Atlantic Canada Drives Economy With Natural Resources, ICT, Aerospace
By offering incentives and investing in technology, the provinces of Nova Scotia, Prince Edward Island, New Brunswick, and Newfoundland and Labrador are strengthening traditional and new industries to build for the future.
Mark Crawford, Contributing Editor,  (June/July 10)

As the global economy begins to recover from the recession, Canada's Atlantic provinces - Nova Scotia, Prince Edward Island, New Brunswick, and Newfoundland and Labrador - appear to have weathered the recession better than other parts of the country.

"Atlantic Canada can definitely look forward to positive economic momentum in 2010," says Craig Wright, senior vice-president and chief economist for RBC Economics, the research arm of Royal Bank of Canada in Toronto.

Federal stimulus funds, an increase in global demand for Atlantic Canada exports, and a recovery in consumer and business confidence are driving economic growth. According to the Atlantic Provinces Economic Council (APEC), monthly retail spending in Atlantic Canada is currently 1.7 percent higher than it was prior to the recession. Public-sector construction investment is expected to increase by 15 percent as infrastructure stimulus projects get underway. And overall employment in Atlantic Canada remains only slightly below pre-recession levels.

Even with these positive indicators, exports still lag about 30 percent behind pre-recession levels. The higher value of the Canadian dollar is also dampening the improving American demand for Atlantic exports. The federal government, provincial governments, and the Atlantic Canada Opportunities Agency (ACOA) continue to develop the Atlantic Gateway Initiative, which will increase export trade with Europe, China, and India. The program will improve transportation infrastructure and utilize untapped shipping capacity to handle increased traffic volumes. Atlantic Canada's advantages include year-round, ice-free deepwater ports that can accommodate large post-Panamax ships, shorter transit times, and secure and reliable intermodal transportation networks to U.S. markets.

High-tech investment continues to be nurtured by APEC's Atlantic Innovation Fund (AIF). Launched in 2001, the AIF supports the development of a knowledge-based economy by enhancing new ideas, technologies, products, and markets. Nearly $650 million has been invested in more than $1.4 billion worth of projects. The AIF also supports innovative research partnerships that leverage the skills and resources of private-sector companies, universities, research institutions, and other organizations in Atlantic Canada. It recently committed $63 million to support high-tech projects in Atlantic Canada this year.

"We continue to encourage Atlantic Canadian entrepreneurs and researchers to undertake world-class, leading-edge research that will help drive the region's long-term economic growth and development," says Keith Ashfield, minister of ACOA and the Atlantic Gateway. "The Atlantic Innovation Fund has been instrumental in helping Atlantic Canadian businesses and research institutions collaborate on ideas and commercialize new products and services."

Key Sectors
Traditional, natural resources-based industries anchor Atlantic Canada's economy. Most of the region's mining and offshore oil and gas production is located in Newfoundland and Labrador. Increased production from existing and new fields will continue for at least another decade. Atlantic Canada is also recognized globally for its expertise in ocean science, cold-water engineering, and geophysical surveying. Leading universities and research institutions are conducting advanced research and development into next-generation wind, biomass, geothermal, tidal, solar, and hydro energy generation.

Building on these strengths, Atlantic Canada continues to diversify into knowledge-based, high-growth industries such as bioscience, information and communications technology (ICT), aerospace, and defense. Emerging bioscience clusters are conducting world-class research in marine science, agri-food, and aquaculture. Both federal and provincial governments are providing industry incentives and assisting in the development of new bioscience research platforms.

"Atlantic Canada's information and communication technologies industry is an increasingly important part of the region's economy," says David Chaundy, senior economist at APEC. The region's ICT industry grew nearly twice as fast as the overall economy between 2003 and 2008, boosting its share of the region's GDP from 2.5 percent in 1997 to 3.7 percent in 2008, and contributing approximately $2.65 billion to Atlantic Canada's GDP in 2008. More than 2,000 ICT firms operate in the four provinces, with prosperous clusters in Atlantic Canada's six largest cities, including New Brunswick's Fredericton and Moncton, which the New York City-based think tank Intelligent Community Forum named as two of the most "intelligent" cities in the world last year.

More than 200 aerospace, defense, space, marine, and security companies comprise Atlantic Canada's growing aerospace and defense industry and employ about 10,000 workers. Aerospace-related exports nearly doubled between 2001 and 2008 to $1 billion annually. Advanced fields of research include cyber-security, intelligence, surveillance, reconnaissance, remotely piloted vehicles, and data fusion. The Atlantic provinces support aerospace and defense as a growth sector through industry incentives, specialized training, and creative research partnerships.

Nova Scotia
Nova Scotia's economic growth is forecast to recover from a 0.8 percent decline in 2009 to about 2 percent in 2010, driven by higher natural gas production and $800 million in infrastructure stimulus spending by the government. Increased U.S. demand and rising commodity prices should boost provincial exports, especially forest products and energy.

"The manufacturing sector in Nova Scotia was hard hit over the past year, but job losses have been limited due to growth in the services sector and public administration as well as the effect of significant stimulus investment," says Wright of RBC Economics. "Looking ahead, increased natural resource production and stronger international demand for these commodities should offset weaker growth in capital spending. In 2011 Nova Scotia's economy should grow by 2.9 percent."

Prince Edward Island
This island economy posted a positive, real GDP increase of 0.4 percent in 2009, with growth forecasts of 2.1 percent in 2011 and 3.2 percent in 2011. To strengthen its economy, Prince Edward Island continues to invest in high-tech sectors, especially aerospace manufacturing. Increased exports from aerospace, as well as machinery and other manufactured equipment, have limited the negative economic impact from downturns in other industries.

The province's technology sector, along with the provincial government's $510 million stimulus plan, has increased commercial construction by nearly 30 percent. Prince Edward Island is also a key player in the Atlantic Gateway Initiative, which will invest $1 billion to develop wind energy through 2013, reaching a 500 megawatt capacity.

New Brunswick
New Brunswick's export-dependent economy suffered during the recession. But the province - which is home to big manufacturers such as Agfa, Jiffy Products, and McCain - hasn't let sluggish recovery deter its growth. McCain plans to expand into Asian markets, and Ocean Spray is building a $90 million cranberry mill in Rogersville. The mining, energy production, and transportation equipment sectors are also prepping for significant investments.

New Brunswick's economy will grow by 2.4 percent in 2010 and 3.3 percent in 2011, according to RBC Economics, driven by $896 million in infrastructure spending and personal tax cuts totaling $258 million. New Brunswick is also the first jurisdiction in Canada and North America to connect 100 percent of its population to high-speed broadband Internet.

Computer Generated Solutions (CGS), a global ICT firm, recently announced its expansion in Saint John, where it will develop Virtual Events 365, a software product that enables companies to design and deliver trade shows and learning events over the Internet. The provincial government kicked in $1.2 million in payroll rebates to help CGS hire 75 new employees.

"As a global information technology services firm, we are constantly on the lookout for top talent," says CGS CEO Phil Friedman. "We have found the talent levels in New Brunswick to be an extraordinary asset. The overwhelming support of the community has motivated us to expand our role in this province."

Newfoundland and Labrador
RBC Economics expects Newfoundland and Labrador to lead Canada in economic growth in 2010, with an impressive projected GDP rate of 4.1 percent. "Aggressive infrastructure spending, along with strong private capital investment and improvement in the mining, oil, and gas extraction and utilities sectors, should lead to a sharp rebound in growth in the provincial economy this year," Wright says.

About $14 million in AIF funds have been designated to support research in alternative energy technology, next-generation satellite imaging, ground radar technology, and geoscientific methods for predicting subsurface ground movement. Dynamic Air Shelters, which manufactures multipurpose inflatable structures such as first-response emergency shelters, relocated its operations from Calgary to Grand Bank, Newfoundland and Labrador in 2006. In 2009 it doubled the size of its original 6,000-square-foot building. It received funding in March 2010 to build a 12,000-square-foot facility and acquire new equipment. Dynamic Air Shelters is currently working with the Canadian military to develop bullet and blast-resistant inflatable shelters to protect soldiers in the field. The Canadian and U.S. militaries are both testing its prototype.

"Both the federal and provincial governments have played a significant role in the growth of our company through equity financing and no-interest loans," says Kay Riggs, vice president of operations for Dynamic Air Shelters. "Organizations such as the Schooner Regional Development Corporation and the Burin Peninsula Chamber of Commerce have also provided networking/relationship-building opportunities, connections to local suppliers, and market-development opportunities." Riggs says sales will increase by about 20 percent in 2010, based on projections provided by the company's major distributors.

"We have invested significantly in a skills development program for our current employees and are completing a number of R&D projects to improve the product and move into new markets," she says. "It is the skill and dedication of our work force that ensure our future growth and that Dynamic remains rooted in a rural Newfoundland Labrador community."

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