BUSINESS

THE RETURN OF THE WEST

AFTER NEARLY A DECADE OF SLOW GROWTH, WESTERN CANADA IS NOW POISED TO LEAD THE NATION

Combines bring in a bumper grain crop on the resurging Prairies,TOM FENNELL September 18 1989
BUSINESS

THE RETURN OF THE WEST

AFTER NEARLY A DECADE OF SLOW GROWTH, WESTERN CANADA IS NOW POISED TO LEAD THE NATION

Combines bring in a bumper grain crop on the resurging Prairies,TOM FENNELL September 18 1989

THE RETURN OF THE WEST

BUSINESS

AFTER NEARLY A DECADE OF SLOW GROWTH, WESTERN CANADA IS NOW POISED TO LEAD THE NATION

Combines bring in a bumper grain crop on the resurging Prairies

Robert Lalonde says that the twohour commutes between his home in Brampton, Ont., and his job in Toronto finally led to his resignation. Because he could not afford to live in Toronto, the 34-year-old design engineer left his job at ATI Technologies Inc. three months ago and moved to Calgary with his wife, Susan, 30, a commercial accounts manager with the Toronto-Dominion Bank. Said Lalonde: “We have a lot of faith in the West. Things are taking off here. I don’t regret the move a bit.” Lalonde’s optimism was amplified across Western Canada last week as a new economic

forecast predicted that the region’s economy was finally—after nearly eight years of painfully slow growth—poised to outperform Central Canada’s. And one particularly bullish observer of the West's prospects was B.C. Finance Minister Melville Couvelier. He declared: “We might well create a greater economic independence from Canada. And I think that every thinking British Columbian would like to see that occur.”

The downturn that gripped the West so tightly for almost a decade still had a positive side. Since the darkest days in 1981-1982, from which banks and government farm-credit agencies continue to hold more than 500,000 acres of land repossessed from western farmers, the four western provinces have launched economic diversification programs. Economists said that these were essential to help the region escape from a punishing series of boomand-bust economic cycles. As a result, the four provinces tried to draw investment to cushion the wild swings in resource and agricultural markets. They had some success and have attracted a wide range of new projects, from the world’s largest pulp-and-paper mill, in northern Alberta, to the development of highly specialized computer industries.

In the process, Alberta decreased its reliance on cattle production and petroleum. British Columbia moved away from fisheries and expanded its forestry exports to Asia. And Saskatchewan and Manitoba are expanding

their economies from agriculture into resource development and manufacturing. Said James Pattison, the multimillionaire owner of the Vancouver-based Jim Pattison Group: “Confidence has never been higher. I’m looking out my window and can see three construction cranes at work. Things are booming.”

New evidence of that economic stability flowed from the Conference Board of Canada’s latest forecast, which it released on Aug. 28. The board predicted that growth in the western provinces would exceed that in Ontario and Quebec in 1989-1990— for the first time since 1982. The board estimated that Saskatchewan’s gross domestic product will grow by 7.8 per cent in 1989, Manitoba’s by five per cent, British Columbia’s by 3.7 per cent and Alberta’s by 1.9 per cent. Said Clay Gilson, an ag2 o ricultural economist at the I University of Manitoba: I “There is a serious attempt , - (;0 diversify the western econ-

omy, and I think we are making gains.” Statistics Canada figures support the Conference Board’s findings and demonstrate vividly that manufacturing has expanded more in the West than in the other regions of Canada between 1961 and 1987. So, even though the West’s manufacturing sector is much smaller

than Central Canada’s, it has grown at a much faster rate. Alberta has shown the most robust growth, outperforming Ontario by about 40 per cent. The growth seems to be tied to a westward shift in population, according to an analysis by David Elton, president of the Calgary-based think-tank Canada West Foundation. And, despite the highly visible new manufacturing enterprises in machinery, electrical products and chemicals, diversification in the West has been helped by the expansion of the region’s service sector, which includes such areas as communications, recreation and health and medical services.

As the West’s economic recovery begins, declining automobile sales and housing starts are slowing Ontario’s economic performance after nearly eight years of steady growth. According to forecasts prepared last month by economists at the Toronto-Dominion Bank, Ontario’s economy will grow by 3.1 per cent in 1989 but by only 1.7 per cent in 1990. In the past two years, Ontario housing starts, a key economic indicator, averaged 100,000. But in 1989, the TD anticipates only 89,700 starts, declining to 78,400 in 1990 and 75,400 in 1991. And Ontario’s auto manufacturers, a linchpin sector of the Ontario economy, have been hurt by the 15-per-cent decline in passenger-car production in the first six months of 1989.

As well as diversifying away from the simple export of raw materials into manufacturing, new markets have emerged for traditional products. During the past five years, B.C. forestry manufacturers have successfully developed Asian markets for their wood products, which provide protection at times when the province’s prime U.S. market slumps. Said Robyn Allan, senior economist with BC Central Credit Union, one of the province’s leading

financial institutions: “The pulp-and-paper sector has undergone major expansion, and we actually have a manufacturing sector that is growing. The high-tech industry is growing.” Allan estimated that, by the end of 1989, B.C. companies will have invested an additional $15.4 billion in plant expansion, machinery, other equipment and. construction—a 21-per-

cent increase over 1988’s $12.8 billion. Said Allan: “That reflects the confidence business has in the economy of the province.”

Alberta, long dependent on the oil sector, is also experiencing a dramatic new investment in non-energy projects, particularly in the pulpand-paper sector. William Allcock, manager of the Edmonton Economic Development Authority, said that so far this year, investors have poured $32 billion into central and northern Alberta, much of that into the forestry sector. He added, “There isn’t another market in North America that has that kind of investment.” Eight pulp-and-paper mills are now operating or are in the planning stages in northern Alberta, including the world’s largest, the $ 1.3-billion Alberta-Pacific plant planned for the Athabasca River, which is awaiting environmental approval.

The effect of the massive investment is already being felt across the West. Edmonton’s Stanley Engineering Group, for one, has joined with a Vancouver engineering firm and has reserved 30,000 square feet of office space in Edmonton to begin design work on the AlbertaPacific pulp mill once environmental approval is granted. The partnership will create 150 design jobs alone, half of them for engineers. Said company president Ron Triffo: “It begins to develop a whole new centre of technological excellence here in Edmonton. Pretty soon, the world will be coming to us for state-of-the-art forestry harvesting systems.”

In fact, a large part of the West’s successful economic diversification stems from such ventures as Stanley Engineering’s, which create new technology for the development of traditional resources, especially oil and forest products. The results have been dramatic. In fact, one-seventh of the world’s petroleum industry’s seismic exploration work is now be-

ing processed in Calgary by scores of small firms. And in August, the Iranian National Oil Corp. announced that it would open a Calgary office to purchase advanced oilfield supplies and services that firms based in that city have developed. Said energy economist Campbell Watkins, president of Datametrics Ltd.: “The economy now is more self-sustaining.”

Structural changes have also occurred in Saskatchewan, making that province less dependent on the farm sector. In fact, employment in Saskatchewan has continued to rise in recent years despite a farm sector that has been, at different times, badly crippled by low prices, drought and heavy debt loads. Diversification has traditionally been the political message spread by successive Saskatchewan premiers, including the province’s current Progressive Conservative leader, Grant Devine. In fact, his strategy has been to legitimize the controversial privatization of a number of Saskatchewan Crown corporations by linking their sale directly to economic diversification plans. Devine told Maclean’s, “We’ve had depression-like conditions in agriculture in recent

years and, despite that, we’ve had good growth because of diversification.”

Privatization aside, University of Saskatchewan economist Isabel Anderson said that Saskatchewan is no longer dependent on farming to sustain growth and, in recent years, Saskatchewan’s economy was cushioned by development of its resource sector. Exploitation of uranium, potash and oil has broadened the base of the Saskatchewan economy. Said Anderson: “The resourcebased economy of Saskatchewan is now well-established. The province’s uranium for the next 20 years has been sold.”

Manitoba is traditionally best-equipped of all the western provinces to cope with economic downturns. Its economy is the most diversified in Western Canada, and it is shifting increasingly away from agriculture and food-related industries and into other forms of manufacturing. Since 1983, agricultural production has been relatively static in dollar terms, while manufacI turing has been growing: in I 1988, it rose by 5.9 per cent £ over the previous year and v totalled $6.24 billion. That was more than three times the value of agricultural production in the province.

According to André Downs, an economist with the Royal Bank of Canada, Manitoba will enjoy a 100-per-cent increase in 1989 in investments in manufacturing, to $350 million from $175 million, compared with a 50-percent increase in Alberta. Last spring, The Boeing Co. announced a $32-million expansion of its manufacturing arm in Manitoba, which will effectively quadruple the size of the plant. And a variety of steel-product companies are opening in the vicinity of Manitoba Rolling Mills in Selkirk. Said Ellis Shippam, senior development officer for the provincial department of industry, trade and tourism: “With the exception of the automotive industry, we can produce anything that can be manufactured in the East.” I As a result of the general optimism about Western Canada’s rebounding future, more families like the Lalondes may soon move west toward new opportunities.

TOM FENNELL

HAL QUINN

JOHN HOWSE

DALE EISLER