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Finlayson: Natural resource industries critical to BC's economic success (Troy Media)

British Columbia is a province with an increasingly urban-based population whose economic success has historically been tied to the efficient extraction, processing and exporting of commodities. In 2011, approximately four-fifths of B.C.’s international merchandise exports consisted of goods produced by the forestry, energy, mining and agri-food industries taken as a group.

This proportion is little changed from 10 years ago, and it is substantially higher than the share of resource-based goods in overall Canadian merchandise exports.

Today’s heavily urban population is poorly equipped to understand the realities of B.C.’s industrial and economic base. Elected officials, media commentators, and the province’s cultural and intellectual elites disproportionately hail from the comfy precincts of the Lower Mainland and Greater Victoria. Yet urban British Columbia is not where the export wealth that does so much to underpin our standard of living is mainly generated.

There is, in short, a growing disconnect between the demographic structure of the province and the industrial and export base that supports the province’s economy. This puts resource industry stakeholders and the communities in which they operate at a disadvantage in the noisy arenas of provincial politics and public affairs. To be heard, they must be persistent in articulating a simple but fundamental message: to a significant extent, British Columbia’s economic well-being depends on well-managed resource industries that are able to get their products to the markets where we do business today – as well as to those that we aspire to access in the future.

A thriving resource economy requires sensible government policies in a number of areas. These include:

  1.  the management and regulation of the resource extraction occurring on Crown land;
  2.  a competitive tax and fiscal structure that supports a reasonable return on private sector capital invested while also ensuring that the Crown obtains a fair return on the province’s collective resource wealth;
  3.  the efficient application of science-based standards for environmental protection and project review; and
  4.  programs to help develop the skills and talent needed to fill today’s increasingly knowledge-based resource sector jobs.

How does B.C.’s resource economy measure up, judged against the acid test of competitiveness? Two areas of public policy stand out in this context.

Start with taxation. The recent return of the provincial retail tax in place of the Harmonized Sales Tax represents a backward step for most B.C. industries, including many of our leading exporters. The Business Council of B.C. estimates that re-instating the retail sales tax will increase the cost of producing goods and services in the province by $1.5 billion per year, with the negative impacts felt most acutely by businesses engaged in resource development, value-added manufacturing, transportation, and parts of the advanced technology sector. For many companies, the B.C. carbon tax presents an added economic burden: by raising the cost of all forms of fossil fuel energy, the carbon tax makes it more expensive to produce goods in British Columbia, and to ship those goods to market. Then there is the one-point increase in the corporate income tax rate announced in the February 2013 provincial budget. On top of all of this, B.C. is further disadvantaged by having few tax-based incentives aimed at encouraging investment in resource upgrading and value-added processing.

The second key policy area is government regulation. B.C. has made progress in reducing “red tape” and easing government-related paperwork requirements, particularly for smaller businesses. But the picture is less positive for major industry and for our key resource sectors. Gaining access to Crown land and resources; obtaining licenses, permits and approvals in a timely manner; and dealing with the complex thicket of First Nations rights and title issues and consultation obligations – all of these remain big challenges for many resource companies.

There are no magic solutions to these problems, but at a minimum the province should commit to “smart regulation” in all fields under its jurisdiction, exercise its responsibility as the ultimate landlord and decision-maker over the Crown land base, and ensure that front-line Ministries are properly resourced to handle the flow of business coming their way.

It’s also important that policy-makers develop a better understanding of the cumulative impact of regulation by looking, on a sector-by-sector basis, at the full array of government rules, fees, legal and administrative requirements in a holistic way – a perspective that’s sometimes been lacking here, but one that’s particularly important to the economic viability of the natural resource industries that continue to be mainstays of British Columbia’s prosperity.

As publiced in Troy Media on May 28th, 2013