is running a story today about a downtown retailer who will have to 'cut spending' and 'layoff' workers as a result of the draconian measure of raising the small business tax rate in New Brunswick from 1.5% to 5%. I won't say the name of the firm because the point is not to single out anyone but to prove my case. The owner of this business says the tax increase will cost him between $2,000 and $3,000 per year. Let's, for the sake of argument, round that to $2,500 per year.

First, he will have to 'layoff' to recoup $2,500?

Second, simple math says that if the tax increase will cause him to lose $2,500 - he must have approximately $71,429 in annual profits (you do the math on this you will see my point).

So, am I wrong here? If a small business makes $71,429 in profits - is it too much to think that they could pay $3,751 (5%) in provincial corporate taxes? Is that too much tax?

I understand businesses don't like to pay tax. That's fair. I don't much like to pay tax either.

But the fact of the matter is real simple. The number one source of revenue for the New Brunswick budget is Equalization - and that source keeps increasing every year. Taxes paid by businesses like this one in Freddy Beach make up one of the smaller sources of revenue.

So, from a public policy perspsective (you know, that whole self-sufficiency thing), we need to generate oodles more taxes from the local economy - something like $1.5 billion per year.

While I don't think we should try and extract that from small Fredericton-based retailers, I think that somebody who makes $71k in profits should not be too worried about antying up $3,700 in taxes.

I have in the past lamented what happened to NBTel. Not what happened in a pragmatic sense. The telco sector was consolidating all over North America and NBTel was bound to be swallowed up in some Bell-icious moment.

No, that's not what I lamented. I was saddened to watch NBTel and its little kitty of keen idea -logues slowly get ground up in the hamburger of a national telco.

I am sure there's a lesson in there about being a small province in a large country - but I'll skip that for now.

The upside of NBTel giving up the ghost - so to speak - is that all these old phantoms keep coming out of the woodwork and doing neat things. Gerry Pond has been involved in a number of interesting ventures. Names like Marcel Lebrun and Curtis Howe keep popping up. The venerable Larry Shaw just popped up as the VP sales for an Irish e-Learning company. Larry, of course, is based in New Brunswick. Then there is Ian Cavanaugh over at Ambir Solutions. Ian followed the call of the wild back in the mid 1990s and went to California during the dot.com gold rush. Like Lassie of old, however; Ian found his way back and now is planted in New Brunswick spinning out IT shtick like the rest.

I have mulled this over a lot to try and figure out what keeps these guys/gals here and what brings them back. After all, isn't New Brunswick the cruddy little place everyone wants to leave?

Apparently, not everyone. Take it from me. Most of these guys/gals would have made a lot more dough elsewhere but they made a conscious choice to stay in New Brunswick - particularly Saint John. You'll find them behind a number of new intiatives and companies in the port city.

Ultimately, the work-live-family balance is a complex dynamic. But the balance for a lot of folks in New Brunswick - even highly talented folks - can be found right here. Sure, family connections matter. Roots put down in a community matter. But at the end of the day, there must be something here beyond the lobster and maple syrup that is attractive.

I have travelled a lot in my career - relatively speaking - and have studied a lot of other community. Great places. Places like Phoenix (although I wasn't there in 45 degree heat), Charlottesville, VA, Raleigh, NC, Atlanta Georgia, San Antonio, TX, San Francisco, Calgary, AB, Dublin, Ireland, Sao Paulo, Brazil, London, England, Paris, France - and my #1 place in the love to visit/not live category - New York City - I get tingles just thinking about it.

But when I crunch the numbers - all the numbers - Moncton - freaky stuff - is a pretty neat place to live. I walk to work from my downtown house which would cost a fortune in a big city. People talk about crime here - but really - let's try and be serious. Winter? My wife hates it but I kind of like it (just a bit too long for my taste). And the people? I am not exactly Mr. Social but when I do bump up against others in the market, they say "excuse me" and you are likely to get some help when your tire goes flat. And, of course, there's the whole Reader's Digest' example of Moncton being the most honest city in Canada.

And when I get a little cabin fever, I jump in the plane and find myself in a big city somewhere enjoying immensely the food and flavour of that environment but I always find my way back here and never once - not one single time - have I wished for a moment that I had stayed in any of those remarkable places.

So maybe I belong to that exNBTelers club - in a spiritual sense.

Actually, in the interest of full disclosure - I worked for NBTel once - I made it 11 months before getting summarily fired. I probably shouldn't have lasted that long - I don't seem to function that well in large bureaucratic environments.

Never mind all that. Getting fired is a humiliating but also liberating thing. I suggest you try it sometime.

Anyway, maybe all the professionals who could have easily left NB for 'greener' pastures are all exNBTelers.

All we need is our own song. Maybe an adapted version of Al Jolson's "California, Here I Come!" from my 1920s collection.

I don't know. That's the thing about exNBTelers. Good lot but not much on the creative side.

No one is talking about this. I listened to the better part of two hours of Rex Murphy's call in (including our old friend Lisa Hrabluk) - nada. Nothing in the papers (that I read).

But, yet, Ontario is very happy that the issue of transfers being doled out per capita is finally being addressed.

Let me restate this so we are all clear. Health and social transfers in the last 10 years to New Brunswick grew roughly at a similar rate as Ontario's (roughly). Ontario added 1.5 million people. New Brunswick dropped slightly.

If we move to a pure 'per capita' basis for transfers by 2014, what would that mean?

Is there anyone out there that can tell me what the impact of this is? If this standard had been in place when Bernard Lord took office - does that mean New Brunswick wouldn't have received an additional nickel of health and social transfers?

This is my third blog on this topic so I'll stop. But, I think somebody that knows should tell us.

I just got done reading the latest issue of Progress magazine. I really like it - the only tinsy flaw is that it tends to be a bit Pollyannish about the business community in Atlantic Canada. But maybe after all the raw, realism I get punched in the nose with on a frequent basis (you know all the stats), a little lah tee dah - tiptoeing barefoot through the tulips - metaphorically speaking - of the Atlantic economy has its place.

So in the latest issue of Neville's brainchild is a cover story about FatKat - the Miramichi-based animation studio.

I was revved up to write a long and windy blog about how this is exactly the kind of company we need and heap congratulatory praise on the entrepreneur behind the company but as I was cracking the knuckles to put pen to paper - so to speak - I had a 'senior's moment' - a flashback - and names just started pouring out: Provinent, Learnstream, e-Com, BKM, Romulin, CyberDesign, JOT - on and on - dozens of 'FatKat's that I have intersected with over the past 15 years - all relegated to the business boneyard of the Atlantic economy.

In fact, statistically speaking, the chances of FatKat lasting 7-8 more years at all are very slim. If you had a list of the top 'IT' firms in New Brunswick from ten years ago 1997 - you would find that very few are in business today.

Between 8-9 out of 10 new start up businesses fail within 5 years.

So, I started to give this some thought and here are a few observations/thoughts - for what they are worth:

Observations:
96% of New Brunswick-based firms generate less than $2 million per year in annual sales. 96%. After 15 years studying this stuff, I have concluded that it is relatively easy to build up a business with a million bucks or so in sales but to take it to $5 million or $10 million is virtually impossible. This is a statistical fact - not just my opinion. Further, and this is more opinion-based, to take an IT firm based in New Brunswick to $10 million in sales is almost impossible. There may be a handful - one hand - of IT firms in New Brunswick that are not either currently or historically affiliated with NBTel that are still in business and generating $10 million + in sales.

What's the problem?

1. Capital. I think they call it 'death valley' that period between start up and serious growth (let's say $1 million or so in sales and $10 million or so in sales) in which it is very hard to find growth capital. In New Brunswick, in my experience, we have a little additional problem and that is that many entrepreneurs don't want to get up any 'equity' to get financing. This is changing a bit with the young Turks but just ask the NBSC how many New Brunswick firms have external equity financing.

2. Management. It is - take it from me - relatively easy to build a lifestyle business of a million bucks or so with the entrepreneur and a couple of buddies. But building a real business with a serious business model that has long term potential takes a serious management team. In many cases you can't fund this management team out of cash flow so issue #1 comes back on the table. Build a serious management team. VP - Sales (with US experience if that's your target market), VP - Finance, VP Operations, legal, etc.

3. Humility. I have witnessed so many small IT flameouts that I am jaded but I hear the speeches in my head "I'd like to thank the academy" and all the "little people" that made this happen. Arrogance is the curse of entrepreneurs. You want to be arrogant? Wait until you are Wes Armour and have an empire - one of the largest firms in your sector in Canada with over 1,000 employees. Then you can take the time to be arrogant. Funny thing, though. Wes Armour still doesn't come across as arrogant. Humility is a key virtue of long term, successful entrepreneurs. Even old Bill Gates stepped aside when his time came.

4. Be in the markets you need to be. Let's face it. It is very hard to build a national or international business from New Brunswick. We can either ignore this reality or face up to it. New Brunswick is a wonderful place to have back office, production studio, support centre and, yes, for some even a head office or a regional office. But if your clients are based in Boston or New York or Dublin, find a way to be in those markets. All this hullaboo about using Web Conferencing is much ado about nothing. And that, of course, comes back to point #1.

5. Finally, get really good at something. Use this nugget of opportunity you have been given to get really good at something. One of the top reasons all these IT firms went under was at the end of the day the majority of them were pushing lower cost of production or some other ephemeral value proposition that will always be outdone somewhere. Why are some of the top animation studios in the world located in downtown San Francisco (I walked by a few last week)? Certainly not because of cheaper costs. Costs are certainly key but if they are the only reason you are getting business - for most IT sectors - you are on shaky ground indeed.

Back to FatKat. I don't presume to serve up advise to that or any specific firm. Each case is too unique. Some new firms are funded out of RRSP withdrawals and others from a large silent partner in Toronto. Some have long established business relationships while others hammer away just trying to get lucky.

But the bottom line is that we (NB) need companies like FatKat to suceed. Think of the 20 or so e-Learning firms that have gone out of business in this province alone. e-Learning was supposed to be the next call centre. Thousands of jobs right here in New Brunswick generating content and technology for global markets. And now kaputsky.

So from a public policy perspective, I hope BNB has had a long hard look at the new 35% tax credit for digtal media production.

I just read that Nova Scotia's new budget contained a 35% tax credit for 'digital media' production. That should help spur a fledging animation/new media sector in Nova Scotia.

There was a time when New Brunswick was at least attempting to be out front in some of these sector development strategies. NB and Manitoba were the first provinces to get serious about attracting call centres. NB had the first 'information highway secretariat' in Canada. NB was early into the game of e-Learning.

In the last 7-8 years, someone please tell me what industry sector has NB led the way in? What innovative incentive program has been developed? What infrastructure has been developed that has given the province a leg up on the competition?

In Nova Scotia, we have seen:
-An innovative approach to ED with the creation of NSBI.
-An innovative 'payroll rebate' incentive program that eliminates taxpayer risk.
-Really neat sector development work - financial services back offices, IT, now digital media. I now read they are starting to build a 'legal services' back office strategy in the province.
-Immigration/repatriation strategies completely tied to real jobs (i.e. move here for job x).
-The attraction of a mega IT company/project RIM
-Transparency and accountability in economic development results reporting.

In PEI, we have seen:
-The maturing of the Slemon Park model
-The development of a financial services cluster anchored by AMVESCAP
-The attraction of several high profile life sciences firms like Novartis
-The building - on spec - of the Atl. Technology Centre which is now filled with technology firms and they are building, I am told, a second one.

In New Brunswick, we have seen:
Well, frankly, I don't know. Please fill this in if you do know. What innovative approaches have been taken?
There was a repatriation effort that all but flopped because there were no jobs aligned with the expectations of the potential repatriated.
I don't know of any new incentive program. I think they are still flogging 'tailored' incentives and 'forgiveable loans' - language and programs that were developed over 15 years ago.
I frankly don't know any specific industry that New Brunswick is outfront on. You could argue rural call centers - but that is really only one firm that was attracted here under the previous Liberal government.

Forgive my frustration but I have been begging all that will listen that New Brunswick could have staked out a lead position in the animation/digital media biz. But since I have been talking about it, BC, Quebec and now Nova Scotia have developed 'tailored' strategies to attract this industry - and New Brunswick zippo.

Hopefully soon - I hope really soon - New Brunswick will get back out front on these issues. Become a leader in sector development. Develop an innovative model or approach. For example, why would the provincial investment attraction team be pysically located in New Brunswick? The bulk of Ireland's people charged with attracting companies to Ireland are located in New York, London, Los Angeles, etc. If your market is elsewhere, why are you here?

I'd like to see an "Invest in New Brunswick" sales team based in a US city with satellites in Toronto, Vancouver, Boston, London, Bangalore, Dublin, Beijing, Sao Paulo and Sydney (Australia).

But maybe I am saying that because I haven't had my coffee yet.

Right up front, let's be clear that I am not picking on either TD Bank or Frank McKenna. It's just that I came across this information in their well written 2006 Corporate Social Responsibility Report and it helps support my point here in this blog.

Firstly, TD pays less than 1% of its provincial taxes (income and capital) in New Brunswick.




In addition, the bank employs less than 1% of its people in New Brunswick.



Why?

Probably the fact that one tenth of one percent (0.1%) of its loans to business are in New Brunswick as shown in the chart.



So, what's my point here? Assuming that the other banks have similar debt in New Brunswick (some higher/some lower), it becomes pretty clear that the banks aren't investing too much in New Brunswick. In fact, at less than 20% of Nova Scotia's TD invested capital, it's pretty bad.

So, to sum up. TD Bank is not 'risking' its capital in New Brunswick firms (I make no direct reason for this at least in this blog - I am just stating a fact). As a result it pays almost no tax here and it employs relatively few people here.

So for those of you who criticize my desire to attract foreign investment (of which I obviously include 'national' investment), take a long hard look. Embedded in this blog is a primary reason why New Brunswick has been mired among the weakest provinces and states in North America.