Northern Economist 2.0

Showing posts with label policies. Show all posts
Showing posts with label policies. Show all posts

Saturday, 3 November 2018

So What Is the New Plan for Northern Ontario's economy?


As the Ford government forges ahead, we should soon expect to see evidence of what its plans for boosting the economy of northern Ontario will be.   Given the change of government, the previous Northern Growth Plan is gone and will not be mourned given that evidence of its positive impact was hard to come by.  The Northern Growth Plan was essentially a form of palliative policy care given that despite the lack of progress on the economic front, there were nevertheless numerous press releases and announcements to the effect that many things were happening in the north -usually announcements of government funding - and we should feel good.  As a strategy, it has even been embraced by the federal government.

Ontario is now apparently open for business and while that can certainly be beneficial for northern Ontario, it is necessary for the government to demonstrate what that actually means for the North.  During his recent visit to northern Ontario, the Premier reiterated his “open for business mantra” and stated a commitment to sectors like steel, mineral exploration and forestry.  His visits in late October to the steel facilities in the Sault, the opening of Harte Gold’s new Sugar Zone mine near White River and Thunder Bay for Resolute Forest Products investment announcement provided excellent photo opportunities for economic success but these were projects that have been in the works for some time.

It is now time for the Premier to demonstrate his commitment to growing the northern Ontario economy.  As to what the new approach will be, one can start by an examination of the election platform that brought the provincial Ford conservatives to office.  The northern platform was a five-point plan that involved:

  • Developing Northern Resources, including the Ring of Fire.
  • Moving forward with resource revenue sharing from mining, forestry and aggregates to help Northern towns and Indigenous communities share in resource development
  • Ensuring hunting and fishing revenues go toward their stated purpose of conservation
  • Cutting the aviation fuel tax for the North to reduce the cost of living in the North and,
  • Bringing back passenger rail service to the North (which I take to mean the Ontario Northland and probably not full service across the north shore).
In terms of proposed implementation, the election platform of the victorious Conservatives said that a provincial conservative government under Doug Ford would:

1.     Build the roads to the Ring of Fire.

2.     Establish resource revenue sharing from mining, forestry and aggregates to help Northern and Indigenous communities share in the benefits of resource development by having the province take a portion of provincial revenues collected from aggregate licenses, stumpage fees and the mining tax and direct it to the local, host Northern and Indigenous communities. This was estimated at $20-$30 million in annual revenue.

3.     Ensure all hunting and fishing license fees are spent on wildlife conservation.

4.     Reverse the 148 percent increase to the aviation fuel tax for all Northern airports returning the aviation fuel tax to its original 2.7 cents per litre

5.     Bring back full passenger rail service to the North by first completing an environmental assessment of what equipment needs to be purchased and what upgrades need to be made to restore the service and then providing $45 million annually for operating costs.

Despite the flurry of activity with respect to announcements about promises made and kept, it remains that these five points and their associated implementation specifics have yet to be addressed.    How they will be implemented given the fiscal constraints the province faces will be an important issue.

In terms of fostering the northern Ontario economy, to these five points, I would add the freeing up of more Crown Land for cottage and camp development to provide the inputs to grow and develop a tourism service sector in the north that can be serviced out of its existing towns and cities. I would also urge extension of the highway twinning projects already currently underway to grow needed transport infrastructure in the north and hopefully improve upon the previous government’s anticipated completion date.

When these specifics will start to take firmer shape may be indicated in the November 15th Ontario Economic Outlook and Fiscal Statement.  Until then, we wait.  Hopefully, the Ford government will repudiate the adage that while provincial governments go and come, the problems of the northern Ontario economy abide. 
 
 

Monday, 9 July 2018

Advanced Industries: A Northern Ontario Economic Challenge


A recently released report jointly released by the Brookings Institute and the Martin Prosperity Institute lays out Canada’s path to future prosperity via advanced industries and the challenges Canada faces in this economic sector.  The report is titled Canada’s Advanced Industries: A Path to Prosperity and is authored by Mark Muro, Joseph Parilla, Gregory M. Spencer, Deiter F. Kogler and David Rigby. These industries are not just in manufacturing but span a number of diverse industries with the commonality being the application of advanced technology and innovation.  Brookings defines advanced industries as: “industries as diverse as auto and aerospace production, oil and gas extraction, and information technology—are the high-value innovation and technology application industries that inordinately drive regional and national prosperity. Such industries matter because they generate disproportionate shares of any nation’s output, exports, and research and development.”

The report argues that Canada’s advanced industries are not realizing their full potential and that these industries need to be targeted to build a dynamic advanced economy for future growth.  About 11 percent of Canada’s employment – about 1.9 million jobs – is currently employed in these higher wage advanced industries and they generate 17 percent of GDP, 61 percent of exports and 78 percent of research and development.  Services account for about half of the Canadian advanced industry worker base followed by manufacturing at about 36 percent.  What is more interesting is the variation in scale, intensity and diversity of this sector across provinces and Canadian CMAs. 

Ontario, Quebec, Alberta and British Columbia together account for 91 percent of advanced industry employment which is just a bit more than their total employment share which is about 87 percent.  Not surprisingly, the CMAs with the most advanced industry jobs are Toronto, Montreal, Calgary and Vancouver.  However, productivity growth in this sector has been lagging relative to the United states. What is particularly disconcerting from the point of view of northern Ontario economic development however is the fact that every Canadian CMA added advanced industry employment between 1996 and 2015 – the exceptions being St. Catharine’s-Niagara, Greater Sudbury and Thunder Bay.  Thunder Bay also ranks low when it comes to the regional value added generated by advanced industries (See figure taken from page 22 of report) whereas Sudbury does better because of the intensity of its mining sector. Moreover, Greater Sudbury and Thunder Bay are also at the bottom of the CMA rankings when the number of advanced industry specializations is compared in terms of local concentrations of activity.

 

Boosting advanced manufacturing in Canada according to this report requires a strategy of “four C’s” – capital, competition, connectivity and complexity.  Capital is of course the most fundamental – that is, investment in machinery and equipment but also knowledge capital such as information and technology systems.  The weakness in business investment has been a long-known factor in Canada.  As for competitiveness, Canadian industries have traditionally had less exposure to intense competition and this may be limiting the capacity of its advanced industries to innovate.  Fixing this requires greater market competition and indeed deregulation and easing foreign ownership restrictions.  Connectivity involves Canadian firms participating more in global value and production chains and networks.  Finally, complexity requires firms to master the technological complexity and specialization of the modern economy and this is often measured by patent activity which in Canadian CMAs is generally below American ones.  Policies for building connectivity and complexity in the end also involve the unleashing of greater competitive forces within the Canadian economy in order to achieve the market size or scale within which advanced industrial output can grow.

Thus, a major obstacle for Canada when it comes to growing its advanced industrial sector is its highly regional nature which in the end results in barriers to internal trade, less competition and small market sizes that militate against the scale needed to grow output.  In the case of northern Ontario, even with the growth in local entrepreneurship which has been quite noticeable in its larger cities such as Thunder Bay and Sudbury, it remains that without growth in market size, new innovative ideas will be like so much seed fallen in rock if the companies cannot grow their output.  In the end, any regional economic policy must focus on increasing the scale of output by boosting market size either via exports or via immigration and local population growth.