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The Changing Face of Atlantic Canada

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.
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