The Changing Face of Atlantic Canada
By Alec Bruce (Jun/Jul 08)
Atlantic Canada — comprised of the provinces of New Brunswick, Prince Edward Island, Newfoundland and Labrador, and Nova Scotia — is home to fewer than three million people. Still, this innovative region at the most easterly fringe of North America continues to prove that, when it comes to economic opportunity, size does not matter.
Over the past several years, government and business leaders have recognized the value of cultivating a growth environment for knowledge-intensive industries. Their models have been the national economies of northern Europe and the regional ones of the southeastern and northwestern United States. As a result, sophisticated, technologically proficient, and skills-dependent enterprises are steadily supplanting the traditional smokestack industries that once dominated the commercial landscape.
Less a transformation than an evolution, regional economic growth has been a continuous, sustained process producing many promising trends. Throughout the 1980s and 1990s, for example, Atlantic Canada’s output consistently outperformed Canada’s as a whole. Meanwhile, recent cutbacks in federal subsidies to individual provinces (transfers to bolster budgets for specific social programs) have rendered the region more competitive and fiscally savvy as the distortions — which once raised costs for Atlantic Canadian producers, slowing private investment and widening the unemployment gap with the rest of the nation — have begun to evaporate.
Today, the region’s various governments happily promote a suite of advantages they offer domestic and foreign businesses: one of the best-educated and motivated labor forces in the western world, skilled and multilingual workers, generous tax and financial incentives, superb multimodal transportation infrastructure and port facilities, an enviable quality of life, and a nearly unbeatable cost structure.
Indeed, according to the 2008 KPMG Competitive Alternatives study, the Atlantic cities of Moncton, New Brunswick; Fredericton, New Brunswick; Charlottetown, Prince Edward Island; Halifax, Nova Scotia; and St. John’s, Newfoundland & Labrador scored first, second, third, fourth, and seventh, respectively, among New England and Atlantic Canadian urban areas for overall business cost competitiveness.
Within this developing context, the provinces are beginning to work together to dismantle the remaining intra-jurisdictional obstacles preventing them from capturing better and more consistent foreign direct investment, business relocations and start-ups from other parts of the world, and crucial immigrant skills. At the same time, each continues to emphasize its own, unique “selling” points to a world that rewards the smart, the nimble, the quick, and not just — or even necessarily — the big.
New Brunswick: The Mantra Is Self-Sufficiency
Representing nearly 750,000 people, the government of New Brunswick (which was elected in a landslide in 2006) has made economic self-sufficiency an explicit goal. Premier Shawn Graham has explained the task this way: “I am the only government in Atlantic Canada that wants less, not more from Ottawa. But, this can’t be the agenda of one leader or one party. It has to become the agenda of everyone. I can build all the hiking trails in the world; the people have to decide to walk them. It’s more than people believing in it. It’s people embracing it, and doing it.”
The doing it part is, of course, the key challenge. The Premier declared his intentions shortly after assuming office by appointing well-known New Brunswick businessmen Francis McGuire and Gilles Lepage to co-chair a blue-ribbon self-sufficiency task force. The two spent months reviewing submissions from more than 100 diverse groups and interests before releasing their 91 recommendations.
Based on these, in late 2007, Premier Graham finally unveiled his much-anticipated action plan for New Brunswick’s economic and social progress over the next several years. In it, he called for “new thinking and new ideas” and the transformation of the province’s economy, work force, relationships, and government. He noted that New Brunswick must target new sectors that will bring it “increased employment and sustainable growth.”
The early results appear promising. Despite downturns in some traditional manufacturing and resource-based industries, the provincial economy continues to grow and become more diversified in knowledge-based sectors, such as aerospace and defense, bio-industries, and information and communications technology.
In 2007, labor market conditions improved and retail sales, manufacturing, and exports all grew faster than the national economy. The number of people employed in New Brunswick increased by 2.1 percent, and with more than 7,000 new jobs, the unemployment rate fell by nearly a percentage point. Most new employment originated in highly specialized service industries, such as healthcare administration, science and technology, and commercial research and development.
New Brunswick sweetens its position as an attractive destination for business through an assortment of financial incentives and tax credits, including loan guarantees and employee training, innovation, R&D, and technology-transfer programs. In fact, its R&D tax credits are among the most generous in Canada; they are 15 percent refundable.
Finally, the province’s approach to site selection support is intensively collaborative. Through partnerships with other branches of government and the private sector, it provides access to public investment capital for trade and technology development, import/export cost assistance, and “incentivized” industrial power rates.
Prince Edward Island: Into the Wild, Blue Yonder
With a population of barely 138,000 people, Prince Edward Island is justly famous for its long, wide beaches; pastoral farmland; and a plucky, fictional redhead by the name of Anne of Green Gables. But aerospace, bioscience, precision manufacturing, IT, and film? It’s not as surprising as it may seem, says the province’s 34-year-old Premier Robert Ghiz: “On May 28, 2007, our Liberal Team was asked by Prince Edward Islanders to take our Island in a new direction. Since forming government, we have kept our commitment to lead our province forward and continue to work for change that will benefit all Islanders.”
In fact, the Island’s aerospace industry has expanded its reach dramatically, as recorded international exports increased from about $38 million in 2006 to more than $90 million last year. Highly machined components from P.E.I. are being shipped to 29 different countries, with most of the export growth in this sector last year occurring outside the main U.S. market. The value of non-U.S.-bound shipments exploded from $6 million in 2006 to more than $48 million in 2007. Exports to the European Union grew from $1 million to $25 million, while shipments to Africa increased from $3 million to $12 million. And even despite the impact of the higher value of the Canadian dollar against its American counterpart, exports to the United States rose by 16 percent. The provincial government reports that the aerospace industry in P.E.I. maintains annual sales of about $275 million and employs 850 highly skilled workers.
Indeed, Prince Edward Island’s industrial profile has been changing in recent years. Traditional agricultural, fishing, forestry, and tourism are still important, but less dominant in the mix of new and emerging sectors. The Island’s research and development capacity received a boost in 2007 when the federal government’s Atlantic Innovation Fund awarded more than $14 million to such diverse firms as BioVectra Inc., Cogsdale Corp., DeltaWare Systems Inc., First Venture Technologies Corp., and Novartis Animal Health Canada. The funded projects include developing new drug compounds, researching new treatment options for cancer patients, and reducing virus outbreaks in aquaculture facilities.
Labor market trends reflect these developments. From 2006 to 2007, the province’s unemployment rate decreased by 1.3 percentage points. Meanwhile employment grew by four percentage points over 2006. Most new jobs were generated by the high-end service sector.
P.E.I. remains committed to attracting new and innovative industries to its shores. Financial, human resource, and tax-based incentives are among the most plentiful and generous in Canada. These include a 20-year tax rebate incentive program for companies that establish operations at Slemon Park — the province’s signature aerospace manufacturing park in the community of Summerside. The program allows for full annual rebates on corporate, sales, and property taxes.
Nova Scotia: A New Gateway to the Asia-Pacific Region
The world economy and modes of transportation are evolving in ways that present Nova Scotia (population: 915,000) with unprecedented opportunity. The Asian and Indian economies are booming and, increasingly, goods from these economic powerhouses are coming to North America in ships that are so large few ports can handle them. Nova Scotia is an exception. Its harbors can handle these vessels and, for India and most of Southeast Asia, Nova Scotia is the closest landfall on the North American mainland via the Suez Canal.
According to Nova Scotia Premier Rodney MacDonald, “Nova Scotia is in a strong position to capitalize on this emerging opportunity. Proximity to markets; deep, ice-free waters; and excellent rail, truck, marine, and air connections are just some of the reasons Nova Scotia is the best and obvious route as a gateway to North America and a pivotal link in the global transportation system.”
Nova Scotia is also one day closer to major northern European markets than any other mainland North American port. Its ice-free Port of Halifax is the only North American East Coast container port naturally deep enough to handle the ultra-large vessels that will soon be common in the world’s shipping fleets. Halifax can double its container traffic with the capacity it currently has available. Melford International Terminal Inc. plans to build a $325 million container facility in the Strait of Canso. What’s more, geographically the province is two hours closer by air to Europe than any other North American destination.
Still, Nova Scotia doesn’t bill its advantages strictly in terms of trade. More than 50 core life sciences firms involved in research, development, manufacturing, customization, assembly, and policy consulting are located there. Halifax-based Dalhousie University’s medical and health facilities attract more than $100 million a year in research dollars. In September 2002, Nova Scotia’s Brain Repair Centre performed the first tele-mentoring robotic neurosurgery at a distance of 400 kilometers. This long-distance procedure, between Halifax, Nova Scotia, and Saint John, New Brunswick, was a first in the world. Meanwhile, the Bedford Institute of Oceanography is the largest center for ocean research in Canada and the third largest of its kind in North America, employing approximately 650 scientists.
By 2009, Nova Scotia will be the most connected jurisdiction in North America with broadband Internet access available to all Nova Scotian homes and businesses. The province’s information and communications technology industry was the fastest growing in Canada in 2006, with a 5.4 percent growth rate. Additionally, Nova Scotia’s strong industry base in aerospace, defense, and related sectors has generated in excess of $600 billion in revenue annually. Finally, the offshore Sable Island area is the fourth-largest natural gas producing basin in North America, supplying markets within the province, in New Brunswick, and in New England.
Newfoundland and Labrador: Where Oil Is King
For Premier Danny Williams, it was news for the ages. In the summer of 2007, Newfoundland and Labrador’s provincial government had finally nailed down an agreement with industry partners to develop the offshore Hebron-Ben Nevis oil field — all but guaranteeing billions of dollars in new revenues for the province’s coffers and private enterprise. “Today marks a historic day in Newfoundland and Labrador, as we enter into a new era of offshore oil development with unprecedented benefits to the people of our province, including taking real and meaningful ownership of our resources, in the form of equity and a new super royalty regime,” he declared at the announcement.
Specifically, the Memorandum of Understanding with ExxonMobil Canada, Chevron Canada, Petro-Canada, and Norsk Hydro Canada, provided the province with a 4.9 percent equity position in the 25-year-long project (purchased for C$110 million). It also sweetened the long-term royalty arrangement, furnishing the government with 6.5 percent of net revenues (after industry cost recovery and return on initial investment) on a per barrel oil price of US$50 or more. Beyond this, the deal ladled substantial and lucrative industrial benefits across the province: the construction of a gravity-based structure (GBS); extensive fabrication (with the exception of the utilities-process module, and subject to the availability of sufficient skills and labor); front-end engineering and design (FEED), especially with respect to the GBS; detailed engineering; and project management. And, for the first time in modern memory, this province of 730,000 people is poised to post a near billion-dollar budgetary surplus as it struggles to figure out what do with all the petro-bucks sloshing around its public coffers.
In fact, the province has spent considerable effort over the past several years diversifying its economy away from traditional fisheries to cold ocean research, biotechnology, marine remote sensing, and, of course, oil and gas engineering, exploration, and precision manufacturing. Over the next two years, the provincial government will invest more than $6.5 million in, among other things, a new Newfoundland and Labrador Research and Development Council, which will develop and deliver a province-wide R&D strategy; ocean technology sector development, which will include the release of a strategy to increase the level of private-sector activity in ocean technology; and a new fiberoptic link for Labrador.
Economically, the province could not be in a better position to execute its grand plans. In 2007, real GDP increased by 7.9 percent, driven by exports of oil and minerals and consumer and government-sector spending; the unemployment rate fell by 1.2 percentage points to the lowest rate in 26 years; and personal income grew by 4.3 percent, while personal disposable income grew by 5 percent.