It's The Economy, Stupid -David Campbell's Blog on economic growth in New Brunswick-Atlantic Canada

Friday, February 29, 2008

NAFTA SCHMAFTA

I just listened to Michigan's governor ranting about the outrage that Ontario is now manufacturing more cars that her state. This, she said, is proof that NAFTA isn't working. It must be reformed.

But, Madam,

The southern U.S. now produce more cars than Ontario - far more - Kentucky, Alabama, South Carolina, etc.

Will changing NAFTA, change this fact?

The Democrats are in a bind in this Presidental year, IMO. In order to secure the working class, they are jeopardizing just about every other class. NAFTA is not perfect but the facts show that it sent lower value, lower wage jobs to Mexico and created higher value, higher wage jobs in the USA.

I am not saying there wasn't displacement. It is still being felt in Michigan, et. al.

But, on balance, the return to Lou Dobbsian protectionism will be a major step back.

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What's the next big idea?

I don't know if it is ironic or not, but Albertans are restless. They are looking for the 'next big idea'. This story outlines some of the big ideas that are being considered.

Funny stuff. New Brunswick needs "the next big idea" - not Alberta. Alberta could sit on $100/barrel oil for 70 years and just grow rich and fat.

New Brunswick, on the other hand, faces economic disaster if the Equalization going up/population going down trend continues.

What's are next big idea?

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Thursday, February 28, 2008

A couple of blogs back, I said that New Brunswick should target the Arabian Peninsula. These countries have piles of cash to invest abroad to diversify their holdings. They are doing developments all over Europe and the US.

Calgary is listening (not to me to the concept):

Calgary Economic Development (CED) is coordinating a strategic trade mission to the Middle East in March, to explore the abundant opportunities for Calgary companies to create business synergies in that region. Several Calgary energy and real estate companies will meet with business leaders in Qatar, Abu Dhabi and Dubai from March 1- 6, 2008. Mayor Dave Bronconnier will be accompanying this mission. The focus of the mission will be on clean energy, capital projects and real estate investment.

With us it's always follow the leader. Take my advice. Eastern Europe. Go to Eastern Europe. Do deals with the outsourcers there to put their nearshore North American IT development centres in New Brunswick.

Oh and don't forget about Dubai.

Think about Scandanavia.

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Tuesday, February 26, 2008

Overtaxed!

Al Hogan is right to be pushing this tax revolt! I was wrong!

Gotcha.

Statistics Canada just released its 2006 household spending data. Here is the average household expenditure on personal taxes:

AB $18,616
ONT 14,869
BC 13,929
CAN 13,634
MAN 12,282
SK 11,920
QC 11,218
NL 10,074
NS 10,074
NB 9,590
PEI 8,046

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Look to Halifax

I know that some snide remarks will be forthcoming but I still think that we should be impressed with the financial services back office sector development strategy in Halifax right now. While Premier MacDonald was ringing the NYSE bell on Wall Street, a major deal was getting put to bed:

Citco, the leading global provider to the hedge fund industry, has chosen Nova Scotia again. The international financial services company is making Halifax one of its key locations for Citco's industry-specific technology development, creating up to 325 new jobs over the next six years. Positions will range from technical support to software and application development.

The province, through Nova Scotia Business Inc., is investing in the expansion with a payroll rebate set at a maximum $7 million over six years. The rebate will be invested incrementally as the company achieves hiring targets. The Department of Economic Development is investing $1.47 million to support start-up costs and training.

This is tailor-made economic development in the new 2008 context. Nova Scotia is not selling cheap labour and not attracting low wage jobs. These are $70k+ jobs that pay serious taxes into the provincial coffers. And it proves that a highly targeted effort with highly professional people can lead to good results. Halifax wasn't on anyone's radar until Lund and the gang came calling.

Actually I am quite disallusioned with these trips to 'Toronto'. All the politicians make them and get relatively little out of them (IMO). The problem is that most of the Bay Streeters already have well formed opinions of Atlantic Canada as a backwater sucking on the hind teet of Confederation. Maybe Lund is right. Maybe the 'trips' should be to Bermuda or Helsinki or Dubai.

Don't get me wrong. I have written before and extensively that corporate Canada should be investing more in Atlantic Canada - their little part for the good of the country. But these days you are just as likely to see a GM Canada closing its Moncton warehouse and moving the jobs back to central Canada as you are some Bay Street firm setting up a new facility here.

For the most part - and there are some exceptions - corporate Canada is investing almost exclusively in the 4-5 major urban markets. They will put retail stores in Atl. Canada and offices that absolutely have to be here to get access to the local market but to put manufacturing here, IT development, back offices, etc. - very unlikely.

If corporate Canada continues to treat this region like an annoying hinterland, maybe the Bermudans will be more receptive or the Finns or the Danes.

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Another $200-million for the auto industry

A couple of years ago Ontario and the Feds put up $1 billion in cash subsidies for the auto sector in southern Ontario. The Globe is reporting that the Flaherty will be throwing another $200 million in the pot in his budget today.

I realize that pragmatism wins out over ideology in politics but for me its a bit like finger nails on a chalkboard. To say out of one side of your mouth government shouldn't be in the business of 'picking winners and losers' and then on the other side announcing subsidies for the lucky winners - seems a bit too callous for me.

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Sunday, February 24, 2008

Think, think, think

I have to admit a little nostalgia for kiddie movies. I used to watch several a week with my kids when they were young. I particularly liked Winnie the Pooh - who used to bang himself on the noggin and say "think, think, think" when he needed to remember something.

I am reading Richard J. Gwyn's new book John A: The Man Who Made Us and enjoying it so far. I don't read enough Canadian history as I should.

Anyway, Gwyn spends a little time on the rise of Scotland during the 18th Century. Here is how Wikipedia describes it:

The Scottish Enlightenment was a remarkable period in 18th century Scotland characterized by a great outpouring of intellectual and scientific accomplishments rivaling that of any other nation at any time in history. What made it even more remarkable was that it took place in a country which was among the poorest and was thought to be among the most backward in western Europe prior to that time, in addition to having a substantially smaller population base and infrastructure than many other major western European nations.

Reading this stuff just reinforces my belief that New Brunswick needs to spend a lot more money and focus on researching economic development issues. Wouldn't it be neat if some of the best ideas for regional economic development eminated out of New Brunswick over the next 50 years?

We get so stuck in our own little worlds, haggling over little issues and the world just passes us by sometimes.

I think the public and private sectors in New Brunswick should fund a non-partisan think tank on economic development. Not your standard academic fair where you get a paper published every three years on the use of goat milk to stimulate rural economic development in Botswana (although that is important). No, as I have outlined on these pages before, I am talking about a serious policy support research institute that is pumping out research on the best global models for dealing with regional economic disparities, attracting global biz investment to poorer regions, fostering successful entrepreneurship in a place like New Brunswick, etc.

I would tack on a robust economic monitoring and benchmarking effort and take a broad view. Ideally, the stuff published in New Brunswick would find applicability in Wales, Maine and underperforming parts of Germany, France, etc.

Just throwing more crap around to see if anything might stick.

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Rabid capitalists until.....

I once heard a business guru (I can't remember which one) say that most CEOs are rabid capitalists until they pass through the door of their own business every morning. From that point on, they spend their time lobbying governments for incentives, looking for tax breaks, angling for favourable legislation, etc. One only has to look at the auto sector, the aerospace sector, the agrifood sector and the pharma sectors in Canada to see this play out.

So, I was grinning ear to ear yesterday when I heard the Chief Economist at Fidelity Canada intone with great indignation that the government shouldn't be "picking winners and losers".

Er, I guess that doesn't apply to Fidelity itself, which received one of the largest incentive deals I have ever seen for a financial services firm when it got $69 million from North Carolina back in 2006.

I wonder what the Chief Economist would say to that?

Maybe that bit about people that live in glass houses...... comes into play here?

I'm sure he would fumble through a response about why that was different some how.

Don't get me wrong. I would be as happy as NBT if all governments around the world stopped giving financial incentives to companies to set up in their jurisdictions. But they never will and I think New Brunswick should be the last place to unilaterally disarm.

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Saturday, February 23, 2008

Tee hee hee

The 'sleuth' in the Times & Transcript is running another 'rumour' about Bernard Lord running in the next federal election. She says "There are some rumours that just refuse to die and Sleuth was hit again this week with one that has more lives than most cats."

The reason it refuses to die is because the T&T keeps it going. No other media outlet is talking about it. The former Premier isn't talking about it. I think Edith Robb and Al Hogan want their boy back on the scene and they figure if they talk about it enough, they might get their way.

Another LOL moment from the TJ is the PC energy critic's comments:

Opposition MLA Bruce Northrup, energy critic for the provincial Progressive Conservatives, said the Tories are "a little bit happy" that the rate increase has been cut to 5.9 per cent.
However, he noted "it's still an increase." "The government is putting the money in their pocket and not the good people of New Brunswick's pockets."

You will recall that in the early 1990s, New Brunswick was one of the lowest cost producers of electricity in Canada. Now, after the Tories and their great energy policies, we are now importing electricity from Quebec because it is cheaper that producing power at Colson Cove.

Someone serious told me we should just hand the keys to NB Power over to Hydro Quebec. It may be a good idea.

Finally, in the chuckle column, I find it absolutely fascinating that no media outlet picked up the story of the Nova Scotia Premier ringing the closing bell at the NYSE this week on Wall Street. We got literally 10 or more stories about Shawn Graham's every move in Toronto - but nothing on a story that has 10 times the significance. Macdonald is only the second Canadian Premier in history to ring the bell and the NS delegation was in New York touting their growing financial services back office cluster.

Maybe I am the only one that finds that funny but I really do. Note to the NB media. If you aren't reporting what others are doing, how will your readers be able to compare how we in New Brunswick are doing?

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Friday, February 22, 2008

Premier Rodney MacDonald to ring the NYSE closing bell

Neat stuff:

NOTE TO EDITORS--Premier To Visit New York Stock Exchange
------------------------------------------------------------
Premier Rodney MacDonald will visit the New York Stock Exchange on Tuesday, Feb. 26, to celebrate Nova Scotia's recent success in the international financial services sector.

Premier MacDonald will be joined by Economic Development Minister Angus MacIsaac, Stephen Lund, president and CEO of Nova Scotia Business Inc., and industry representatives. To mark the occasion, Premier MacDonald will ring the closing bell at 5 p.m., AST.

Premier MacDonald, Mr. MacIsaac and Mr. Lund will be available for telephone interviews from New York. To arrange an interview, contact Sarah Levy at 902-222-3658 or by e-mail at levyse@gov.ns.ca .

A live webcast of the closing bell, beginning at 4:55 p.m., AST, will be available at novascotiabusiness.com . A photograph is expected to be posted on the Communications Nova Scotia website about an hour after the event.

-30-

Media Contact: Sarah Levy
Nova Scotia Business Inc.
902-222-3658
E-mail: levyse@gov.ns.ca

**end of message**

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Goin' down slow

Despite all the rhetoric. Despite all the hyperbole. Despite all the grinning and shaking of hands, the vast majority of New Brunswickers are still well entrenched in our belief that New Brunswick is going down slow.

I used to say this with the last government. The same week that Premier Lord was running around yakking about prosperity, his Finance Minister was going around the province with his officials telling universities to be prepared for the huge coming decline in student populations.

Now, I've cut a few lines out of a T&T story this morning for your edification and then I'll comment below:

At this point, even before those mills went out, we were talking well into 2020 before we'd need additional generation," said NB Power CEO David Hay. "Now that obviously gets extended even beyond that date."

The drop in demand raises questions about the case for a second reactor pumping out 1,100 MW "" possibly half of that destined for the Maritimes -- at Point Lepreau, said David Coon.

"You also have the (Brunswick) mine going down in 2010 and likely the smelter with it," said Coon, policy director for the Conservation Council and a long-time critic of nuclear power. "NB Power's industrial load is rapidly shrinking. And that's base load.

"If your base load is shrinking, and you actually are spending all this money refurbishing (the existing reactor at) Pt. Lepreau, why would you be looking to supply even more base load when demand is less?"

David Coon,the leading proponent of a major decline in New Brunswick saying "nah, nah, nah - we're going down. Told you so." - like some nasty kid on the playground. But then you have Hay, also assuming not only that our forestry industry will collapse but that nothing will happen to replace the demand.

They build these negative expectations into their scenarios. It's sick.

David Coon talking about the closure of the Brunswick Mine and smelter and just assuming nothing will be coming along to replace it. Or better yet, use more energy.

David friggin' Hay should be the first one up saying we expect to replace this loss of demand with 50 data centres brought in by BNB. Or, we need to get our rates in line with North American jurisdictions to keep our large forestry players or some other growth expectations.

They say they are just being 'realistic'. Good 'planners'. Good stewards of the trust put in them by New Brunswickers.

The bottom line is very simple folks. If the heads of all the government departments, agencies and NB Power are planning for decline - they will get it ipso facto.

And no goofy grinning Premier will stop them.

Maybe it's because my father was a Baptist minister, but I feel like serving up a parable every time I read this crap.

The parable tells of a master who was leaving his home to travel, and before going gave his three servants different amounts of money. On returning from his travels, the master asked his servants for an account of the money given to them. The first servant reported that he was given five talents, and he had made five talents more. The master praised the servant as being good and faithful, gave him more responsibility because of his faithfulness, and invited the servant to be joyful together with him.

The second servant said that he had received two talents, and he had made two talents more. The master praised this servant in the same way as being good and faithful, giving him more responsibility and inviting the servant to be joyful together with him.

The last servant who had received one talent reported that knowing his master was a hard man, he buried his talent in the ground for safekeeping, and therefore returned the original amount to his master. The master called him a wicked and lazy servant, saying that he should have placed the money in the bank to generate interest. The master commanded that the one talent be taken away from that servant, and given to the servant with ten talents, because everyone that has much will be given more, and whoever that has a little, even the little that he has will be taken away.

I know New Brunswick has gotten the short end of the stick. The 'one talent' if you will. But assuming a loser posture is not the solution.

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Electric discussion

It's interesting that my column this week on using the electricity produced by Lepreau II to power economic development in New Brunswick and not New England got probably the most feedback I received to date. Several colleagues called and emailed to debate the issue and one guy tracked me down at home. He took issue with my term 'low cost power' regarding nuclear energy.

The truth is that I have been told that nuclear - over a long time horizon - is still one of the cheapest (and cleanest) forms of electricity generation. I don't have personal knowledge of this but I have been told it by folks who should know.

Regardless, the assumption of my column was more simple than that. Simply, if you can produce power that you can sell into the U.S. that is competitive price wise with other forms of electricity production - my thinking is that if you back off your expected profit margin that must, by definition, make it cheaper here. Unless you plan on selling all the surplus power on the spot market to fulfil short term needs. My assumption, and it is only an assumption, would be that NB Power would want to negotiate stable, fixed term agreements for the power - at a lower rate than they would get on the spot market.

But, I don't claim to be an energy expert - not in any sense of that term.

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Thursday, February 21, 2008

Deja vu all over again

Good exposure this morning in a CP article (and others) for New Brunswick.

New Brunswick Premier Shawn Graham descended on the country's financial hub Wednesday to promote the Maritime province's burgeoning energy sector, calling New Brunswick the "next Alberta in the Canadian economy" in a bid to lure back both businesses and bodies.

You can't say that Graham doesn't like to overstate things, can you? We will be 'self sufficient'. Our post-secondary system will be a 'model' for the rest of North America. Our education system will go 'from worst to first' and now we are 'the next Alberta'. Hmmm. As I have said before, I'd settle for 'worst to a little less worse' and 'the next Manitoba' or something like that but that's just me.

But I do think these guys should learn from the old gang. Under McKenna, these little junkets were just about political points. The real dealmaking, the hard selling, etc. was done behind the scenes and, in fact, deals that had been in the works for months and even years were announced to be the 'result' of such a junket.

During the Lord tenure, the junkets themselves become the 'result' and I hope that hasn't carried over into this new administration. Graham and Byrne making speeches to polite applause - will get New Brunswick nowhere. It's just PR effort. I am not discounting PR - I'm just saying that if that is it, they will achieve little to nothing.

There is no substitute for hard work. For product development, for building a sales funnel and winnowing it down over time. For driving passion throughout the BNB team and across government.

In fact, I would go as far as to say that a Graham/Byrne junket to talk with their own team and fire them up might do more good than a Bay Street junket. But that's just me.

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Wednesday, February 20, 2008

Sometimes, the destination is the destination

You've heard the old epistemological saying about "the journey being the destination". I guess that's fine in some contexts but when it comes to economic development, the destination is the destination.

I read this morning in the T&T about the Premier's trip to Toronto to woo businesses. If I was advising the Premier, I wouldn't even talk about this stuff. It's just process. They say McKenna made 30 calls to business leaders per day. Wait, and then tell us about results. The new companies setting up in New Brunswick, for example.

Former Premier Lord loved to talk process "the journey being the destination" kinds of things. Trade missions with Manitoba of all places. Missions to Russia. Speeches in Calgary. At the end of the day, a cynic might conclude these were never about results as we were never provided follow up with the details of all the jobs that came out of the mission with Manitoba to Texas. The cynic might conclude they were about making politicians look good - rather - busy.

These days I prefer my politicians out of sight, quietly getting it done. Of course, I am not talking about Richard Hatfield in the last three years out of sight.

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Tuesday, February 19, 2008

United we stand, divided we fal-ter

I just read about the ACOA mission to India. I am a fan of more cooperation among the four province when it comes to international marketing activities such as this. I know that some folks aren't so keen on this and I respect their position. They say introducing another layer of geography between a province and a country - doesn't really help. But if you look at England, they are marketing 'regions'. If you look a the United States, you will find a number of regional initiatives.

But this region has a lot of common problems - ironically with the emergence of oil & gas there is a gap rising between NS/NL and NB/PEI - and I think cooperation really makes sense.

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Monday, February 18, 2008

Technology and economic development

I thought this was very interesting. The Global Mobile World Awards 2008 were given out last week and one of the categories was "Best Use of Mobile for Social & Economic Development".

Grameenphone: CellBazaar
Grameenphone CellBazaar is a user-generated virtual marketplace, accessible via mobile phone or PC to nearly 17 million people in Bangladesh. In developing countries, limited communications hinder commerce and uninformed farmers and traders have little bargaining power with exploitative middlemen. Using CellBazaar (www.cellbazaar.com), buyers and sellers trade basic goods from their mobiles, bringing the benefits of information exchange and one-to-many trading to a previously unwired rural population. Users post or search an item, spending less than US$.02, either by SMS or WAP or WEB, depending on their preferences. While common telephony establishes one-to-one communication, CellBazaar links many-to-many using the same basic mobile infrastructures. Judges’ comments: “Great initiative - full marks for self-sustainability. This grass root level initiative is not only for operators to make money but for rural folks to sell and trade their goods and increased price transparency and help for the illiterate is also available. It has clear environmental benefits through reduced travel.“

One wonders out loud if anyone at Business New Brunswick is looking at the use of technology to support economic development here?

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Friday, February 15, 2008

Old Faithful

One thing you have to admire about the CFIB, they are consistent. No waffling there. In today's TJ Leanne Hachey, Vice-President, Atlantic Canadian Federation of Independent Business (CFIB), demanding the province cut small business taxes. Unidimensional. Consistent.

When Lord cut small biz taxes, the CFIB praised him to the highest mountain. Four years later, after New Brunswick had the second worst small biz performance in North America - nary a word out of the CFIB.

When will the CFIB admit that the success of small businesses doesn't rest with one or two point tax cuts. All of Lord's small business tax cuts combined amounted to about the cost of a Starbucks coffee per day per small business.

If the CFIB was really interested in the economic health of small businesses, it would focus on the underlying reason why they do so poorly in New Brunswick - because of the chronic economic challenges.

The best thing that could happen to the small businesses in the Miramichi would be for the mill to restart or some other large industrial company to come in with 800 high paying jobs. Then, the SMEs would have better outcomes. The same story applies across the province.

Diddling around with small biz tax rates while hundreds of high paying jobs disappear is silly. The CFIB should be right out front demanding that the government work to ensure that we receive our share of national and international business investment which in turn will gird up the SMEs and ultimately create the opportunity for genuine tax cuts. Cuts not based on a short term political pressure but cuts as a dividend for the strong economic growth in the province.

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Thursday, February 14, 2008

Turn down the pressure valve

Well, I have had my intellect, credibility, experience, writing skills and career slammed in recent commentary. And that's not the personal stuff. So, to move the subject off my person foibles and inadequacies, let's start arguing about oil again! Doesn't that sound fun?

The southeastern tip of South Dakota is the lone identified short-list location for the first new U.S. oil refinery built in more than three decades. Trumpeted as “the gold standard for all future refineries,” Hyperion Energy’s 1,800-employee operation has inched a little closer to reality. Dallas-based Hyperion is eyeing a 3,882-acre (155-hectare) South Dakota site 12 miles (19 km.) north of Elk Point, part of the Sioux City metro that stretches into Iowa and Nebraska. If the so-called Siouxland Site is selected, it would see an estimated capital investment of $10 billion, the second largest in U.S. history, trailing only Boston's Big Dig.

I wonder where the Saint John refinery plans are these days??

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Wednesday, February 13, 2008

According to Corporate Research Associates, types of boomers seem to cluster together in certain parts of the country. Their study classified them into five categories:

-The Free Spirits of British Columbia
-Modern Altruists of the Prairies
-The Self-Reliants spread across the country
-Passive Conformists of Quebec
-The Jaded Fatalists in the Maritimes

The jaded fatalists?

That sounds like Don Mills' opinion on the world - maybe his data backs him up.

Well, if Maritime boomers are jaded and fatalists - I still give them the nod over 'modern altruists'. It's a lot easier to be an altruist with all that oil money coming out your ears, n'est-ce-pas?