Premier Jason Kenney listens to Janice MacKinnon, a former Saskatchewan finance minister, and chair of a blue-ribbon panel announced to examine the Alberta government's financial situation.
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Beneath an array of data that shows Alberta’s financial house needs some major repair work to balance the budget books, the new MacKinnon report shines a spotlight on another sore spot to fix.
The province needs to up its game on attracting private investment if Alberta wants to grow the economy, increase government revenues and get its finances back on track.
“The panel found that Alberta has lost its competitive edge in attracting investment and is seen as being over-regulated, with lengthy processes and uncertain timelines,” panel chair Janice MacKinnon told reporters this week.
“Alberta has lost its reputation as the most competitive place to invest.”
The expert panel report released earlier this weekdelves into the state of Alberta’s finances, focusing on the need to curb spending if the Kenney government expects to balance the province’s budget in 2022-23.
Largely overlooked, however, was a suggestion government “take a deliberate and proactive approach to increasing revenues through growth in Alberta’s economy . . .That growth will only be achieved by Alberta being an attractive place to invest by investors inside and outside of Alberta.”
The idea sounds simple enough: improve economic competitiveness, focus on making the province more enticing for investors and the money will follow.
Former Saskatchewan finance minister Janice MacKinnon speaks on the report she chaired on the state of the province’s finances at the McDougall Centre in Calgary on Tuesday September 3, 2019. Finance Minister Travis Toews listens in the background.
But success will involve more work than just putting a fresh coat of paint on an old car, given the headwinds facing the province.
Earlier this decade, it was relatively straight-forward for a province sitting on the world’s third-largest oil reserves to pull in money.
“We did have it easy. A significant proportion of investment and wealth creation was driven by those very high commodity prices,” said University of Alberta School of Business dean Joseph Doucet.
“Among other things, that led to cost escalations and probably less urgency regarding some of these questions about competitiveness, because the commodity prices were so high that people were throwing money at problems.”
The days of government doling out $400 cheques to all provincial residents — remember Ralph Bucks in 2006 — are long gone.
So too are oil prices hovering above US$100 a barrel.
Rising oil prices once meant boom days for Canada. Not any more, say economists.
The study notes growth in private-sector investment in Alberta has lagged behind the rest of the county recently.
That’s not a surprise. The collapse of global oil prices in 2014 triggered a sharp drop in energy sector expenditures and an economic slowdown in the province. As construction on major oilsands projects has wrapped up with no new developments in the wings, investment has continued to fall.
According to the MacKinnon report, total private-sector investment in Alberta dropped by about one-quarter in 2015 and another 22 per cent in 2016. Last year, Alberta’s overall investment levels dipped by one per cent, and are expected to decrease by a similar amount in 2019, the report states.
Meanwhile, private investment has increased across the rest of Canada since 2017, rising by two per cent last year and expected to increase by five per cent in 2019.
What can Alberta do to reverse such trends, when it doesn’t control global commodity prices, federally regulated pipelines or the U.S.-China trade spat?
The report recommends government work with industry and Albertans to craft a “compelling vision for Alberta’s economic future,” devising a deliberate economic strategy to create jobs and wealth.
“Make competitiveness and attraction a top priority and send an important signal to industry and investors that Alberta is putting out a ‘welcome mat’ and tackling all the issues facing business, not just taxes,” it states.
Pictured is an empty pace an empty space put for lease in Five Ten Fifth building in Downtown Calgary on Monday, June 24, 2019.
These are largely aspirational goals, but they do highlight important issues such as economic competitiveness and innovation that require more thought and attention.
During the spring election, the UCP pledged to cut Alberta’s corporate income tax rates by one-third by 2022 to create jobs and attract investment — an idea that has both fierce detractors and supporters.
“Reducing the corporate tax can make economic sense, but it can also be a signal . . . that Alberta, it’s back for business,” MacKinnon said.
In an interview, the former Saskatchewan finance minister said the panel believes Alberta needs to measure competitiveness by identifying key factors that drive economic growth and investment, and then track the data carefully.
The panel cited a 2017 report card completed for the government that found Alberta performed well in a number of key competitiveness measurements — such as GDP per capita and head office employment — when stacked up against 14 other jurisdictions, including B.C., Texas and Norway.
But it performed near the bottom in research and development spending, time required to start a new company and venture capital investment.
Similarly, the Conference Board of Canada handed Alberta a D grade in its report card last year examining innovation performance, ranking the province 19th among 26 jurisdictions.
Panel vice-chair Mike Percy said another issue facing the province is the amount of time it takes to get projects through approval processes when several departments or agencies become involved.
Mike Percy, a former U of A Dean of Business.