______Why Change?
Saskatchewan has epitomized great promise and potential since its creation through an Act of Parliament 100 years ago. It is the country’s second largest producer of oil and the third largest producer of natural gas. Saskatchewan is home to a third of the world’s supply of potash, a third of the world’s supply of uranium and the most arable acres in the Dominion. We are well positioned for success in the new knowledge-based economy thanks to Canada’s only synchrotron and leading-edge research parks at the province’s two universities.
Saskatchewan’s wealth in human and natural resources is truly staggering. Given our potential, Saskatchewan should have finished the 20th century as one of Canada’s economic leaders – ready to compete in the emerging global economy. Instead, our province entered this century after having spent most of the last century as a ‘have-not’ province.
The statistics are startling. Between 1981 and 2000, total employment in Saskatchewan grew by only 12.5% compared to 34% in Alberta and 32% across Canada. Only Newfoundland posted a worse job creation record than Saskatchewan during these two decades. Over the same period, Saskatchewan’s economy grew by 60%. While that was more than Manitoba, it was less than the national average and half the GDP growth experienced by Alberta.
The lack of meaningful growth in personal disposable income and per capita income is another indication of how far Saskatchewan has fallen behind. Between 1981 and 2000, real disposable income in Saskatchewan increased by only 7.6% -- well behind the rest of Canada (36.8%), Alberta (34.6%) and Manitoba (18.8%).1 In 1974, Saskatchewan per capita personal income was 102% of the Canadian average. By 2002, Saskatchewan’s per capita personal income had declined to just 83% of the Canadian average -- a 19% reduction in less than three decades. 2
But, perhaps the most disturbing trend of all is the continuing exodus of young people. In 1991, 30.2% of the Saskatchewan population was in the 20-39 age group. By 2001, only 25.9% of the Saskatchewan population fell into that age group.3 If this trend continues, only one in five Saskatchewan residents will be in the 20-39 age group by the year 2014.
How can both of these descriptions, the one of promise and the current unflattering reality, possibly describe the same province?
Simply, because the promise of Saskatchewan has not yet been realized.
If we do nothing and the status quo becomes our comfort zone, there is every reason to believe Saskatchewan will continue to suffer an exodus of young people, skilled workers and capital. If our economic reality remains unchanged, our future will entail fewer taxpayers accepting more responsibility for the provision of health care, education and other services; a future which could only mean higher taxes or fewer services.
It’s time to change.
1 Fraser Institute, Saskatchewan Prosperity: Taking the Next Step (Vancouver: Fraser Institute, 2002), pp.5-6. 2 Government of Saskatchewan, Saskatchewan Bureau of Statistics “Economic Review 2003” (Dec. 2003) pp. 36. 3 Ibid, pp. 11.
The Promise of Saskatchewan — September 2004 1 ______A New Vision for Saskatchewan’s Economy
If you only have a hammer, you tend to see every problem as a nail. - Abraham Maslow
Why has Saskatchewan failed to capitalize on its tremendous promise?
The answer lies in understanding past economic policies and the extent to which government has played such a major role in our economy. Saskatchewan has enjoyed the benefits of public investment in those areas where the private sector was unable or uninterested in providing effective and affordable services, such as utilities like power, energy, telephones and car insurance.
There has, however, been significant government intervention in the economy well beyond infrastructure and utilities.
Saskatchewan’s challenges over the past sixty years must have all looked like nails to policy makers, because our toolbox of economic development has rarely contained anything but the hammer of government.
Perhaps we have become comfortable with the notion that geographically large and sparsely populated jurisdictions must rely on the public sector and government involvement at every turn for their economic development strategies.
This would appear to be the case in Saskatchewan, where governments of three different political stripes have allowed public sector solutions to eclipse the potential of private investment, innovation and entrepreneurship as sustainable economic development options for growth. No doubt the temptation, the tradition and the immediate political gratification of public sector intervention and politically motivated public investment has been strong. Fiscal policy, program spending, mega-project debt financing, mega-project equity, loans of last resort, targeted investment, joint ventures, Crown corporations, infrastructure investment, strategic investment, not-so-strategic investment and grants to business have been employed by governments for sixty years with unacceptable results.
Even though there has been considerable political debate on the merits of these strategies – the 1957 Mossbank debate between Liberal Leader Ross Thatcher and then Premier Tommy Douglas stands as a notable example – nobody has fundamentally deviated from this approach.
Political history aside, it is time to look at the question more objectively and to take stock of the consequences of the strategic choices that successive Saskatchewan governments have made over the past sixty years. Our population statistics compared to Alberta, Manitoba, or even the national average make the case quite adequately that economic development approaches which rely on government intervention have not helped to realize the great potential of a
The Promise of Saskatchewan — September 2004 2 ______province so naturally endowed.4 A brief overview of the economic development strategies pursued by successive Saskatchewan governments is instructive if we are to find new ways of solving old problems.
Saskatchewan’s Economic Development Strategy: 1975 to 2000
In recent years, there have been some significant academic examinations of public policy approaches to economic development. Professor Peter Phillips at the University of Saskatchewan reviewed the economic policies utilized by provincial governments in our province from 1975 to 2000, and has highlighted four types of economic public policies:5
1) Macroeconomic stabilization (fiscal and monetary policies designed to expand or stabilize the size of the economy).
2) Export Promotion (targeted trade policies designed to encourage a certain mixture of production or exports).
3) Investment policy (tax, subsidy, and policy measures designed to encourage or support specific projects with targeted firms or sectors).
4) Innovation policy (policies intended to establish a climate in which entrepreneurial activity can flourish).
Macroeconomic Stabilization
Macroeconomic stabilization policies such as home improvement programs, direct government investment, or tax cuts are tools utilized by governments to control the economy. The problem with such tools, according to the Economic Council of Canada as quoted by Phillips, is that “wide fluctuations in the macroeconomy impede capital accumulation and lead to a suboptimal use of existing capital which together reduce the rate of growth of productivity and income”.6
Aside from the question of whether any government can effectively thwart the fiscal realities over the long-term, this type of public policy is also very expensive. For those governments that try it in earnest, Professor Phillips highlights the necessity of pushing hard in the other direction when the fiscal reality of the policies set in and the bills are received. With a low multiplier effect in Saskatchewan, the potential for these policies or other direct public interventions is low, compounding the expensive fiscal implications of this approach.7
4 Saskatchewan’s total population in 1931was 921,785. By 2004, that number had increased by only 73,000 people, an astoundingly low figure in comparison to Alberta which had 190,000 fewer people than Saskatchewan in 1931, but whose population has grown by almost 2.5 million since then. Statistics Canada, Historical Statistics of Canada, Ottawa: Canada Communications Group, Cat. No.11-516 XIE. Also see Statistics Canada, “Demographic Statistics,” January 1, 2004. Preliminary estimates, The Daily, March 22, 2004, http://www.statcan.ca/Daily/English/040322/d040322e.htm, June 3, 2004. 5 Peter Phillips, “Whither Saskatchewan: A Look at Economic Policies 1975-2000,” Canadian Business Economics (November 1998), pp. 36-37. 6Economic Council of Canada, Pulling Together: Productivity, Innovation and Trade, 1992. Quoted in Phillips. 7 Phillips, pp. 40-41.
The Promise of Saskatchewan — September 2004 3 ______
Export Enhancement Policies
Controlling the trade of goods and services with other provinces or nations is a second way in which governments have intervened in the economy. Export policies such as local preference procurement (Buy Saskatchewan), and Crown corporation-levered industrial development – such as Phillips Cable and the Northern Telecom plant in Saskatoon – illustrate this approach. However, Phillips notes, “this policy has not been shown to produce any sustainable benefits in employment or per capita incomes.” 8 These policies allow certain sectors to flourish where they lack a competitive advantage while crowding out other private sector investments and leaving behind uncompetitive enterprises.
Investment Policies
According to Phillips, most of the province’s recent efforts have been focused on attracting investment or making direct government investments in the economy. Examples of these policies include direct investment in forestry projects, heavy oil upgraders, and government grants tied to job creation. The infamous Gigatext venture in the 1980s and the government’s $28 million loss on SPUDCO in the 1990s are just two examples of such failed ventures.
Phillips argues, “based on the goals of employment per capita income growth, this policy was not a major success. Despite the significant amounts of capital invested, few direct jobs were created.”9 His colleague, and my former statistics professor, Eric C. Howe, also waded in on the debate of the effectiveness of direct investments, and more specifically, mega-projects. In a 1993 Saskatoon Star Phoenix article, Professor Howe bluntly stated, “[m]y career which included economic impact analysis for the Blakeney, Devine, and Romanow governments, has led to an inescapable conclusion. Government funded mega-projects are making you poorer.”10
Howe concluded the actual impact of mega-projects on provincial GDP has been demonstrably less than the public cost of the project.11 It should be noted the example given by Professor Howe was the upgraders. Infrastructure mega-projects that produce public goods such as electricity may require unique analysis.
It is important in such cases, however, to distinguish between government investment in infrastructure and government pump-priming. Whether it consists of providing roads or electricity, the former is a necessary pre-condition for economic development. Investment in infrastructure provides a legitimate public good which is widely shared or accessible by the public. In contrast, pump-priming confers benefits narrowly upon fellow investors while exposing taxpayers to financial risk.
Innovation Policies
The final set of policies discussed by Phillips concern innovation. Here, Phillips highlights how governments have tried to facilitate growth of the knowledge-based or “learning by-doing productivity growth” industry.
8 Philips, p. 43. 9 Phillips, p. 44. 10 Eric Howe, “Government-funded mega-projects make public poorer,” Saskatoon Star Phoenix, September 16, 1993, p.A5. 11 ibid.
The Promise of Saskatchewan — September 2004 4 ______
The establishment of the Canadian Light Source, the ongoing activity at the research parks found in Saskatchewan’s post-secondary institutions, the establishment of research centres of excellence in oil/gas (Regina), forestry (Prince Albert) and the life sciences at Innovation Place (Saskatoon) offer a foundation upon which to build. While there is a clear and important role to be played by government in this seminally important economic development area, Phillips observes that in areas other than the tourism sector, “governments have been unwilling to let industry lead and the industries have not yet been organized enough to lead themselves.”12
Economic development clusters are also part of the innovation framework. This strategy was utilized in successful economic development zones long before there was a word for it. Both governments and political leaders have called for a greater focus on cluster-based development. They are right to do so. However, private industry must lead the process. The lack of cluster-based development in Saskatchewan is partially due to the government’s unwillingness to put the necessary economic development processes in place.
All four policy types referred to by Phillips have a role to play in a dynamic new vision for our economy. For example, all four components should be focused on the reduction of barriers to growth. Whatever its components, however, that new vision must be led by the private and non-governmental sectors.
Government-Led Economic Development : An Ineffective Approach
Of the four types of economic policies outlined by Phillips, Saskatchewan has relied almost exclusively on macroeconomic manipulation and direct public investment. Other policy tools have been utilized sparingly.
In discussing the megaproject investments of the 1980s and government ventures like SPUDCO in the 1990s, former Saskatchewan Finance Minister Janice MacKinnon noted the inherent problem with having government directly invest in the economy:
At the heart of the problem was the source of the decision making. Direct investment decisions are made at the cabinet table, and as soon as a decision reaches the cabinet table, politics is involved. When politics is involved, immediate benefits are more likely to overshadow concerns about long-term costs…Governments, I firmly believe, should not be risking taxpayers’ dollars by picking economic winners and losers, especially since the record shows that governments of all stripes pick their share of losers.13
University of Saskatchewan Professor Brett Fairbairn offers another compelling reason to avoid direct investments: governments simply do not have the power to influence the economy the way they once did.
Drawing upon the research of Howe and Phillips, Fairbairn observes the capacity of the provincial government to determine economic growth through direct means such as spending or tax cuts is limited. His observation that the Saskatchewan economy can have a billion
12 Phillips, p.47. 13 Janice MacKinnon, Minding the Public Purse (Montreal: McGill-Queen’s University Press, 2003), pp.52-53.
The Promise of Saskatchewan — September 2004 5 ______government dollars injected (1980s) or taken out (1990s) with so little apparent overall effect should give us pause for thought about the nature and integrity of our economy.14
While the limited nature of government influence in a global economy is a point well taken, Fairbairn’s reference to the efficacy of tax cuts should be viewed in the context of two provisos. First, the targeted nature of tax cuts means their overall effect on the economy is dependent upon the barriers which are removed. For example, removing or lowering the corporate capital tax – a tax that penalizes private sector investment – may be a more effective way to stimulate the economy than removing the tax on gasoline. The second proviso concerns the sustainability of the tax cuts. If tax cuts have the effect of contributing to large deficits, then clearly they defeat their own economic development purpose in the medium and longer terms. Still, Fairbairn’s observations are stark and must not be ignored.
If Not the Hammer of Government, Then What?
It is clear that Saskatchewan’s economic strategy over the past 60 years has failed to improve the integrity of our economy, grow our population, attract investment or adequately capture and commercialize intellectual capital and innovation.
It’s time to try something new.
As Fairbairn accurately notes, “given what are truly spectacular failures of traditional kinds of policy, Saskatchewan governments in the twenty-first century will have to continue to reconceptualize their role with respect to economic development.”15
We need to acknowledge this challenge and have the courage to embrace new economic strategies and innovative thinking if we are to achieve long-term economic growth. We must also realize that there are many reasons for hope. Our rich natural resource base, the quality of our people and our world-class post-secondary assets provide the foundation for an economic future that could be much more successful than the past would indicate.
Other jurisdictions around the world have undertaken the same introspective analysis of what they have done in the past to achieve growth and what they must do in the future. The Netherlands, Ireland and Sweden present such cases, and there are common denominators in each. The Dutch Miracle and the Celtic Tiger illustrate how effective analysis and a cooperative approach can achieve change. In these examples, organized labour, business, and government came together to create fundamental, lasting, and positive change in their economies.
The Irish example is particularly compelling in the context of this discussion. Ireland’s economy was plagued by outmigration of the country’s best and brightest. Ireland experienced significant barriers to growth, including its tax regime and infrastructure challenges. A lack of public policy focus on the importance of post-secondary education, research, and innovation also hampered Ireland’s economic growth. Yet the nation managed to overcome these challenges. We can, and must, learn from the successful experience of other jurisdictions once plagued by lagging economies.
14 Brett Fairbairn, ‘Economic Development and the New Role of Government,” in Politics in Saskatchewan (Regina: Canadian Plains Research Centre , 2001), p.300. 15 Fairbairn, p.301.
The Promise of Saskatchewan — September 2004 6 ______
Facilitating Entrepreneurial Growth
If we are going to grow the Saskatchewan economy and avoid the public policy mistakes of the past, we must focus on stimulating entrepreneurial activity in our province. Here again, it is instructive to look at how other jurisdictions have tackled this problem.
Professor Gregg Lichtenstein of the Collaborative Strategies Group has spent 20 years working with over a thousand entrepreneurs in the United States. After conducting research and working with partners in dozens of different regional and community settings throughout the world, Lichtenstein concluded that a successful entrepreneurial community must: • Take a systematic approach to enterprise and community development efforts by creating a community-wide entrepreneurial development system. • Customize the enterprise development system to the specific needs of a community. • Focus on developing a supply or pipeline of highly skilled entrepreneurs capable of building successful companies, and also institutionalize these efforts so that the community can sustain a constant flow of entrepreneurial activity. • Develop new roles, skills and tools for managing and implementing an enterprise development system. • Operate this system as a ‘transformation business’ – one that seeks to transform entrepreneurs, their companies, and ultimately, the community’s economy. 16
Taken together and applied to Saskatchewan, these strategies suggest a new approach to economic development in our province.
Instead of pursuing economic development through macroeconomic strategies and direct government investment as we have done in the past, a new approach should focus on building an enterprise development system. As Fairbairn notes, this sounds simple, but in fact “entails a difficult shift in thinking away from planning and toward process facilitation.”17
Such a system would focus on the development of an enterprise facilitation system built upon partnerships throughout the province and would be evaluated, in the words of Lichtenstein, “on the basis of efficiency, effectiveness, equitability, and sustainability of its performance, as well as the scale of impact on the community’s economy.” 18
Surely a province with the rich human and natural resources of Saskatchewan has much to achieve and much reason for hope. But, we need sound public economic development policy fortified by the courage of the government to recognize that what we have been doing for the past 60 years has not worked. The same measure of courage is required for a government to implement a plan designed to survive the often volatile political cycle of Saskatchewan and actually outlive the government that created it.
That must be our starting point – the point at which this vision for a bright economic future begins.
16 Gregg Lichtenstein, “Building Entrepreneurial Communities.” Draft Paper, 2004, p.14. http://www.ruraleship.org/content/pdf/buildingecommunities.pdf, June 4, 2004. 17 Fairbairn, p. 301. 18 Lichtenstein, p.17.
The Promise of Saskatchewan — September 2004 7 ______Enterprise Saskatchewan A New Role for Government
Those who offer business counseling as a function of economic development have a mantra for their clients: Develop a business plan driven by specific goals and principles. Continually revisit the goals. Re-evaluate the principles. Measure progress. Repeat.
I believe our vision for an enterprising and expanding economy must be built on similar fundamental goals and principles.
At its core, our economic vision for the province must recognize that the private, cooperative and non-government sectors must be the engines for economic growth if it is to be sustainable, meaningful and avoid past failures.
To ensure this vision harnesses the tremendous human, natural, and capital resources available to our province, we will target our efforts in at least eleven key economic sectors:
• Energy Production • Life Sciences, Synchrotron Science, and • Agriculture Information Technology • Tourism • Environment • Forestry • Construction • Advanced Education, Research • Trucking and Transportation and Development • Financial Services • Arts & Culture
While these target sectors may change, they will not change at the whim of government in the Enterprise Saskatchewan model. They will not change because the government has been made aware of some opportunity to attract an industry with incentives or money in advance of an election. Instead, they will change when the industry and the community based-economic development agency of Enterprise Saskatchewan has identified a new opportunity (see Appendix I for a more detailed discussion of these key economic sectors). Creative partnerships, investment in new and old economy infrastructure, a focus on post- secondary education and the removal of barriers to investment in each of our key economic sectors will replace direct government investment and intervention in the economy.
A Saskatchewan Party government would implement this new vision for economic development through the creation of a new partnership called Enterprise Saskatchewan.
Spearheading a new role for government in facilitating entrepreneurial growth, Enterprise Saskatchewan will operate as an economic development partnership between government (provincial, local, and First Nations) and the private, cooperative and non-government sectors to implement a broader Enterprise Saskatchewan Plan consisting of, but not limited to, the following sixteen elements:
1. Enterprise Saskatchewan A new economic development agency called Enterprise Saskatchewan will be established to replace the line department economic development function of government. This will ensure that
The Promise of Saskatchewan — September 2004 8 ______industry groups, local governments, First Nations, post-secondary institutions, labour and economic development bodies such as Agrivision and the Saskatchewan Chamber of Commerce are part of the strategic planning, implementation, governance and monitoring of the Enterprise Saskatchewan Plan.
2. Identify and Remove Barriers to Growth Enterprise Saskatchewan will develop a systematic and ongoing process to identify and remove barriers to growth in each of our key economic sectors.
3. Ensure Technological Efficiencies A Saskatchewan Party government will ensure the efficacy and engagement of technological efficiencies in all sectors of the economy. This is a key underpinning for sustainable growth in both the ‘old’ industrial economy and the new knowledge-based economy.
4. Build a Knowledge Future Our Enterprise Plan will harness the enormous potential of our post-secondary institutions and programs to drive economic growth and support labour force development. We must make the commercialization of innovation and intellectual capital a public policy priority.
5. Develop an Economic Partnership with First Nations and Aboriginal Peoples Saskatchewan’s First Nations and Aboriginal peoples must be full partners in all aspects of Enterprise Saskatchewan, including its governance.
6. Develop Our Human Resources Increased immigration and youth retention are essential to expanding our tax base. A stagnant population has been identified as a key barrier to the growth of the province in the short-term, and both immigration and youth retention are necessary to meet our economy’s need for skilled labour.
7. Develop the Entrepreneurs of Tomorrow Enterprise Saskatchewan will advance entrepreneurial training and development across the province. It will also be mandated to work with the Department of Learning to ensure that courses in entrepreneurial, economic and financial literacy are available as an option for all high school students.
8. Ensure Fiscal Responsibility Balanced budgets and a long-term plan for debt reduction are essential if we are going to create a competitive economy that will attract new private sector investment.
9. Attract New Investment Capital Enterprise Saskatchewan must focus on ways to ensure the availability of investment capacity from institutional investment, mezzanine financing, local venture capital, angel investor capital networks and junior capital pools. Health care research venture capital must be a particular priority given the significant potential of the Canadian Light Source.
10. Create New Growth Tax Incentives New growth tax incentives will be the preferred vehicle to stimulate economic activity in a fiscally tight environment. While the government of Saskatchewan may not be in a position to offer meaningful immediate reductions in taxes such as the corporate capital tax which inhibits investment, it can be much more aggressive in terms of incremental taxes on new activity. Enterprise zones will also be explored as a delivery vehicle for such incentives.
The Promise of Saskatchewan — September 2004 9 ______
11. Retain Saskatchewan Businesses Enterprise Saskatchewan will implement a province-wide business retention program. As the government turns away from competing with business and towards facilitating private sector business growth, the competitive environment in Saskatchewan will improve. Enterprise Saskatchewan will identify and facilitate the establishment of a competitive business environment to ensure that no business leaves or bypasses Saskatchewan because of barriers erected by government.
12. Implement a Performance Based Focus for Government Investments Enterprise Saskatchewan will manage the assets of Investment Saskatchewan Inc. In partnership with the private sector, Enterprise Saskatchewan will target venture capital resources toward research, development, and the commercialization of innovation in areas such as the life sciences. Government will not pursue direct equity investments in mature industries.
13. Promote Saskatchewan The promotion of our province is a key element of the Enterprise Saskatchewan Plan. However, Saskatchewan will be promoted across Canada and around the world only after the product to be marketed – a competitive, investment friendly, enterprising and entrepreneurial province – is refined and fully developed.
14. Establish and Measure Goals for Growth The government of Saskatchewan must set clear and measurable goals for growth. Growth in population, investment, GDP, and even the general goal of becoming a ‘have’ province must be defined. The Enterprise Saskatchewan plan must clearly identify deliverables and measure results.
15. Single-Window Service to Business Enterprise Saskatchewan will facilitate ‘single-window’ permitting, licensing, and most other government-to-business services and processes.
16. Utility Crown Corporations and Enterprise Saskatchewan A Saskatchewan Party government will maintain Saskatchewan’s four major utilities (SaskPower, SaskTel, SaskEnergy and SGI) as government-owned Crown corporations and they will play a key role in the implementation of the Enterprise Saskatchewan Plan.
The Promise of Saskatchewan — September 2004 10 ______The Enterprise Saskatchewan Plan
1. Enterprise Saskatchewan
Enterprise Saskatchewan will be created as the central economic development agency of government replacing the economic development function currently resident in the Department of Industry and Natural Resources. The Enterprise Saskatchewan approach is bold and innovative because, for the first time in Saskatchewan, government will cede significant control over the formation and implementation of economic development strategies to a broad partnership of economic stakeholders with the full support of the Premier and Executive Council.
The Enterprise Saskatchewan model builds upon the traditional structures of economic development and broadens them through a partnership involving provincial and local government, industry, First Nations, labour, post secondary institutions and other economic stakeholders dedicated to the goal of sustained economic growth. The Enterprise Saskatchewan approach also builds on the Romanow government’s successful modernization of the line department functions of trade and tourism into two new partnerships known as Saskatchewan Trade and Export Partnership (STEP) and Tourism Saskatchewan. Enterprise Saskatchewan’s breadth and scope (which will include responsibility for both STEP and Tourism Saskatchewan) and the fact that it will be structured as a central agency of government in full partnership with other public and private sector stakeholders, will make it unique in Canada.
The success of Enterprise Saskatchewan will depend on the commitment of its partners to the common goals of the organization. Its board will represent both government and the aforementioned partners, with the chairperson coming from the non-government members of the board. In addition to an innovative governance structure and mandate, Enterprise Saskatchewan also breaks new ground in its unique relationship with the provincial government.
Rather than taking direction from government, Enterprise Saskatchewan will establish provincial economic development goals and strategies for endorsement by Cabinet and the Legislature. Government departments, agencies and, in some cases, Crown corporations, will then be tasked with implementing these strategies. Enterprise Saskatchewan will also monitor progress and measure results.
Is the Delivery Vehicle That Important?
In a word, YES. How we go about developing the economy – in this case through Enterprise Saskatchewan – is as important as identifying our goals.
When Saskatchewan Party MLAs speak to industry groups in Saskatchewan and those outside the province, we often hear concerns regarding the stability of our political-economic environment. While industry groups may welcome many of the policy initiatives we are proposing, they worry about a subsequent change in government and a pronounced shift to some other policy preference. That reality, they tell us, is almost as untenable as high taxes.
Enterprise Saskatchewan offers our province the chance to move beyond economic policy instability. We are committed to keeping both Tourism Saskatchewan and STEP as they exist. These two entities have proven to be effective methods by which to deliver marketing and
The Promise of Saskatchewan — September 2004 11 ______economic development services in our province. The much larger scale of Enterprise Saskatchewan and its goal oriented, entrepreneurial, and business-planned approach offers that same opportunity for stability through the development of an economic blueprint for Saskatchewan. We must build an economic plan that is capable of surviving the volatile swings of our electoral cycle. If the Saskatchewan Party is successful in a future election and even benefits from multiple terms in office, we will not have been successful unless we, as a province, have achieved an effective and lasting change in our approach to growing the economy. As Premier, I would not hesitate to take the politics out of economic development if it meant securing long-term economic growth. Nor, I suspect, would any subsequent Premier.
Any economic blueprint for the future of our province should be designed to survive the swings of our election cycle. New York Times Foreign Affairs columnist and author Thomas L. Friedman’s book, The Lexus and the Olive Tree, aptly refers to much of today’s capital markets as the “electronic herd.” His supposition is that the herd values stability, predictability and transparency – the very qualities that we will build into Enterprise Saskatchewan to ensure its success.19 Moreover, these qualities are consistent with the direct feedback that our caucus has received from those who are interested in investing in Saskatchewan should the economic climate improve.
Perhaps more importantly, our chance at reviving our own lagging economy is better if it is developed, executed, and driven by a partnership comprised of industry, communities, First Nations, labour, educational institutions and government. We have achieved a great deal in this province when a partnership model has been used in earnest as the method of delivery. Moreover, the challenge facing us is too great and too important for any political party to suggest that it alone can make the difference. Enterprise Saskatchewan also offers a more holistic approach to economic development than simply reducing taxes or expanding the role of Crown corporations.
2. Identify and Remove Barriers to Growth
The interaction between Enterprise Saskatchewan and government will be important in achieving the second goal of our economic plan – identifying and reducing barriers to growth.
Enterprise Saskatchewan will continually act to identify barriers to growth in the key sectors of Saskatchewan’s economy and communicate them to policy makers. No doubt some of these barriers, such as the corporate capital tax, will be too costly to be eliminated or significantly reduced immediately.
Enterprise Saskatchewan will report annually to the public on the progress government is making in reducing barriers, as well as the delineation of long-term plans and timelines to achieve those barriers that may come with larger fiscal price-tags.
Non-Tax Barriers
Saskatchewan Party MLAs have spent a great deal of time meeting with various industry groups and economic development organizations to identify barriers to growth in key economic sectors. We understand the many and varied barriers that exist. However, we rarely discuss the many barriers facing businesses beyond the obvious impediment of high taxes. While taxes that
19 Thomas Friedman, The Lexus and the Olive Tree (New York: Anchor Books, 2000), p.171.
The Promise of Saskatchewan — September 2004 12 ______penalize investment such as the corporate capital tax are among the most insidious restraints on new investment and economic expansion, there are many other barriers to growth in our province:
“Old Economy” Infrastructure Barriers If a short-line implement manufacturer is directly employing hundreds of men and women in a rural area of Saskatchewan, it is most assuredly the provincial government’s job to ensure there is a high quality road to the plant. Water, sewer, utilities, and transportation need to be organized in a fashion that facilitates the attraction of investment and the recruitment and retention of businesses.
“New” Economy Infrastructure A study on entrepreneurship from the Western Centre for Economic Research at the University of Alberta makes it clear that the absence of new economy infrastructure is a barrier to growth.20 As the study notes, the absence of high-speed internet:
“[D]eprives businesses in the rural areas of Western Canada of a major instrument in overcoming the disadvantages of distance and access. Further, this handicap works against firms in more rural areas in that it robs them of the means for the prompt response that is demanded for realizing new market opportunities.“21
Allowing entrepreneurs to meet provincial regulatory requirements quickly is another recommendation in the study. At the moment, only British Columbia has a one-stop on-line registration point to register a business. In Saskatchewan, SaskTel and private sector IT firms have done an excellent job of ensuring that Saskatchewan is “well-connected’. In regions of the province where this is not yet the case, it is clearly a barrier to further growth.
Other Non-Tax Barriers Other non-tax barriers that will require the attention and diligence of Enterprise Saskatchewan include direct competition to business from various government agencies and Crowns attempting to diversify from core functions, as well as policies of the Crowns themselves. For example, the refusal on the part of SaskPower to allow industrial customers to “wheel” or generate excess power from one site to compensate for the power needs of other holdings needs to be revisited.
3. Ensure Technological Efficiencies
We must ensure the efficacy and engagement of technological efficiencies in all sectors of the economy. This is a key underpinning for sustainable growth in the both the ‘old’ economy and the ‘new’ information-based economy.
When Thomas Friedman interviewed top managers at leading Silicon Valley companies and professors at Stanford University for The Lexus and the Olive Tree, he was told that Silicon Valley measured the power and potential of jurisdictions not only by the number of PCs per household, but by degrees of connectivity. As a result of his own interviews, Friedman suggests that ‘mega-bits per capita’ (installed bandwidth divided by the number of users) is the measure
20 Edward J. Chambers, and Stuart E. Shaw, A Primer on Western Canadian Entrepreneurship, (Edmonton: University of Alberta - Western Centre for Economic Research, Information Bulletin, No.76, April 2004). p.54. 21 ibid.
The Promise of Saskatchewan — September 2004 13 ______of a jurisdiction’s connectivity and an indication of its preparedness to compete in today’s economic environment.22
Here in Saskatchewan this may be a less effective way to measure our own connectivity in light of our rural/urban, north/south reality. However, it underscores the importance of such measurements.
While Saskatchewan scores well with regard to access to high-speed internet services, many IT business owners have expressed serious concern about inadequate access to bandwidth. In fact, many technology businesses have either left Saskatchewan or bypassed us altogether because of inadequate bandwidth.
As mentioned previously, the lack of high-speed internet access in parts of the province is another technological barrier to economic growth. Enterprise Saskatchewan must develop and continually monitor the state of our technical infrastructure to ensure Saskatchewan maintains a leading edge position in technological innovation.
4. Knowledge as a Building Block
An essential component of the Enterprise Plan will consist of building upon the huge potential offered by our post-secondary education institutions and programs – particularly with regards to labour force development. Greater emphasis upon facilitating the commercialization of innovation and intellectual capital must be a public policy priority.
In the 1980s, academics were already debating the significant question of where knowledge- based industries were choosing to incubate and locate. Manuel Castell’s The Informational City postulated that “the basic raw material on which the new industries work is innovative technological information.”23 He highlighted the four different types of organizational environments where such information could be found:
• Leading universities and higher education institutions; • Government-sponsored R&D centers; • Corporate R&D centers linked to large technologically advanced corporations; • A network of R&D centers in an established industrial complex.24 Saskatchewan is clearly well positioned with respect to the first two sources, and the current federal and provincial governments deserve credit in this regard. The latter two seem to be a product of economies of scale and critical mass – both of which are dependent on long-term growth.
Our post-secondary institutions have begun to embrace their role as catalysts for economic development. Both Saskatchewan universities have established industry liaison offices, and the University of Saskatchewan will bring a series of entrepreneurship options to be delivered by the College of Commerce in conjunction with faculties across campus during the current planning
22 Friedman, p.199 23 Manuel Castells, The Informational City (Oxford: Basil Blackwell Lt,1989), p.83 24 ibid.
The Promise of Saskatchewan — September 2004 14 ______cycle.25 Research and development tax credits are building blocks to further success in this area. We must do more to realize our full potential when it comes to commercializing innovation and research.
The Education – Research – Innovation Nexus
John T. Chambers, President and CEO of Cisco Systems, Inc., who served on the U.S. Administration’s Education and the Workforce panel, offered this quite forceful assessment on the nexus involving education, innovation, and the economy: “University centers are the hub for innovation, which in turn, creates jobs. That circle is repeatable, but it must be nurtured at the earliest possible stages.”26
Chambers reiterates the importance of education in discussing the challenges posed to the US economy by outsourcing and offshoring when he states, “we’ve got to have help from government in terms of our education system, our infrastructure, and incentives to allow companies to compete effectively.” This is an important point for a province like Saskatchewan which has been outsourcing much of its economic opportunity for the better part of the last sixty years.
Finally, our post-secondary institutions must be properly financed. As indicated earlier, our two universities, SIAST and the regional colleges understand the vital role they play in the future development of both our society and our economy. To the extent that our post secondary institutions are diverted from these goals by constant and temporal government funding concerns, the entire economy loses. Enterprise Saskatchewan can be another powerful proponent of long-term funding for these institutions and the post-secondary education needs of our population.
During the last election, the Saskatchewan Party was the only party to offer significant and specific funding increases to our universities, SIAST and the regional colleges. That commitment must be maintained.
5. Develop an Economic Partnership with First Nations and Aboriginal Peoples
The direct involvement of First Nations and Aboriginal peoples is critical to the success of Enterprise Saskatchewan. The economic policies of the government of Saskatchewan will respect the Treaties as the foundation of our partnership with First Nations in the shared goal of creating prosperity for all people in Saskatchewan through sustained economic growth.
I have made it a top priority to meet with many First Nations and Aboriginal leaders and individuals since assuming the leadership of the Saskatchewan Party. I have appreciated the opportunity to learn more about issues and policies. The entrepreneurial tradition and current entrepreneurial spirit amongst First Nations holds great potential for the growth of our province. Saskatchewan’s First Nations leaders and individuals have demonstrated a keen interest in
25University of Saskatchewan. Integrated Plan for the First Planning Cycle 2003/04 to 2006/07 (Saskatoon: University of Saskatchewan, April 21, 2004), p.18. 26 John Chambers, Jobs will go to the best educated workforce, “Cisco Systems – Executive Thought Leadership,” October, 2002. http://newsroom.cisco.com/dlls/tln/exec_team/chambers/pdf/article10_2002.pdf , June 4, 2004.
The Promise of Saskatchewan — September 2004 15 ______economic opportunities not only on-reserve, but also in places like my home community of Swift Current whose closest reserve is the Nekaneet First Nation near Maple Creek.
Saskatchewan’s young Aboriginal population has the potential to give this province a significant economic advantage as we move forward. In fact, engaging aboriginal youth in the economic development of Saskatchewan will be a key to our success as a province. As the Saskatchewan Chamber of Commerce notes, “since Saskatchewan has the highest number of Aboriginal people – in real and percentage terms – in Canada, we hold a distinct competitive advantage in an era when the entire western world is watching the graying of its baby boom generation.”27
6. Developing our Human Resources
Strategies to increase our population must continue to figure prominently in any economic plan for the province. Increasing both youth retention and immigration will be necessary if we are to achieve our goals.
Immigration
Immigration was the first and most powerful tool ever used to spur growth in the Saskatchewan economy. While the current government is on the right track in designating a minister for this file, it is difficult to see what action, if any, the government is taking to set and achieve specific goals for increased population through immigration.
Over the last number of years, Saskatchewan has fallen far behind its neighbours in attracting immigrants to the province. From 2000 to 2002, a total of 5,264 people immigrated to Saskatchewan. This is far behind the 13,853 who immigrated to Manitoba during the same period and the 45,438 new Canadians who now call Alberta home. To put these numbers into context, more people immigrated to Alberta during those three years than currently live in the cities of North Battleford, Yorkton and Swift Current combined.28
While new targets have been established by the current government for the provincial nominee program, it cannot disguise the fact that we have had difficulty meeting the previous targets. Nor have we kept pace with most other provinces. Since Manitoba undertook a provincial nominee program to attract qualified, skilled, and experienced individuals or business people in 1998, over 7,858 principal applicants and family members have settled in that province.
The potential of immigration as a source of tax base expansion must receive more from government than after-thought ministerial capacity and few resources. The opportunities for synergy with existing federal government programs should result in the immigration opportunity being discussed and developed with the national government in every available instance.
27 Saskatchewan Chamber of Commerce, Version 1.0 Action Saskatchewan: A Blueprint for Saskatchewan, 2000 . http://www.actionsask.com/documents/195Action_Saskatchewan_Version_1.0.pdf , p.26, May 13, 2004
28 See: Saskatchewan Bureau of Statistics, “Quick Facts.” http://www.gov.sk.ca/bureau.stats/ , June 4, 2004. Also: Citizenship and Immigration Canada, Facts and Figures 2002, http://www.cic.gc.ca/english/pub/facts2002/immigration/immigration_4.html , June 4, 2004.
The Promise of Saskatchewan — September 2004 16 ______
Youth Retention
Young people across Canada explore opportunities in other provinces and around the world. Saskatchewan’s young people are no different. However, too many of those young people leave Saskatchewan never to return. In fact, Saskatchewan loses more young people to net out-migration than any province in Canada except Newfoundland. Between 1991 and 2003, Saskatchewan lost a total of 76,760 people to net out-migration.29 This dismal statistic is even more alarming given that 47,274 or 68% of those who left Saskatchewan were young people between the ages of 15 and 29 years of age. This dramatic outflow of young people from Saskatchewan is not sustainable in the medium or long term.30
Sask. Net Out-Migration 1991 - 2003
0
-1000
-2000
-3000
-4000
-5000
-6000
-7000
-8000
-9000
-10000 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
Clearly, youth recruitment and retention will be a major priority for Enterprise Saskatchewan and an important measure of Enterprise Saskatchewan’s success. A thriving and growing economy will be the surest way to stem out-migration not only by young people, but in all demographic and economic groups in our province.
7. Develop the Entrepreneurs of Tomorrow
Enterprise Saskatchewan will foster and promote entrepreneurial training and development across the province and support the Department of Learning in expanding the availability of entrepreneurial training to every high school in Saskatchewan.
I come from a family of entrepreneurs. My dad started his first business when he was 17, and was self-employed for the vast majority of his working life. I am intensely proud of both my parents. They created jobs for themselves and others, and contributed more in taxes to the public sector than they received. Yet I did not give business much consideration as a career option. Nor was I unique in this regard. Indeed, if our teachers had asked our graduating class how many planned to create their own jobs and jobs for others in the future, few hands (if any) would have been raised.
Our society encourages youth to be job takers, not job makers. Entrepreneurship and self- employment are simply not on the radar screen of our education system, or our society as a
29 Statistics Canada Population Estimates as cited in Action Saskatchewan Report Card, June 2004, p. 4-5. 30 ibid
The Promise of Saskatchewan — September 2004 17 ______whole. This should be very alarming to all of us, especially policy makers. Every single public dollar that is used to provide health care, public safety, education, or social assistance depends on entrepreneurial activity. Even Crown corporation dividends depend on consumers, who in turn depend on the economy.
Our future depends on those organizations and individuals that will create jobs. The creation of just one job is, in my view, the economic equivalent of the birth of a child. After it happens, nothing is the same.
Entrepreneurship Education
What are we doing in Saskatchewan to recognize and deliver on the importance of entrepreneurship in education? What are we doing to introduce entrepreneurship to young people as a career option? What are we doing to ensure that our educational institutions – who produce our engineers, doctors, accountants, dentists, mechanics and IT specialists – are giving students the basic skills in small business planning, management and entrepreneurship? Or perhaps it is better to ask: what should we be doing?
The University of Saskatchewan is set to introduce a number of entrepreneurship programs and options in conjunction with existing programs in the faculties of Engineering, Agriculture and Commerce. They will also offer a business minor for many programs in the Arts and Sciences, as well as a package of business courses designed for non-Commerce students.31 These are important first steps, and will help to fill a vacuum that exists at the post-secondary level.
But we must also address the issue at the secondary level, a perspective shared by Ernest Heapy, the former director of the Southwest Centre for Entrepreneurial Development:
The questions is; “what would be the most effective and efficient way for assisting the development of entrepreneurs within the entire province? The utilization of the established school system is key in addressing the three central components of the question: efficiency, effectiveness, and availability.” 32
As Heapy argues, the public education system provides the best vehicle to foster and promote entrepreneurial training and development across the province.
Instead of simply offering a course or two in entrepreneurship or being content with the uneven development of entrepreneurial education that exists across the province, we must re-evaluate how we develop entrepreneurial awareness and skills in students.
Enterprise Saskatchewan will be mandated to work with the Department of Learning to ensure that courses in entrepreneurial, economic, and financial literacy are available as an option for all high school students.
Economic literacy is the basic building block of entrepreneurial development. It is both a practical tool and a necessary precondition for students if they are to develop the skills to manage the world around them. How can we expect students to develop an entrepreneurial outlook if they lack management skills in personal finance? Surely the inevitable outcomes of
31 University of Saskatchewan. p.18 32 Ernest Heapy, “ Making Entrepreneurship Compulsory for High School Graduation,” (Unpublished paper, Commerce 345, University of Saskatchewan, Saskatoon, December 2003), p.6
The Promise of Saskatchewan — September 2004 18 ______poor financial management, such as a bad credit rating or even bankruptcy, will negate all the work experience in the world unless we take steps to ensure that students have the ability to avoid such pitfalls.
Just as important, we must teach students that entrepreneurship is a viable option for transforming their personal passions into life-long careers. With this understanding, students can begin to benefit from their practical work experience in their community and the relationships they develop with local businesses. It is important that we convey to students the personal and social rewards that are gained through entrepreneurship – the freedom (and risk) that comes from pursuing one’s dream, the need to be open to new opportunities, and the sense of self-worth that comes through entrepreneurial accomplishment. If we are successful, we will be well on our way to creating our province’s next entrepreneurial generation.
Entrepreneurship has the ability to transform, but it also has the ability to empower individuals within society. In 2003, women constituted 34% of those who were self-employed in Canada.33 According to RBC Royal Bank, women account for 40% of new business start-ups and the number of women entrepreneurs is growing at twice the rate of men.34
Entrepreneurship and Labour Force Development
Entrepreneurial development cannot end once individuals leave school. One of the most enjoyable times in my career as an economic development professional was my involvement in the development of what came to be the South West Centre for Entrepreneurial Development. As a member of the initial steering committee and the Centre’s first board, I was encouraged by the way in which existing businesses and the community worked together to ensure that entrepreneurship remained a key value in the community.
In the earliest days of the Centre, we partnered with the federal government to offer entrepreneurial education and training for unemployed individuals who wished to explore the option. Our curriculum was not a textbook / term paper / final exam program. Instead, it was a hands-on eight-week program that required students to prepare a business plan, present the business plan to volunteers from financial institutions, and execute the plan if at all possible. Whether students continued in entrepreneurial endeavors as a result of the training or decided that self-employment was not for them, they were well-served. Anecdotally, the Centre heard from employers that hired graduates and highlighted the fact that the graduates were significantly better employees because they had at least looked at the employment situation from the other side of the fence.
Entrepreneurship as a Tool to Fight Outmigration
There is already preliminary evidence that the self-employment option may be a powerful weapon in the fight against youth outmigration.
In its Regional Needs Assessment Final Report, the Southwest Regional Planning Partnership noted that the long term action plan on labour shortage and youth outmigration must include an, “[e]mphasis on entrepreneurship and job creation to assist in retaining and attracting youth.”35
33 Statistics Canada, Women in Canada: Work Chapter Updates, (Ottawa, Ministry of Industry, 2004), p.19. 34 RBC Royal Bank, “Women Entrepreneurs – Statistics,” March 26, 2004, http://www.rbcroyalbank.com/sme/women/statistics.html , June 7, 2004. 35 Southwest Regional Planning Partnership, Regional Needs Assessment Final Report (2001), p.13.
The Promise of Saskatchewan — September 2004 19 ______
The report goes on to say that, “[e]ntrepreneurship skills provided to all students of the area give every individual the opportunity to develop the high level position they desire. A community equipped with individuals skilled in developing a business will have a greater opportunity to succeed.”36
What was interesting about a study on school-leavers quoted in the report was not the dismal rate of self-employment amongst graduates surveyed (less than 1%), but rather that youth retention rates were higher in rural regions such as Frontier where entrepreneurial activity had achieved an economic critical mass.
If current trends towards self-employment, home-based businesses, and contractual relationships replacing employer/employee situations continue, Saskatchewan can take advantage of the population retention and attraction opportunities. To do this, we will need policy makers to support entrepreneurship with training programs and the assurance of a positive business environment.
8. Ensure Fiscal Responsibility
Enterprise Saskatchewan will be a force within Saskatchewan and government for fiscal stewardship. Balanced budgets are essential for stainable growth in any jurisdiction. A specific commitment to long-term debt retirement is equally important to the business climate and our potential to attract investment. This commitment would enhance the stability of the investment climate in the long-term by reducing the possibility of major tax increases by future governments.
9. Attract New Investment Capital
Venture capital and attendant levels of available investment are essential to growth in Saskatchewan. Enterprise Saskatchewan must focus on ways to ensure the availability of investment capacity from institutional investment, mezzanine financing, local venture capital, angel investor capital networks and junior capital pools. There may be no greater source of frustration for local economic development, especially in rural Saskatchewan, than the lack of venture capital.
All too often in our province, government investments have forced taxpayers to become involuntary venture capitalists. Like other market instruments, venture capital has been reticent to compete with government in Saskatchewan. Entrepreneurs have become resigned to this fact, and will often begin by asking economic development professionals and policy makers about government sourced venture-capital.
Capital fuels the engine of economic growth. In Saskatchewan, government directed economic development has resulted in weak capital formation. For example, per capita new capital expenditures were almost 96% higher in Alberta than in Saskatchewan in 2002. During that same year, industrial average weekly earnings were almost 14.5% higher in Alberta than in Saskatchewan.37 It is difficult to imagine a more direct linkage between access to capital,
36 Southwest Regional Planning Partnership, p.18 37 Government of Saskatchewan pp. 14-17
The Promise of Saskatchewan — September 2004 20 ______
investment in the economy and the resultant improvement in the standard of living for industrial workers.
Without the availability of significant capital from a broad range of private sources, Saskatchewan’s economy will continue to suffer. Government should not provide the capital required for business expansion, and must not drive other sources of capital from the field. Instead, government should foster the formation of capital so that entrepreneurs can fund growth.
To encourage in the formation and attraction of private capital, Enterprise Saskatchewan will:
• Explore opportunities to shelter RRSP eligible investments from provincial tax on the returns earned from eligible local investments, provided it is patient capital that remains with the new company for a pre-determined period of time.
• Foster and advance the creation of angel investor networks across Saskatchewan. This particular model is used extensively in Alberta and other high growth jurisdictions to assist entrepreneurs in financing innovation.
• Develop a Saskatchewan model for employee share ownership. The British Columbia Employee Investment Act (1996) offers plans and tax credits for employee share ownership and employee venture capital plans. This model provides employees with greater access to ownership and the employer with stakeholder venture capital.38
• Recommend a review of the Saskatchewan Financial Service Commission to ensure it continues to afford investor protection and enforces proper disclosure while not acting as a barrier to investment.
• Promote new generation co-operatives within Saskatchewan.
• Participate in partnerships to ensure the availability of venture capital for innovation, the life sciences, and technology research and commercialization.
• • Establish a venture capital and commercialization team to focus on the opportunity presented by the Canadian Light Source Synchrotron.
• • Maintain provincial jurisdiction over regulation of securities (investment professionals have expressed serious concern about the negative consequences of current proposals calling for a national approach to securities regulation).
10. Create New Growth Tax Incentives
New growth tax incentives will be the preferred vehicle to stimulate economic activity in a fiscally challenged environment. New growth tax incentives are targeted tax cuts on incremental costs and new investment. While the government of Saskatchewan may not be in a position to offer meaningful reductions in taxes such as the corporate capital tax, it can be much more
38 British Columbia, Employee Investment Act, RSBC 1996, Chapter 112. http://www.qp.gov.bc.ca/statreg/stat/E/96112_01.htm , June 7, 2004.
The Promise of Saskatchewan — September 2004 21 ______aggressive in terms of incremental taxes on new activity. Enterprise zones will also be explored as a delivery vehicle for such incentives.
Municipalities utilize such tax incentives to attract business. They are revenue neutral to the granting body because they forgive future taxes on land that is not currently utilized. Abatement programs are offered over some pre-determined time-frame, usually with a declining incentive until the property is paying property tax at the full rate.
During my time as the Director of Business Development for the City of Swift Current, such incentives were usually reserved for attracting manufacturing operations. Inner city residential renewal programs in cities such as Swift Current and Regina have used similar incentives to encourage new home construction and movement into core neighborhoods. We also enjoyed success when we converted an empty light industrial park into an oil and gas incentive zone. Under that initiative, oil and gas service companies that located or expanded in Swift Current were offered incentive priced land and a three-year declining abatement program. Applicants had to demonstrate and fulfill on commitments of new job creation to be eligible. In less than two years, seven of the ten previously empty lots were sold.
Throughout Saskatchewan and the country as a whole, there are similar new growth tax incentives in operation:
• Moose Jaw offers a tax exemption for up to five years to new and targeted existing businesses who are interested in long-term development in the city. It also offers a program to businesses that put Moose Jaw in a competitive position to attract additional new businesses that it would not otherwise.
• In Ontario, the City of Thunder Bay and the Province of Ontario negotiated an agreement for new businesses which sees qualifying firms eligible for not only property tax relief, but also exemption from Ontario’s capital tax and employer health tax.
• The government of Newfoundland has introduced the Economic Diversification and Growth Enterprises Program (EDGE) for new companies who create at least 10 new jobs in the province and are prepared to make a minimal capital investment.
Like the Moose Jaw program, the Newfoundland program is geared towards businesses who would not otherwise locate in the province. The tax incentives offered are generous: a 100% rebate on provincial corporate income tax and the provincial payroll tax for 10 years (15 years if the company locates in a rural area); a 50% rebate on federal corporate income tax for the same period; a 100% rebate on municipal property and / or municipal business taxes for the period, followed by a five year phase-out of such rebates; and access to unserviced Crown land for $1.00 where such land is required to implement the company’s business plan. 39
Decreasing incremental tax rates can be done at no cost to the treasury. To the extent that they may cause some increased activity, decreasing incremental tax rates would generate new tax income to the province, albeit at a lesser rate. Resource surcharges, the capital tax and the corporate income tax may be further models for such incentives.
39 Government of Newfoundland, “Innovation, Trade, and Rural Development – The Economic and Growth Enterprises Program,” http://www.gov.nf.ca/itrd/edge_page.htm , May 21, 2004.
The Promise of Saskatchewan — September 2004 22 ______
Enterprise Zones
Enterprise zones offer another approach to generating new economic activity, and have been particularly effective at stimulating economic investment in under-developed rural and inner city areas across North America. Through the use of tax incentives and the relaxation of regulatory requirements over a designated period, enterprise zones have been an effective tool for growth.
One bold example of this exists in Ontario, where the former provincial government designated all of northern Ontario as a tax incentive zone for a ten-year period beginning in January 2004. In partnership with municipalities, the plan aims to attract new business growth in key sectors while not undermining existing businesses. Qualifying businesses would be exempted from the province’s business education tax and capital or employer health tax. In addition, municipalities will provide full property tax relief for all eligible businesses as well as case-by-case assistance on municipal charges and fees.40
Establishing enterprise zones around our post-secondary institutions and targeting new growth tax incentives towards new start-ups specializing in research and commercialization may represent another method of stimulating new economic activity in the province.
It is essential that we encourage new business development in Saskatchewan. New growth incentives applied on a sector or geographic basis in partnership with communities across the province can assist us in achieving this goal.
11. Retain Saskatchewan Businesses
Too often, economic development organizations and initiatives become so consumed by the pursuit of new investment and new projects that they forget to encourage existing businesses to stay where they are and expand their operations. Sustained job and population loss in Saskatchewan confirms that we are not doing a good enough job of retaining existing businesses. This must be another area of focus for Enterprise Saskatchewan.
Business retention is seen as one of the cornerstones of a community economic development strategy. As one U.S. regional economic development report explains:
Business retention and expansion, although less glamorous and press-worthy than business attraction, is widely recognized as a more cost-effective strategy. At least two- thirds of new jobs are created by existing companies. It is sometimes called the ‘caring’ approach, making it clear that the community values the presence of its own companies.41
In my home community of Swift Current, Action Swift Current was established three years ago to develop an action plan for the future of the community. Achieving buy-in from the business sector was integral in developing and executing the plan. The Action Swift Current team turned to the challenge of branding the community by highlighting specific economic development
40 City of Thunder Bay, Superior Business – Tax Incentive Information,” http://www.thunderbay.ca/index.cfm?fuse=html&pg=1585 , May 21, 2004. 41Gaston County Chamber of Commerce, Cleveland-Gaston Comprehensive Economic Development Strategy, 2003, http://www.gastonchamber.com/CEDSFinalWrittenReport.htm , June 1, 2004.
The Promise of Saskatchewan — September 2004 23 ______opportunities, developing a plan for youth retention and recruitment, and involving itself with efforts to secure a new regional hospital.
Specific economic development policies have complimented Action Swift Current. Some of these policies target business retention, such as tax incentives targeted towards existing businesses who expand and improve their operations in the city. By doing this, the city of Swift Current and Action Swift Current have sent a strong message to the existing businesses that they are valued and absolutely essential to the future success of the community.
As mentioned earlier, Moose Jaw has adopted a similar approach to retaining new businesses and encouraging expansion. Through their tax phase-in policy, Moose Jaw encourages existing businesses to expand their operations and create long-term jobs.
Business retention must be a priority. Venture capital initiatives, taxation policy, and regulatory changes advanced by Enterprise Saskatchewan will help us to achieve our goals.
12. Implement a Performance Based Focus for Government Investments
Investment Saskatchewan Inc. (formerly CIC III) is currently a designated subsidiary Crown corporation managing a $609-million portfolio of direct government investments.
Enterprise Saskatchewan will manage the assets of Investment Saskatchewan and look for opportunities for the commercialization of innovation, research and development. Only divestiture opportunities which offer job retention or expansion and a net economic benefit to the province will be considered.
We need to send a signal to venture capitalists around the world and to our own business community that they will not be forced to compete with their own government in entrepreneurial endeavors. However, government has invested significantly in businesses over the last sixty years and it is crucial that this portfolio be managed in a professional manner to provide the best return for our province.
While Enterprise Saskatchewan will not invest in mature industries, this does not preclude investment partnerships with the private sector in non-mature industries involving the commercialization of innovation, research and development. However, investment must drive the agenda of growth, non-government capital formation and help to create an enterprising and entrepreneurial economy.
13. Promote Saskatchewan
Promotion of Saskatchewan across Canada and around the world is a key element of the Enterprise Saskatchewan Plan.
The main problem with the current government’s Our Future Is Wide Open campaign is not the actual marketing campaign, which was quite effective in my opinion, but that the government forgot to ensure that the product itself – namely, Saskatchewan’s business environment – was ready for scrutiny and consideration prior to embarking on an advertising campaign.
We simply must improve our business environment and our ability to compete before we market ‘our product’ around the world. Enterprise Saskatchewan will undertake extensive marketing
The Promise of Saskatchewan — September 2004 24 ______and promotion of our province across Canada and around the world once progress has been made on the general business environment, barriers to growth have been reduced and a cadre of new growth tax incentives are available for promotion.
14. Establish and Measure Goals for Growth
The Enterprise Saskatchewan plan must involve the establishment of growth goals. GDP levels, population, investment and even the general goal of becoming a ‘have’ province within fiscal federalism must be defined. The plan must have deliverables and be constantly measured.
Any successful business or organization sets clear and measurable goals for itself. Enterprise Saskatchewan will be no different. One gets the impression that the current government simply does not believe that our population must grow, that investment activity must expand and that the tax base must be much larger if we are to afford the quality of life we prize in Saskatchewan.
Specific targets will be set by and monitored as part of the Enterprise Saskatchewan plan, including the reduction of barriers to growth in key sectors, GDP, employment, venture capital investment and population. The overarching goal of the plan must be for Saskatchewan to become a ‘have’ province, whatever the formula, whatever the nature of fiscal federalism. A province as naturally endowed as Saskatchewan should simply be giving more to Canada then it ever needs to receive.
Some current government MLAs have suggested that significant population growth is not possible, while others have said that outmigration means there is ‘more left for the rest of us.’
This is patently absurd. Enterprise Saskatchewan will be measured by its success at increasing the wealth of our province and the prosperity of our citizens.
15. Single Window Service to Business
Existing and potential new entrepreneurs often express frustration with the ‘run-around’ they sometimes experience when dealing with various government agencies, regulators, and licensors. Single-window access to government for business and entrepreneurs will enhance Saskatchewan’s competitive position.
16. Utility Crown Corporations and Enterprise Saskatchewan
A Saskatchewan Party government will maintain Saskatchewan’s four major utilities (SaskPower, SaskTel, SaskEnergy and SGI) as government-owned Crown corporations and they will play a key role in the implementation of the Enterprise Saskatchewan Plan.
As the central agency for designing, implementing, and monitoring provincial economic development, Enterprise Saskatchewan will have coordinating role with regard to the major Crowns. Much has been made in this paper of the importance of infrastructure to a competitive Saskatchewan economy. Crown corporations will play a lead role in achieving that infrastructure.
The Promise of Saskatchewan — September 2004 25 ______
The Saskatchewan Promise It’s Time To Keep It
The April 29, 2004 edition of the Winnipeg Free Press covered a recent innovation conference. The headline of the story read “Get Message Out To Students: It’s Cool To Be An Entrepreneur.”
The article reported on presentations to the conference from Sven-Thore Holm, founder of the Ideon Science Park in Sweden. Holm said that an entrepreneurial attitude shift in his country was the reason it has transformed itself into one of the most entrepreneurial societies in the world. He went on to say that students should finish their education with the idea of putting their knowledge to the test in a company they started on their own rather than going to work for major corporations. “We are, on a mass scale, encouraging students to start their own companies,” he said. ‘Smart Parks’ at Sweden’s universities are helping achieve the goal.42
The article also reported on a presentation by President Emeritus Dr. Edward Walsh of the University of Limerick in Ireland, who agreed with Holm’s assessment of the importance of post- secondary institutions in helping make the jump to the knowledge-based economy. But, he added, governments must have a pro-enterprise attitude and provide a competitive tax environment. As he noted, having “low taxes has been absolutely critical. Without them, all the investment related to skills and information would not have borne fruit.”
Saskatchewan can, and must, adapt its economic development policies to these core principles. Enterprise Saskatchewan is the vehicle that can do it.
The Promise of Saskatchewan: It’s Time to Keep It
Sunsets, living skies, friendly people and golf courses are great. In some cases, especially tourism, they are important arrows in our economic development quiver. But our natural advantages should not deter us from our quest to become a much more competitive economy.
In 1996, a KPMG study on location cost analysis highlighted the need for Saskatchewan to become competitive on taxes and stability. Investors were worried about the stability of the business environment and the potential for radical changes in operating conditions. Indeed, the study recommended more partnerships between stakeholders through a provincial economic development authority. The study also pointed out that investment decisions are driven by financial factors, not quality-of-life considerations. It recommends Saskatchewan emphasize its attraction in business terms, not social ones, when marketing itself to outside investors.43
Let us not lose sight of the basics. Saskatchewan must be competitive in terms of taxes, regulation, the availability of venture capital, and innovation.
42 Geoff Kirbyson, “Get message out to students: it’s cool to be an entrepreneur,” Winnipeg Free Press, April 29, 2004, p.C8 43 Phillips, p.46-47.
The Promise of Saskatchewan — September 2004 26 ______
An enterprising, entrepreneurial Saskatchewan economy will be impatient, relentless, aggressive, self-promoting and even brash. Profit within that economy will be lauded instead of envied.
Maybe it was the nature of agrarian settlement, but our first Premier Walter Scott seemed to see the promise. He wrote: “Just as sure as the sun shines there will be within the Province alone some day a population running into the tens of millions.” 44 Premier Scott’s population dream may not have been realized, but there is much cause to remain optimistic about the future of the province he pioneered.
Saskatchewan is a 100-year-old promise – a promise founded on pioneering spirit, cooperation and innovation in public policy. It is a promise founded on compassion, volunteerism and undying optimism.
Never mind next year country. Saskatchewan is a promise that has waited one hundred years.
It’s time to keep it.
Brad Wall Leader of the Official Opposition Saskatchewan Party
44 Premier Walter Scott cited in Gordon Barnhart, From Progress to Prosperity (Regina: Canadian Plains Research Centre, 2000), p.48.
The Promise of Saskatchewan — September 2004 27 ______Appendix I Target Sectors for Growth
Oil, Gas, and Energy Production
Saskatchewan accounts for almost 20% of oil production in Canada, putting us second behind only Alberta. Industry sources have made it clear that there are significant opportunities for Saskatchewan’s oil and natural gas industry. In addition to strong demand (and prices) for oil and gas, Saskatchewan is close to external markets, possesses good infrastructure, and has the human resources to further develop the industry in our province. While the government has made progress in terms of royalty rate restructuring to stimulate activity in the oil and gas sector, other irritants such as red tape, permitting processes, the PST, the corporate tax, income tax and the capital tax are deterrents to further investment.
While Saskatchewan’s regulatory and tax environments must remain competitive to encourage further development of the oil and gas industry, we must also ensure that Saskatchewan takes its place on the continent as a source for every imaginable source of energy, and as a center for excellence in energy research and innovation. As a continental leader in energy production and research, our provincial plan must encompass all potential sources: hydrogen technology, bio- mass, ethanol, wind, clean-coal technology, natural gas, hydro and nuclear power.
Agriculture
Any long-term vision for our province has to recognize the importance of primary agriculture. Former Premier Grant Devine aptly described both seeding and harvest as two huge mega- projects that happen every single year.
Our new provincial government must make continued improvements to long-term safety net programming a top priority. While commodity prices and international trade issues are not the purview of provincial governments, issues like the education portion of property tax and the provinces share of programming must be the priority of any government with a new long-term vision for economic growth for our province.
Thanks to the work done by the Saskatchewan Agrivison Corporation and numerous local economic development bodies, Enterprise Saskatchewan can have a huge head start in coordinating the goals and activities of the agriculture sector. Agrivision anticipates the role we have envisioned for government in economic development and the mandate of Enterprise Saskatchewan: “Government’s role is changing to one where it provides a policy and legislative framework for business growth, leaving it in the hands of the industry to take the lead.” 45
The intensification of agriculture is another initiative which requires attention. Once again, Enterprise Saskatchewan will work in partnership with producers and organizations such as Agrivision to identify and remove barriers to growth in this initiative.
45 Saskatchewan Agrivison Corporation Inc. It’s Time to Move Forward. http://www.agrivision.sk.ca/Archives- PDF/Other/sac_brochure.pdf , June 2, 2004.
The Promise of Saskatchewan — September 2004 28 ______
Enterprise Saskatchewan must also be positive force within government to ensure current program offerings such as Crop Insurance and the Canadian Agriculture Income System (CAIS) are bankable. There will likely never be an agriculture safety net program in our country that is equitable in any meaningful way to those of Europe and the United States. ‘Bankability’ of what is available is essential and necessary for this vital sector of our economy.
Tourism
Tourism is a major economic growth area for Saskatchewan. Our natural advantages include wide open spaces, a rich Aboriginal and non-Aboriginal history and a vibrant arts and cultural community. Together they create a strong foundation for further growth in niche areas such as Aboriginal tourism, eco-tourism and cultural tourism.
As mentioned previously, Tourism Saskatchewan’s mandate as an industry-driven partnership with responsibility for marketing, training and industry development is beneficial to the sector’s long-term development. The Saskatchewan government also has a role to play in supporting capital investment in tourism including investment in interpretive and historical centres.
Further growth in our tourism sector is dependent upon removing barriers and promoting ourselves in Canada and around the world. Some of the key issues facing the tourism industry across the country, such as infrastructure, are particularly important in Saskatchewan. The Tourism Industry Association of Canada (TIAC) has called upon the federal government and the provinces to participate in a national transportation investment strategy which would see a higher proportion road user taxes, such as gas and excise taxes, be returned to maintain our highway system. 46 While financial considerations will dictate the government’s ability to participate in such a strategy, its goal is correct. Poor infrastructure is a barrier to growth in many industries in our province, and must be targeted for improvement.
Forestry
Border disputes notwithstanding, forestry will play a key role in a bright future for Saskatchewan. The forest industry in Saskatchewan employs 6,000 people whose annual income is about $215 million. Another 7,600 people in our province derive their incomes from forestry activities.47 The willingness of industry members to work in partnership with First Nations and government is a source of strength, and a foundation for further growth. To ensure that we capitalize on our strengths and develop our potential, we need to address specific barriers such as red tape, government permitting, the capital tax and the PST.
Mining
Mining is the third largest industry in the province, following oil and natural gas, and agriculture. In addition to being the largest producer of uranium and potash in the world, Saskatchewan’s
46 At the moment, the federal government collects more than $6 billion in such taxes, but returns less than 6 per cent to the system through contributions to construction and maintenance. Tourism Industry Association of Canada, “Issues – Infrastructure,” http://www.tiac-aitc.ca/english/Infrastructure.asp ,June 4, 2004. 47 Council of Saskatchewan Forest Industries, “About COSFI,” http://www.cosfi.sk.ca/html/about.html , May 31, 2004.
The Promise of Saskatchewan — September 2004 29 ______mining industry employs over 20,000 people with total mineral sales of $2.4 billion in 2003. Coal, copper, zinc, potassium sulphate and even diamonds are also part of our future.48
As in other industries, we need to address barriers to further economic growth. These barriers include the resource surcharge, corporate income taxes and the capital tax. We need to make clear that the role of government is not only to regulate, but to assist companies in navigating the maze of government.
Advanced Education, Research and Development
For too long, we have looked on post-secondary education as a service and a cost rather than as an investment. Fifteen years ago, the Government of Sweden expanded the mandate of its universities to include economic development in addition to education and research. Sweden has also encouraged students to use their knowledge to start their own companies through the creation of ‘smartparks’ at the nation’s universities. While Canadian universities frequently try to grow their research parks by luring large businesses, Sweden instead focuses upon creating new start-ups by students and faculty. The net result is impressive. “In Sweden the vast majority of the approximately 500 companies in the country’s smart parks were created at universities, by both students and faculty.” 49It is worth noting that Innovation Place has also been successful by placing priority on homegrown enterprise.
A government prepared to make a commitment to our existing post-secondary institutions can benefit from the increased economic growth which results from attracting investment, ideas, and individuals to our province. Unfortunately, it appears that our Universities may understand this better than the current government. As the recent integrated plan from the University of Saskatchewan states, “we must make a renewed commitment to Saskatchewan to compete in the 21st century.”50
Environment
Our obligation to manage Saskatchewan’s natural resources is both a responsibility and an opportunity. Projects such as the Communities of Tomorrow project at the University of Regina provide an excellent example of how Saskatchewan can be a national centre of excellence in environmental sustainability and technology commercialization.
Life Sciences, Synchrotron, Information Technology
Information technology and the life sciences sectors are key engines in the new economy of our province. The synchrotron is Canada’s largest science project, with the potential to attract $35- million annually in commercial research and development. The Canadian Light Source, the International Vaccine Centre,and the Veterinary and Infectious Disease Organization (VIDO) are not only helping develop new science in Saskatchewan, they are, to quote the Executive Director of the Saskatoon Chamber of Commerce, “evidence Saskatoon isn’t competing with
48 Saskatchewan Mining Association, “Fact Sheet – General Information,” May 2004, http://www.saskmining.ca/factSheets.php?PAGE=GI , May 31, 2004. 49 Kirbyson, p.C8. 50 University of Saskatchewan, p.18.
The Promise of Saskatchewan — September 2004 30 ______mining industry employs over 20,000 people with total mineral sales of $2.4 billion in 2003. Coal, copper, zinc, potassium sulphate and even diamonds are also part of our future.48
As in other industries, we need to address barriers to further economic growth. These barriers include the resource surcharge, corporate income taxes and the capital tax. We need to make clear that the role of government is not only to regulate, but to assist companies in navigating the maze of government.
Advanced Education, Research and Development
For too long, we have looked on post-secondary education as a service and a cost rather than as an investment. Fifteen years ago, the Government of Sweden expanded the mandate of its universities to include economic development in addition to education and research. Sweden has also encouraged students to use their knowledge to start their own companies through the creation of ‘smartparks’ at the nation’s universities. While Canadian universities frequently try to grow their research parks by luring large businesses, Sweden instead focuses upon creating new start-ups by students and faculty. The net result is impressive. “In Sweden the vast majority of the approximately 500 companies in the country’s smart parks were created at universities, by both students and faculty.” 49It is worth noting that Innovation Place has also been successful by placing priority on homegrown enterprise.
A government prepared to make a commitment to our existing post-secondary institutions can benefit from the increased economic growth which results from attracting investment, ideas, and individuals to our province. Unfortunately, it appears that our Universities may understand this better than the current government. As the recent integrated plan from the University of Saskatchewan states, “we must make a renewed commitment to Saskatchewan to compete in the 21st century.”50
Environment
Our obligation to manage Saskatchewan’s natural resources is both a responsibility and an opportunity. Projects such as the Communities of Tomorrow project at the University of Regina provide an excellent example of how Saskatchewan can be a national centre of excellence in environmental sustainability and technology commercialization.
Life Sciences, Synchrotron, Information Technology
Information technology and the life sciences sectors are key engines in the new economy of our province. The synchrotron is Canada’s largest science project, with the potential to attract $35- million annually in commercial research and development. The Canadian Light Source, the International Vaccine Centre,and the Veterinary and Infectious Disease Organization (VIDO) are not only helping develop new science in Saskatchewan, they are, to quote the Executive Director of the Saskatoon Chamber of Commerce, “evidence Saskatoon isn’t competing with
48 Saskatchewan Mining Association, “Fact Sheet – General Information,” May 2004, http://www.saskmining.ca/factSheets.php?PAGE=GI , May 31, 2004. 49 Kirbyson, p.C8. 50 University of Saskatchewan, p.18.
The Promise of Saskatchewan — September 2004 30 ______other Canadian cities when it comes to health science infrastructure – it is competing with a handful of centres worldwide.”51
Saskatchewan is also a world leader in agricultural biotechnology. With a thriving ag-biotech cluster, it is critical that we find innovative ways to continuing developing our life sciences sector by attracting new venture capital to the province.
Through research and development activities at the Petroleum Research Centre at the University of Regina and Innovation Place at the University of Saskatchewan, we are building a solid foundation for further scientific breakthrough and the commercialization of new technologies. Further development in these key sectors will depend on an innovative mix of new growth tax incentives, a streamlined regulatory environment, venture capital, and smart parks to encourage new entrepreneurs.
Construction
A 2002 paper issued by the Saskatchewan Construction Association noted both the importance of the construction industry to the economy of the province and the challenges facing the industry.
Specifically, the paper identified labour force development as a major challenge. Like many other skilled trades across the province, the construction industry is facing both an aging workforce and a shortage of skilled workers. Strategies to address this barrier include better career counseling and work based education programs in high school. 52 The industry has also targeted First Nations and Aboriginal youth with training and apprenticeship programs. Finding ways to broaden this initiative and make it work in conjunction with government and the industry as a whole should be a priority.
Further issues facing home builders, commercial contractors, and one-person operations in the construction industry include taxation, the tendering processes, and workplace compliance.
Trucking and Transportation
A supplement on transportation in the latest Action Saskatchewan Sectors Report states the challenges facing the industry: “the major issue that needs to be dealt with in terms of the transportation sector is the improvement of the province’s highways.” 53One of the unfortunate after-effects of recent grain transportation changes is the increased use of our highways by truck transport. The report notes that significant investment will be required for a number of years to improve the condition of our roads. Increased usage, however, has contributed to an even more significant trucking industry in our province.
51 Gerry Klein, “Synchrotron and VIDO get $100 million,” Saskatoon StarPhoenix, March 9, 2004, p. A3 52 Saskatchewan Construction Association, Construction: Meeting Saskatchewan’s Challenge, 2002, http://www.saskchamber.com/documents/92Saskatchewan_Construction_Association_Presentation.pdf , May 31, 2004. 53 Saskatchewan Chamber of Commerce. Action Saskatchewan: A Blueprint for 2005. What We Heard, 2001, http://www.actionsask.com/documents/192Action_Saskatchewan_Version_2.0_Supplement.pdf , p.11, June 5, 2004.
The Promise of Saskatchewan — September 2004 31 ______
While the Saskatchewan Auto Fund provides the trucking industry with a competitive advantage in our province, barriers facing this key sector such as taxation and a shortage of skilled labour are preventing further growth. The Action Saskatchewan report urges governments at all levels to “re-evaluate the taxes on fuel and the impact this has on the industry and ability.”54 High fuel taxes and the cost of property taxes on rail lines are also putting the rail sector at a competitive disadvantage with neighbouring jurisdictions. If we are going to encourage meaningful investment in short-line rail lines and development in the rail industry by independent and community based proponents, these issues will have to be addressed. Rail and air transportation offer significant potential for economic development in Saskatchewan. However, high fuel taxes are a major barrier to growth for both of these industries.
Financial Services
The strength of our Credit Union system alone would dictate that this sector must be a key part of any new economic vision for Saskatchewan. The presence of the chartered banks and non- chartered banks, Co-operators Life Insurance Company, Canada Life, and of course SGI enhance the already significant economic potential of our financial services sector. The retail financial services sector also provides an important source of employment for rural Saskatchewan.
Given the importance of the financial services sector as an employer and supplier of capital in our province, it is crucial that we create a competitive environment to encourage growth. One notable barrier for this sector is a discriminatory tax rate that sees financial institutions taxed at a higher rate than manufacturing firms. The issue of parity in business taxation is one deserving of further review.
Arts and Culture
Artists and cultural workers play an invaluable role in our province. They help us to sustain a high-quality of life, define ourselves as a people and a province, contribute to the ongoing creativity and innovation of our citizens and create new jobs in emerging cultural industries. Enterprise Saskatchewan will examine new ways of supporting the arts and fostering entrepreneurial initiative. New growth tax incentives for cultural enterprises could provide new mechanisms to stimulate growth in the sector.
54 Saskatchewan Chamber of Commerce, What We Heard Sector Reports, p.12.
The Promise of Saskatchewan — September 2004 32 ______Appendix II Risk Assessment
As with any paradigm shift for an organization, a shift in the economic development model of our province involves both risks and opportunities. The opportunities have been outlined in the previous pages. What are some of the risks?
1. Risk of Ceding Control
Government risks losing some control over economic development tools and processes as it cedes this ground to Enterprise Saskatchewan. In terms of assessment, there seems little downside to this risk given what previous governments have achieved by maintaining control.
2. Risk of the Global Economy
World events, new markets, and the “shrinking of the globe have all served to bring about rapid changes in our economy. If Harvard Business Professor Joseph Schumpeter is right, the essence of capitalism is creative destruction. Thomas Friedman paraphrased his theory as the perpetual cycle of destroying the old and less efficient product and service and replacing it with a more efficient and useful one.55 Whether you are in the camp that holds to a quick end to the economic phenomena known as globalization or an adherent to the notion that the democratization of technology, finance and information has set in motion a lasting economic epoch, the fact remains that today’s economy is for jurisdictions which are fleet of foot.
3. Risk of Uncertainty and Job Flux
The 1999 State of the New Economy Index produced for the Progressive Policy Institute highlighted the fact that, “[w]ith entrepreneurial growth, however, comes risk. Almost a third of all jobs are in flux every year (meaning they have either recently been added, or will soon be eliminated from the economy).” 56 Certainly the nature of the global economy means that jurisdictions must act quickly to ensure that they remain competitive. This requires continual investment in both human capital and new technologies. It is essential that we position ourselves to keep up with the pace of change, so that the disappearance of one business is replaced with the creation of two new ones. There is a risk that the partnership structure of Enterprise Saskatchewan may not lend itself to speed as much as a singularly driven agency. However, this risk can be mitigated by recognizing the need for agility in economic development related policy.
4. A Diminished Role for Enterprise Saskatchewan
Over a period of time, government may be tempted to ignore or diminish (through funding) Enterprise Saskatchewan if it desires more control in this key public policy field. On a smaller scale, STEP and Tourism Saskatchewan have survived such temptations on the part of the
55 Friedman, p.11. 56 Robert Atkinson, Randolph Court, and Joseph Ward, The New State Economy Index (Washington: Progressive Policy Institute, Technology, 1999), p. 3.
The Promise of Saskatchewan — September 2004 33 ______sponsoring government. The breadth of the partnership and the stake of its mission should protect Enterprise Saskatchewan from future governments seeking greater public control of economic development.
5. Failing to Prioritize Innovation, Entrepreneurship, and Education
There is a risk that future governments may lose sight of the importance of the innovation, entrepreneurship, and post-secondary education components of the Enterprise Saskatchewan model.
It goes without saying that these components are critical to its ongoing success, as they are to all successful new economies. Ireland’s transformation into the Celtic Tiger was brought about because it, ”advanced its technological, technical and trades training programmes and institutions, as well as establishing new apprenticeship programmes.”57 As McMahon points out, “[t]he availability of educated workers for the jobs being created, particularly in the high-tech sector, sustained and furthered Ireland’s recovery.”58
Further evidence from the State of the New Economy Index which ranked American states in terms of their ability to compete for new economy benefits, postulates that:
“In the New Economy, states’ economic success will increasingly be determined by how effectively they can spur technological innovation, entrepreneurship, education, specialized skills, and the transition of organizations – private and public – from bureaucratic hierarchies to learning networks.”59
The study ranks the states by various indicators and offers the following steps to guard against the risk that these economic success factors will be diminished :
1. Co-investing in skills of the workforce; 2. Co-investing in an infrastructure for innovation; 3. Promote innovation and customer-oriented-government; 4. Foster the transformation to the digital economy; 5. Foster civic collaboration.60
Written in 1999, this study is somewhat dated and we have seen significant shock waves through the North American technological industry in the intervening time period. Yet the fundamental characteristics of the new economy – speed and creative destruction – remain its hallmarks five years later. The technological economy continues, and its risks and opportunities must have the undivided attention of Enterprise Saskatchewan.
57 McMahon, p.88 58 ibid 59 Atkinson, p.4. 60 ibid.
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