Research Report No. 18 | April 2017
Economic Zones of Northern Ontario: City-Regions and Industrial Corridors
By Charles Conteh northernpolicy.ca Who We Are
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This report was made possible through the support of our partners Lakehead University, © 2017 Northern Policy Institute Laurentian University and Northern Ontario Heritage Fund Corporation. Northern Policy Published by Northern Policy Institute Institute expresses great appreciation for their generous support but emphasizes the 874 Tungsten St. following: The views expressed in this commentary are those of the author and do not Thunder Bay, Ontario P7B 6T6 necessarily reflect the opinions of the Institute, its Board of Directors or its supporters. Quotation with appropriate credit is permissible. ISBN: 978-1-988472-31-7 Author’s calcuations are based on data available at the time of publication and are therefore subject to change.
Edited by Barry A. Norris Contents
Who We Are 2
About the Author 3
Executive Summary 4
Acknowledgments 5
Introduction 6
An Overview of Northern Ontario’s Economic and Social Structure 8
Past and Present Constructs of Northern Ontario’s Economic Clusters 9
A Conceptual Discussion of Economic Clusters 13
Economic Clusters in Northern Ontario 14
The City-Region Economic Clusters 15
The Industrial Corridor Economic Clusters 22
Conclusion 27
Policy Implications 28
References 30
Related Research 34
About the Author Charles Conteh
Charles Conteh is an Associate Professor in the Department of Political Science at Brock University. From 2007 to 2009, he served as Assistant Professor in the Department of Political Science at Lakehead University. Over the past eight years, he has focused his research on public policy responses to the economic challenges of various regions, including Northern Ontario. His broader research interests are in the areas of Canadian and comparative public policy, public management, political economy and governance. Northern Policy Institute / Institut des politiques du Nord 4 Economic Zones | April 2017
Executive Summary
As the twenty-first-century global economic system It should be noted that another important region, unfolds, it is exposing the fragility of national models the Far North, has largely been excluded from this of economic governance. Globalization is shifting study. The particular characteristics, potential, and economic power both upward to transnational constraints of the Far North are distinct from those of forces and downward to subnational or regional the other economic regions of Northern Ontario. It is spaces. Now emerging are new, localized production a unique region with special needs based on issues systems of specialized, geographically delineated of access, distance, and density. For instance, these industrial zones, which are becoming the main communities need investment in rudimentary physical spaces for contemporary economic development and social services infrastructure just to bring them up and governance. In this process, however, local to par with other communities covered in this study. communities have become increasingly vulnerable. The problems of isolation, lack of basic road and rail Regions that are able to exploit the opportunities access, and subsequent socio-economic exclusion are presented by the disruptive forces of industrial particularly poignant in these Far North communities. restructuring are those that can leverage their The deliberations about strategic investment in the Far economic and social assets to reinvent themselves. North, however, should not be restricted to thinking simply about road access. Rather, it should be a larger In Northern Ontario, the widening diversity of problems framework of community capacity building through among its constituent communities provides evidence the provision of basic necessities that most Canadians that spatial policies, planning, and practices aimed take for granted: safe drinking water, electricity, and at addressing their specific economic challenges are broadband Internet access. a more viable alternative to one-size-fits-all, top-down programs. This study thus examines Northern Ontario’s Thinking about Northern Ontario’s economy in terms economic zones or clusters, and argues that these of geographic economic clusters has implications for zones are natural governance units for economic public policy. Some evidence of positive changes development planning and investment. emerging from the challenges of economic restructuring can be seen in the extremely strong Four commonly held views about economic clusters in desire on the part of local communities to preserve Northern Ontario date back to the early years of the their existence, reinvent themselves, and adapt to region’s frontier economy. One conceives of the region the imperatives of a post-industrial economy. This as simply two growth poles, with Sudbury and Thunder determination to ride the wave of change must be Bay serving as their respective urban hubs. A second matched, however, by the platforms and processes perspective is to see the five major urban centres with needed to enable these communities to leverage and populations of more than 40,000 — namely, Sudbury, mobilize their economic assets. Such communities need Thunder Bay, Sault Ste. Marie, Timmins, and North Bay to feel a sense of control of their own socio-economic — as the main economic zones of the region. A third destiny and be a critical part of the identification of construct is based on the two major transportation assets and challenges and the prioritizing of investment corridors of Highway 11 and Highway 17, and assumes decisions. that people and goods naturally follow these road network in the form of industrial corridors. A fourth Communities do not always require lofty blueprints of approach to economic clusters is based on the growth plans; instead, they need a local governance tendency to conflate Northern Ontario’s administrative infrastructure that enables them to mobilize ideas and districts with economic zones, even though such resources to ensure a sustainable future for themselves, districts serve different purposes than economic zones and the partnership of upper levels of government to for strategic industrial policy and community economic help them make the necessary investment in realizing development policy. those ideas. This strategy points to the imperative of greater local control of the economy and new This study, however, introduces the concept of partnerships among constellations of municipalities geographic economic clusters as the main lens bound together by geography, shared assets, and through which to better understand Northern Ontario’s common challenges. Economic development does economic zones. These clusters are divided into six not need rigid governance structure, but fluid platforms “city-regions” — Sudbury, Thunder Bay, Sault Ste. Marie, to think strategically and act regionally with respect to Timmins, North Bay, and Kenora — centred around sector-specific supply chains, agglomerations, shared major urban areas; and five “industrial corridors” opportunities, and needs. At present, Northern Ontario — Temiskaming Shores, Greenstone-Marathon, has no such platforms. Fort Frances, Parry Sound, and Manitoulin Island — centred around a collection of relatively smaller but geographically proximate communities sharing key similar sectors, assets, and needs. Northern Policy Institute / Institut des politiques du Nord Economic Zones | April 2017 5
Acknowledgments
I am greatly indebted to my family for their remarkable support of my successful completion of this project. As always, they stoically endured my countless hours of self-imposed solitary confinement in my study and at work away from home conducting research. I also owe a deep gratitude to the many interviewees in the public and private sectors and in a number of non-governmental organizations who shared their valuable experiences and insight with me. I was often amazed by their grace in fielding my usually inquisitive and audacious questions about their organizations. They accommodated my harassment and sometimes erratic schedule with patience and a willingness to avail me of their valuable time. Without their expertise and support, this project would not have been possible.
Finally, I wish to thank the Northern Policy Institute (NPI) for giving me the opportunity to undertake a project so close to my heart ― studying developments in Northern Ontario. The breathtaking landscape and unspoiled beauty of the region’s natural wonders have etched a special place in my heart, and it is this passion that I bring to my current research. Through the support of the NPI, I was able to conduct extensive research around the region and meet with people across all sectors whose daily work contributes to the building of this vast, rich, and beautiful part of Ontario. Northern Policy Institute / Institut des politiques du Nord 6 Economic Zones | April 2017
Introduction
Prime Minister Justin Trudeau famously declared at a become increasingly vulnerable (Conteh 2015; high-powered gathering of the World Economic Forum Eraydin and Taşan-Kok 2013; Storper 2013). The regions Annual Meeting in Davos, Switzerland, in January 2016 that successfully combat the threats and exploit the that “[m]y predecessor [Stephen Harper] wanted opportunities of the disruptive forces of industrial you to know Canada for its resources. I want you restructuring are those that can leverage their tangible to know Canadians for our resourcefulness” (Milner and intangible economic and social assets to reinvent 2016). This statement signals a visionary embrace of themselves. In Northern Ontario, for instance, the the opportunities and challenges of the twenty-first- widening diversity of problems among its constituent century economy. It is a generally accepted axiom, communities provides evidence that spatial policies, however, that no single national policy of economic planning, and practices aimed at addressing the development would work in a country as vast and specific economic challenges of communities are more diverse as Canada (Bradford and Wolfe 2011; Conteh viable alternatives to the one-size-fits-all, top-down 2013; Savoie 2003). The most practical and effective programs of conventional policy interventions. way to tap the country’s resourcefulness in the current age of unprecedented industrial restructuring is for In light of the above, the goal of this study is to each region to exploit its assets and strengths fully determine at a more fundamental level how while addressing its peculiar challenges. Cookie-cutter many economic regions or clusters there are in national economic policies have never worked in Northern Ontario.1 In pursuit of this goal, I offer a Canada or anywhere else in the world. Indeed, most deeper understanding of the distinct and peculiar residents of Northern Ontario know this all too well. configurations of Northern Ontario’s economic/regions and clusters, and argue that these economic zones One significant aspect of the transformation that is should be treated as natural governance units for occurring in the global economic system as the twenty- the purposes of economic development planning first century unfolds is the exposure of the fragility of and investment. This undertaking is highly important national models of economic governance (Asheim, because it should precede any meaningful discussion Cooke, and Martin 2006; Porter 1998; Scott 2001). Just about bottom-up models of economic development. over two decades ago, many observers wondered The study sheds light on long-prevailing assumptions whether the major shifts in industrial structure, the rise about the configuration of the region’s economy, given of mass production methods, and the emergence of the distinct assets and needs of clusters of communities the large integrated firm would result in the demise of across its vast geographic space. localized concentrations of specialized activities. Not so; rather, quite the opposite is happening. First, however, a brief note on the research methodology is in order. One challenge of studying Globalization is shifting economic power upward to economic clusters is that boundaries often do not transnational forces on the one hand, and downward correspond to conventional industry classifications that to subnational or regional spaces on the other (OECD statistics-gathering agencies use. Economic clusters are 2007; Storper 2013). These countervailing trends are often formed by a complex combination of activities some of the central paradoxes of globalization. Some involving trade in raw materials, intermediate goods, observers refer to this paradox as “glocalization.” final products, machinery industries, and the like (Belussi Globalization and technological change seem to be 2006); thus, conventional industrial classifications might reinforcing, instead of undermining, the importance of prove misleading (Penaccia 2006). It is more fruitful “location” in the organization of economic life. What to use concepts of interrelatedness guided by the have emerged are new localized production systems industries’ technology base (Porter 1998) – namely, the of specialized, geographically delineated industrial range of horizontally and vertically related industries agglomeration. These point to the general resurgence that provide the most organic and realistic indications of geographic clusters of economic regions as the of agglomerations and complementary industries within main spaces of contemporary economic development a given geographic node. and governance. This means, therefore, that the global economic system should be best understood Therefore, the approach I take in this study to identify as a mosaic of subnational regions of production clusters is to look for geographic nodes of economic and exchange (Gertler and Wolfe 2006; Scott 2001). activities with notable strengths in specific sectors Globalization of economic activity over the past in Northern Ontario. Since there Statistics Canada few decades thus has deepened the centrality of territorially delimited subnational regions acting as critical loci of economic governance and reinvention. 1 I use the terms “clusters,” “regions,” “zones,” and “corridors” interchangeably in this study. Although different research The disruptive forces of global economic restructuring traditions prefer one term over another, they all generally mean the same thing: a geographically delineated space of economic also mean, however, that local communities have agglomeration manifesting a relatively high specialization or density in one or more sectors of the economy. Northern Policy Institute / Institut des politiques du Nord Economic Zones | April 2017 7
provides no data on Northern Ontario’s economic The economic clusters identified in this study are thus regions, I have relied on in-depth interviews with the result of the integration of interview responses key actors across the nine cities and larger towns of about actors’ demarcation of such clusters in the Northern Ontario to confirm the existence, strength, region, content analysis of economic growth plan and breadth of particular economic sectors within documents, and statistical census data. their community. The interviewees include local economic development officers, Community Futures The rest of the discussion is structured as follows. I Development Corporation officials, staff in each of the begin by providing a brief panoramic overview of the main economic development agencies from the two economic and social structure of Northern Ontario. I upper levels of government — FedNor; the Northern then critically outline some of the prevailing constructs Ontario Heritage Fund Corporation (NOHFC); and the of the region’s economic zones, and highlight the Ontario Ministry of Northern Development and Mines key problems and limitations of each construct. Then (MNDM) — local private sector officials in respective I introduce the concept of geographic economic chambers of commerce, individual business people clusters as the main lens through which one can better in the lead sectors of identified economic clusters, understand these economic zones. This section of the officials from non-profit groups, and researchers in post- discussion involves a review of the current academic secondary institutions across Northern Ontario. In all, I and policy literature, as well as an analysis of the main conducted forty-six interviews (each lasting about one criteria used in this study for investigating geographic hour) over a period of two months (May–June 2016). economic clusters. This is followed by an examination and mapping out of the economic clusters based on I asked interviewees to identify the main economic the findings from the field research discussed above. I sectors within their respective cities, towns, and conclude the study with a discussion about the public surrounding rural communities. I also asked them to policy implications of thinking about Northern Ontario’s describe the main export/trading activities of their economy in terms of geographic economic clusters. communities. I then supplemented these interviews with content analysis of economic sector drivers Principally, this section addresses the question: From identified in the strategic economic growth plans of the an economic governance standpoint, what are the various communities.2 I then combined the interviews potential benefits of economic clusters? Relatedly, how and content analysis with population size estimates can the tangible and intangible assets of these clusters from census data pertaining to each of the identified be mobilized to exploit the opportunities and confront geographic economic clusters to highlight the size of the challenges of industrial restructuring and global their respective labour forces and markets. economic change?
Please Note: the communities in the Far North have been excluded from this study because their particular characteristics, potential, and constraints are distinct from those of the other economic regions of Northern Ontario. The Far North is a unique region with special needs based on issues of access, distance, and density. For instance, these communities need investment in rudimentary physical and social services infrastructure just to bring them up to par with other communities covered in this study. The problems of isolation, lack of basic road and rail access, and subsequent socio-economic exclusion are particularly poignant in these Far North communities. The deliberations about strategic investment in the Far North, however, should not be restricted to thinking simply about road access. Rather, it should be a larger framework of community capacity building through the provision of basic necessities that most Canadians take for granted: safe drinking water, electricity, and broadband Internet access.
2 Not all communities have a strategic economic growth plan. Some communities simply listed their key economic sectors and assets on their websites. A few others (especially smaller single-industry towns) had no such data available except for the information solicited by the author through the field interviews. Northern Policy Institute / Institut des politiques du Nord 8 Economic Zones | April 2017
An Overview of Northern Ontario’s Economic and Social Structure
Northern Ontario’s social and economic structure The Aboriginal population of Northern Ontario has manifests several unique characteristics that set it apart increased rapidly in recent decades from just over as a distinct entity for public policy considerations 64,000 in 1996 to about 97,935 in 2011 (Statistics (Southcott 2013). The first is its overreliance on natural Canada 2006; 2011), a trend that generally can be resource exploitation. The result is a high degree of seen as one of the most positive for the region’s future. vulnerability to resource depletion, volatile world Indeed, the past three decades have witnessed the commodity price swings, the roller-coaster boom and increasing visibility of Indigenous Peoples in Northern bust cycles of the resource industries, the whims of Ontario’s social, cultural, and political affairs. Still, corporate decisions, and changes in the Canadian this demographic continues to face considerable dollar exchange rate (Dadgostar, Jankowski, and constraints in the critical areas of education and Moazzami 1992; Skogstad and Alahmar 2016). employment (Madahbee 2013): Indigenous Peoples have lower levels of formal education and lower labour The second, and closely related, characteristic of force participation rates than the average for Northern Northern Ontario relates to the region’s high degree Ontario. of dependence on external forces. Northern Ontario’s history of economic development powered by outside A fourth notable characteristic of Northern Ontario interests has resulted in a rather limited or stunted is its distinct structure of local governance relative to rate of local entrepreneurship compared with other southern Ontario. Unlike most areas of southern Ontario, regions in Canada (Robinson 2013; 2016). This lack of Northern Ontario is made up of districts, instead of an entrepreneurial culture in the region poses one of regions and counties, and Northern Ontario’s districts the most serious constraints to economic reinvention do not have the policy or administrative authority of for communities decimated or challenged by industrial the south’s regions and counties. This means that, in restructuring. Two recent reports by the Northern Northern Ontario, no regional government acts as an Policy Institute illustrate the severity and urgency of this intermediary between the provincial government and problem (Cuddy and Moazzami 2016a, 2016b). the municipalities (Conteh 2015; McBride, McKay, and Hill 1993; Southcott 2013). This characteristic of local A third broad characteristic of Northern Ontario is government poses a peculiar fragility of economic its dispersed and low-density socio-spatial structure, development governance in Northern Ontario generally consisting of three different types of (MacKinnon 2016). Regions provide the forum in which communities. The first consists of the six main cities: the tangible assets of a cluster of municipalities or Sudbury (population 157,857), Thunder Bay (109,140), communities can be scaled up to provide sufficient Sault Ste. Marie (74,948), North Bay (53,966), Timmins density and a sufficiently large resource pool for longer- (42,997), and Kenora (15,348) (Statistics Canada 2011). term strategic economic planning and investment. These cities tend to be relatively more diversified than Regions can also serve as spaces where citizens can other communities, even if still heavily dependent on overcome the centripetal forces of parochialism to natural resource industries. They also serve as important address commonly shared challenges and threats, and centres for health, education, and other services for thereby shape their own socio-economic destiny. This the outlying regions. The second type of communities basic fragility of local governance is a much lamented — the majority of non-Aboriginal communities in the fact in Northern Ontario, and has led to various region — are smaller, significantly less diversified, and and often problematic constructs of de facto local resource dependent, and are commonly referred to economic regions. as single-industry towns (Randall and Ironside 1996; Segsworth 2013). The third type consists of Aboriginal communities. Northern Policy Institute / Institut des politiques du Nord Economic Zones | April 2017 9
Past and Present Constructs of Northern Ontario’s Economic Clusters
The oldest construct of economic zones in Northern A second prevalent construct of economic regions in Ontario, dating back to the early years of the frontier Northern Ontario today is a variation of the two-pole economy of the early 1900s, was to divide the region model and is based on the five major urban centres into two growth poles – namely, Northeastern and with populations of more than 40,000 people – namely, Northwestern, with Sudbury and Thunder Bay serving Sudbury, Thunder Bay, Sault Ste. Marie, Timmins, and as their respective urban hubs. The central political North Bay (Figure 1). This construct arguably has and administrative significance of these two cities and become the most commonly used economic regional their sheer demographic density relative to all other classification in conventional economic development communities in the region have led to the persistence policy discourses (see Conteh and Segsworth 2013).5 of this tradition, which fits well with the hinterland image For example, the Northern Ontario Growth Plan of the region (McBride, McKay, and Hill 1993). In fact, (Ontario 2011), currently the seminal document people from outside Northern Ontario often tend to on the region’s economic prospects, challenges, view these broad categorizations as a most obvious and future directions, identifies these five centres and convenient (even if largely ill-informed) lens as the loci for planning high-level and larger-scale through which to view the region.3 economic investments. Quite apart from the rather dubious assumption of subsuming the city of Kenora Sudbury’s larger population gives the city its under the Thunder Bay economic hub, the notion of considerable market size, with attendant economies five growth poles rests on the same erroneous hub- of scale in retail, professional, and financial services, and-spoke logic of economic investment as that of as well as its concentration of government-related the two-pole concept of the region. Principally, this sectors such as education and health care. Thunder approach disregards local residents’ perception of Bay commands similar economic and administrative their economic space, groups the economic interests clout in addition to its critical role as a multimodal and needs of smaller communities with those of larger hub of land, air, rail, and shipping transportation by urban centres, and assumes a trickle-down logic of virtue of its prime location along major continental economic development. For understandable reasons, transportation corridors. Despite the two cities’ therefore, most residents in smaller communities considerable economic and administrative influence reject the “hub-and-spoke” concept of regional in their respective areas of the region, such dominance economic development, and identify more strongly should not be interpreted to mean that the two areas with the economic cluster approach. They do not function as monolithic economic spaces. The vast see five or even six but more than ten economic differences of economic clusters within each of the two clusters in Northern Ontario based on distinct and poles belie such a generalization. The hub-and-spoke4 identifiable assets and specializations in those clusters logic of economic regions implicit in this assumption of communities. equates political-administrative importance with economic flows and the sectoral configuration of local economies.
3 Author’s interview with an official at the Ministry of Northern Development and Mines, Sudbury, June 2016.
4 The hub-and-spoke concept of economic development argues that a large urban area should serve as the main engine of economic growth, which then trickles down to smaller, peripheral communities. Implicit in this concept is the need to focus economic development investment in the urban area on the assumption that the gains from such investment will spill over to 5 Author’s interview with an official at the Ministry of Northern the surrounding towns and/or rural areas. Development and Mines, Sudbury, June 2016. Northern Policy Institute / Institut des politiques du Nord 10 Economic Zones | April 2017
Figure 1: Five-Pole Construct Centred on Major Urban Areas with Populations of More than 40,000, Northern Ontario
THUN ER BA TIMMINS