Made in Alberta: Latest Klein economic plan – New strategy calls for less reliance on raw energy, forestry exports

The Alberta government will embark on an aggressive strategy to move the province’s economy away from its reliance on natural resources in what is being hailed as an evolution beyond the hallmark Klein revolution era of Tory politics.

Tom Olsen
The Edmonton Journal

The province aims to identify barriers to industrial development in the province, including examining the tax structure and possibly introducing tax credits for business, as used in some other regions.

A committee with representatives from 10 government departments will initially focus on the so-called big four provincial economic engines — oil and gas, forestry, agriculture and tour-ism.

The central goal will be creating an environment where secondary manufacturing can flourish, thus reducing the amount of raw product that’s shipped from the province.

"This signals the government looking forward a minimum of 20 to 50 years," said Economic Development Minister Mark Norris.

"The Alberta Advantage that was put in place 10 years ago needs updating, and we feel this is one of the ways to do it."

The plan is relatively simple. Companies associated with the province’s resource base — both local and multinationals — will be asked if there are regulatory or provincial taxation barriers that keep them from engaging in secondary manufacturing.

"Why ship raw timber, for example, when we could ship furniture? The first step is identifying with industry what the barriers are," said Norris.

Once a problem is identified, it will be eliminated. That would potentially be followed by additional commitments to research funds, available to entrepreneurs on a dollar-for-dollar matching basis.

The existing template is the Agri-Food program, which offers technological, financial and practical assistance for the development of secondary agriculture processing, such as production of beef and grain-based snack foods.

Norris cited the relatively slow pace of diamond exploration in northern Alberta, despite some promising discoveries, as an example of how government policy change could help.

Some provinces, including Quebec, offer tax credits of up to 35 cents on the dollar for exploration. Alberta has no such program.

"In this case, our taxation policy is driving them elsewhere," said Norris.

His deputy minister, Barry Mehr, will lead the committee, with representatives from departments including learning, revenue, finance, sustainable resource development, aboriginal affairs and energy.

The strategy is seen as an acknowledgement by senior cabinet ministers and Premier Ralph Klein that the debt-reduction focus of the past decade must change into a more fully rounded and forward-looking economic program to keep Alberta prosperous as natural resources dwindle.

The rationale posits that Alberta can continue as a manufacturing powerhouse, regardless of the availability of provincially produced raw materials. "We can get the commodity from anywhere," said Norris.

Mike Percy, dean of University of Alberta’s school of business, said the government’s diversification plan has a better chance of success than previous efforts because it intends to be market-driven and to build on natural resource strengths that exist.

Tory administrations from the 1970s to the early 1990s tried their hands at diversification, but took risks by using public dollars to prop up existing businesses or to help set up new ones. The province ended up with a long string of financial misadventures involving nearly $2 billion worth of government loans and loan guarantees to businesses.

For instance, the province took a $209-million hit by the time Edmonton’s Gainers meat-packing plant went under, and lost $164 million in MagCan, a magnesium plant.

"This is much more looking for where the market opportunities are for further processing," said Ken Nicol, head of the Alberta Liberals.

"The more you move up the value-added chain, the higher the revenue to government as the resource owner, generally the jobs are higher paid and generally the prices are more stable."

Nicol said the Tories should develop more programs similar to the agri-food initiative.

"They have got to let the economy drive itself," said Nicol. "The best they can do is support a very strong research and commercialization program."

The Tories must steer clear of the past policies which saw the government partner with private enterprises, he said. "The government should not be picking winners and losers. They should be providing the background and letting the private sector pick it up."

[email protected]

© Copyright 2003 Edmonton Journal

http://www.canada.com/edmonton/edmontonjournal/story.asp?id=D121AB5A-B8A7-4259-A78B-7CB1977B063D