Commentary

Economic Development Is The Cure, Not The Illness

Opportunities New Brunswick CEO Stephen Lund.

Krista Ross is CEO of the Fredericton Chamber of Commerce

Last month, a Brunswick News editorial proclaimed that the time was right for the Higgs Government to disband Opportunities New Brunswick (ONB). I disagree.

The editorial opens by stating that “centralized economic development is bad public policy” as a blanket statement. I suppose if you believe ONB is making all their decisions from inside their office in Fredericton that might be true – in fact – they have satellite offices across the province taking the local pulse, identifying opportunities, and engaging with local entrepreneurs and stakeholders.

We’ve seen the work they do locally, and to dismiss ONB’s efforts with stakeholder organizations like the chamber of commerce and Ignite Fredericton is unfair and uninformed. Local governments, community stakeholders and industry from across the province have been coordinating with ONB since its inception.

Having an overarching organization like ONB provides several benefits that were not considered in the editorial. It expresses concern with centralization of economic development pitting communities against each other, competing over limited dollars.

Without an entity like ONB, it is likely that the competition would be even worse, because no one would be coordinating the efforts, communities would be potentially competing for the same opportunities – like we used to do in the bad old days. New Brunswick needs to have a coordinated provincial strategy that is – yes – tailored to local regions and builds on the strengths of local communities, and a central body can accomplish this by leveraging the skills of individuals and the strengths and assets of the community or region.

A good Fredericton-centric example of the value of a provincial layer of economic development is the burgeoning cybersecurity industry. Fredericton’s knowledge economy has been flourishing for quite some time – driven by our post-secondary institutions that are building on decades of investments and decisions by all three levels of government, private investors and other stakeholders and there are examples of this around the province.

There are two important points here. First, ONB has played an instrumental role in developing the cybersecurity sector in Fredericton and we would not be in the position we are today without them. Second, without their involvement and their ability to strategize provincially, can you guess how many communities in N.B. would be competing to get involved in cybersecurity? “All of them” may be a stretch, but not by much.

And where would that lead? At best, a diluted and piecemeal approach – the bad old days. A centralized agency can be more efficient with funds – piecemealing $40M around the province to an undefined number of communities won’t go nearly as far – diminishing leverage when it’s spread so thin.

The editorial also reviews some of the most public failures of ONB and notes that ‘economic development bureaucrats are not flawless’ as a reason to stop providing financial incentives. It’s been said many times, but it’s worth repeating: there is no jurisdiction in North America that does not use financial incentives to draw investment. We may not like giving money to international corporations to invest in New Brunswick, but what is the alternative? Not to be involved at all?

And to say that the track record hasn’t been flawless is unrealistic. Is that really the standard? Would local communities be held to the same flawlessness standard before that model is abandoned? Like any investment agent – public or private, you must look at the bigger picture and the long game. Do the hits outweigh the misses? Are they making money over a one-, three- or five-year period? It’s why investors don’t put everything into a single stock – no one is flawless.

Of course, we would all prefer if every investment was a winner, but this is not a reasonable expectation. None of this necessarily means that ONB has to provide financial incentives, but if we’re going to swim against that strong of a tide, Plan B better be something more than “make better policies.” Economic Development agencies like ONB have many tools in their toolbox – financial incentives (such as loans and payroll rebates) are just one of them. Criticism of ONB tends to be in the financial area, but we need to keep in mind the other areas of their work and not decide to get rid of a whole organization or strategy due to concerns with one component of their work.

The editorial is correct that high taxes and other costs are a major problem with economic growth in N.B., but to cite the ONB budget as a significant factor is incorrect – the $40-million for ONB is a relatively minor factor when considering a $15-billion debt that is really driving much of our tax situation. N.B. spends the equivalent of ONB’s budget on our debt interest every three weeks.

However, in real terms, we must recognize that ONB’s $40-million budget is a lot of money so it’s important that they are transparent and accountable and that New Brunswickers get value for those dollars and understand the value we are getting. The chamber often talks about the government investing strategically instead of spending politically. What separates a government ‘spend’ from an ‘investment’ is the existence of a legitimate ROI – the return on investment.

ONB is delivering ROI – maybe it’s not perfect but they are returning $1.66 in personal income taxes (based on jobs created) back to NBers for every $1.00 invested – not to mention the other returns associated with growth. If a concern is lack of results, perhaps the question we should be asking, or the results we should be expecting could be realized through understanding ONB’s Key Performance Indicators (KPIs) – perhaps this is where stakeholders can even better engage with ONB to help develop, or understand and be well informed about the current KPI’s to ensure our tax dollars are being invested in the best way possible and that the message is getting out to all taxpayers.  To dismiss the value and function that ONB provides with only a vague idea to make economic more localized is not going to fix anything.

This doesn’t mean that there isn’t also a need for local organizations, private funding sources, or an all-hands-on-deck approach. Increasing private-sector involvement and investment is always preferable, but as the editorial ends:

“The fact remains that companies in the Maritimes do face challenges in securing capital even for worthy projects, with risk-averse private lenders sometimes taking a pass on investing here. These public agencies have a role to play in supporting local businesses and marketing their geographic region for investment. If government loans and grants can stimulate viable projects and improve the appeal of the local economy, such programs can provide value for taxpayers and communities.”

I quite agree with that statement and would point out that ONB has been evolving since its creation based on the needs of the province. And it will continue to evolve – it can never be perfect, but it would be a mistake to start from scratch once again. There is real value in continuity; there is real value in coordination and there is real value in what ONB delivers. Economic development is the cure, not the illness.

Huddle publishes commentaries from groups and individuals on important business issues facing the Maritimes. These commentaries do not necessarily reflect the opinion of Huddle. To submit a commentary for consideration, contact editor Mark Leger: [email protected]