DISTURBING TREND OF CANADA/ALBERTA EMPLOYMENT SCENARIO – DESIGN AND ENGINEERING/WHITE COLLAR JOBS DISAPPEARING SWIFTLY

First let’s look at the numbers reported by Canadian economy regarding month of May 2014: Canada's unemployment rate rose to seven per cent from 6.9 per cent over the previous month; the economy actually shed 29,100 full-time jobs in May. As a consolation, there was a gain of 54,900 part-time jobs, most of them likely temporary seasonal work.

Among sectors that lost jobs, the natural resources industry declined by about 23,000, and there were about 21,000 fewer workers in finance, insurance, real estate and leasing. Manufacturing was also down by 12,200 and construction was largely flat. Alberta saw the strongest gains, with 16,400 new jobs, and Newfoundland and Labrador lost 4,100 positions, but the other provinces saw little change in their employment rates.

The number of working Canadians aged 15 to 24 increased by 49,000 (this is attributed to many university and college students finishing their spring term in April and seeking out work for the summer) bringing their employment to a level similar to that of May 2013. However, this was partly offset by fewer employed men aged 25 to 54.

Still, there are 1.3 million unemployed Canadians, evidence of an economy that has run out of steam after churning out strong job gains in the first few years following the 2008-09 recession. One bank’s chief economist says the latest report "pounds home the point that underlying Canadian job growth remains anemic." He further adds, "Even those modest gains are almost entirely concentrated in piping hot Alberta, with the rest of the country managing just 0.1 per cent growth in the past year."

Now, let’s sift the grain from the chaff and also look at some aspects no one is talking about in Canada for whatever reasons – failing to notice in the first place due to ignorance and/or mediocrity, or, not having the guts to stand up and speak about it.

First, about the so-called ‘piping hot’ jobs in Alberta. These are mostly in the construction (sustaining capital and some new capital investment projects), drilling, and maintenance. As we know, these jobs tend to support associated service sector, therefore, there is some addition of jobs in this sector too.

But the most disturbing aspect of jobs in Alberta (and to a reasonable extent in Canada) is that there is continual decline in white collared jobs in design and engineering (in the EPC companies) in particular and other sectors in general. Reasons?

a)      Drop in new capital projects in oil sands by large, medium and small companies due to increasing pessimism in the investing companies (recent example: TOTAL deciding to put $10 billion project on hold for indefinite period);

b)     Owner companies in Alberta insisting on farming out large chunks of engineering work to offshore places, e.g., China, India, Philippines etc. in order to depress total engineering costs.

The combined effect of the above reasons and especially ‘b’ is that more and more engineering work (from FEED and Detailed Engineering) is getting shipped out of Canada. The direct impact of this in Alberta (and EPC companies located in other provinces of Canada) is increasing job redundancies and hence more and more layoffs.

The way things are going, eventually, the EPC companies in Canada would be doing just the concept evaluation, the design basis memorandum (DBM) and a bit of FEED. Consequently, the engineering work force will continue to shrink and large number of experienced engineers and technologists would either go to other countries (wherever they find jobs) or take on jobs much below their competence level. This would potentially have a domino effect – overall decrease in service sectors’ size and contribution to economy (remember, service sector contributes about 70% to Canadian economy).

One may argue that the proposed LNG projects would pick up the EPC houses’ slack increasingly discernible in Alberta. Unfortunately, that’s not going to happen. Why? Because the bulk of engineering will be done by the companies in Japan (example, JGC, Chiyoda), Korea and US (example, KBR, Foster Wheeler). Only some residual engineering work will be done in Canada.

The other industries, namely, mining are also seeing sluggishness and new capex projects are few and far between. There is hardly any basic design and development engineering taking place in manufacturing industry also. This is coupled with another very disturbing situation: sharp decline in intellectual property generation in Canada which is causing atrophy of design and engineering work in those areas.

So, the net effect of above would be that gradually, for all intents and purposes, Canada will get reduced to a body supplying country for construction industry, drilling, and service sectors, essentially, blue collared jobs. The white collared jobs will decline.

To have blue collared jobs is not bad but disappearance of white collar jobs would mean negative impact on service sector (from new higher mortgages, to new homes building, to new vehicles purchase and so on). Of course, this impact would not be felt immediately, it would take a while before StatsCan and the government in Ottawa would notice the significant negative impact on the economy.

Canada was at one time at the cutting edge of knowledge based activities, but that situation is rapidly metastasizing to such a degree that Canada’s leadership in technology and engineering will turn in to a myth. The situation is getting exacerbated by reluctance of Canadian companies to invest in innovation, R&D and productivity enhancement activities. 

The above indeed is very sad for Canada. If the Federal and the Provincial governments do not show guts and take timely corrective actions, things would continue move from bad to worse and Canada would morph from being a first world knowledge powerhouse to a second or third world body supply warehouse.  

WHY CANADIAN ECONOMY IS IN DANGER OF SLOWLY SLIDING IN TO A SECOND WORLD ECONOMY

Statistics Canada’s figures released on 30 May indicated that Canada’s economic growth slowed to an annual pace of 1.2 per cent in the first three months of 2014. It was the weakest growth since the fourth quarter of 2012. As per Statistics Canada, the gross domestic product of Canada in the first quarter of 2014 marked a deceleration from the 2.7 per cent of the final three months of 2013.

Much of the above is being attributed to severe winter which apparently impacted the overall domestic demand, or spending by consumers, government and business. Harsh winter conditions in US are also being cited as one of the contributing factors apart from drop in housing construction.

            

The weaker first quarter, however, hasn’t changed the 2014 outlook for some observers. A lot of hope is being pinned on US economy to bounce back and businesses in Canada loosening their purse strings to invest. However, some analysts fear that domestic demand are likely to remain under pressure as debt-laden households constrain growth in consumption, housing constructions slows, and government spending remains capped by tight fiscal policy.

But the abovementioned fear does not recognize the elephant in the room – the tardy pace of the exports and the ominous circumstances threatening to crush the expansion potential of major components of Canada’s export resource, i.e., oil sands (and yet to be tapped gas for export as LNG).

People who are familiar with the basics of Canada’s GDP know the significant contribution oil makes to Canadian GDP and the huge service sector it supports (remember, service sector is one of the two main components of Canada’s GDP). The Canadian Association of Petroleum Producer’s 2013 Crude Oil Forecast, Markets and Transportation report forecasts Canadian crude oil production will more than double to 6.7 million barrels per day by 2030 from 3.2 million barrels per day in 2012. This includes oil sands production of 5.2 million barrels per day by 2030, up from 1.8 million barrels per day in 2012.

But the situations that are surrounding oil sands today seem almost poised to strangulate the lofty expansion plans set forth by the industry. One of the main stifling reasons being lack of infrastructure to export the bitumen out of Alberta – the various proposed pipeline projects meant to solve this situation are getting increasingly bogged down in litigations, controversy and delays. One of the casualties of this disheartening situation was Total’s Joslyn North project which was recently put on hold for an indefinite period.

Over on the LNG export side of things too, the portents don’t inspire optimism: the tax regime of the Province (BC) is yet to be finalized, LNG supply economics is getting squeezed due to the recent gas supply deal between Russia and China and the issues with First Nations not settled yet.

The horrifying scenario of oil sands industry getting stifled and LNG projects not getting off the grounds (or just one or two LNG projects getting set up at best) is that Canada’s revenues will get severely impacted in which situation hundreds of thousands of jobs will not get created which will in turn mean opportunity lost in the boost the service sector would have got.

As more people get jobs and earn more, they spend more and, as this work force grows, they need more of everything - from Tim Hortons to pickup trucks. This leads to more jobs and higher wages in other sectors and other regions of the economy, so everyone benefits.

The knock-on effect of stifling of the oil sands (and the proposed LNG industry) will be so severe on the overall Canadian economy that many features of the first world economy that Canada is would get severely disrupted: health care, education, infrastructure, seniors’ care, all these sectors would be badly affected. What would that mean? It would mean Canada would slide from being a first world country to second world nation for all intents and purposes. Is this what Canadians would like for their children’s future?

Can something be done about it? Yes, sure but Canada does not have the luxury of time. The Canadian Federal and the Provincial governments would have to resolve the issues that have the potential of strangulating the oil sands and the LNG industry. The governments need to deal with the First Nations (FN) on top priority basis. The FNs are economically better off than before and smarter too – they now know better how to leverage off their so-called treaties with the Crown and wangle bigger slices of the pie.

The FNs are getting publicity savvy too – the latest example being to get Desmond Tutu to lecture Canada on climate change. What should be raising the alarm bells for the Federal and Provincial governments is that people like Tutu are not lecturing the other heavy oil producing countries nor even lecturing his own country (South Africa) on coal based power plants but comes almost half way around the world to lecture Canada.

This means that there is probably a sinister move to throttle Canada’s oil industry (which for all practical purposes is predicated on oil sands) and thereby deal a crippling blow to Canada’s economy and its economic clout. This is indeed cause for worry and the Canadian government with all the resources at its disposal, namely, CSIS and CSEC, should investigate and take necessary protective measures.

The global economic situation stands at a very critical juncture where economic outlook is still very uncertain and recovery mechanisms highly fragile. At such a juncture, Canadian economy is also walking a tight rope. A slight push or shove can potentially send Canadian economy on downward slippery slope, some forces seem to be wanting to do that. It is up to Canada (its government and the peoples) how it handles this and succeeds in continuing to be a vibrant first world nation. Canada would need all the speed, alacrity, nimble-footedness, resilience, determination and innovativeness to come out on top. 

CANADIAN ECONOMY’s RESTORATION: TIME RUNNING OUT, CANADA NEEDS TO ACT FAST

There were some important nuggets to be picked up from Bank of Canada Governor’s address to the Saskatchewan Trade and Export Partnership in the last week of April:

·       One of the most important forces powering Canada’s economy currently is the long-term strength in global prices for resources; and, for Canada, oil stands out. 

·       As people earn more, they spend more and, as this work force grows, they need more of everything - from Tim Hortons to pickup trucks. This leads to more jobs and higher wages in other sectors and other regions of the economy, so everyone benefits.

·       Diversifying Canada’s export markets is important to future growth and resilience.

·       Canada’s is an export-driven economy. Canadian economy needs to shift gears and for exports to lead again.

A new report from the Conference Board around middle of May put Canada's three oil rich provinces on top of the world in terms of economic performance. The report places Alberta, Saskatchewan and Newfoundland -- the three oil producing provinces -- in that order as the top performers with A-plus scores across indicators such as per capita income, economic growth, unemployment and productivity. They are the only jurisdictions rated to have A-plus economies. Alberta is "class leader," says the report with 2013 per capita income that was $10,000 higher than Norway, the top-ranked country in that indicator. For the rest of the country the news was not so stellar.

What the above narrative clearly suggests is that while the 31 subsectors (of Bank of Canada) of the non-energy export sector need to be promoted with suitable strategies, the increase in production and export of the energy resources, i.e., oil and gas is vital from the point of view of Canadian economy’s restoration to good health in near term and sustaining it in the long term.

However, the growth of the aforementioned two energy resources appears to be getting bogged down in an endless loop of consultation, opposition and procrastination. As Leo De Bever, chief executive of Alberta Investment Management Corp., the largest wealth fund in the country with assets under management of $63-billion, says, “We find it easier to pay somebody not to build something rather than actually build it. There has been a shortage of resolve to build projects.”

De Bever was alluding to opposition to various pipeline projects and oil sands projects. To compound issues there is tardiness is formulating policies that the investors need to know urgently to firm up their investment decisions. For example, investors (Petronas, Shell, Chevron et al) are eagerly waiting on British Columbia’s final decision on the tax regime. As well, the investors are concerned about wage inflation, the tax environment and about Canada’s ability to actually deliver in a timely fashion on environmental assessments.

Besides cost-competitiveness of doing business in Canada (e.g. British Columbia) being crucial, time is of the essence as investor companies are mulling similar projects in Australia, East Africa and the United States. Petronas led consortium is hoping to set sail its first shipment of LNG by 2019 before a number of Australia’s brownfield projects start ramping up. Analysts say that some South Korean investors are already gravitating towards U.S. projects.

Then there is the proposed long term multi-billion dollar oil and gas agreement between Russia and China which Russia’s president Putin is going to pursue aggressively. If this agreement gets concluded, it would mean China’s financial capacity and need to import these resources from other countries like Canada would get that much reduced. Which would in turn mean the companies intending to invest in Canada may like to change their minds.

On the flip side, the Ukraine crisis has got the Europeans to clearly articulate their desire to source their long term energy needs from Canada (and US). This is a godsend opportunity for Canada to latch on to and expedite the necessary approvals process associated with oil and gas and pipeline projects.

Just to give an idea on negative impact of ‘endless cycle of consultations’, as oil sands projects stall and crawl, Canadian producers have lost as much as $30-billion annually due to discounts on their blend of crude in the past few years. While spreads have narrowed over the past 12 months there is much more at stake. According to energy consultancy IHS CERA if oil sands production reaches 3.8 million barrels per day in 2025, the bitumen’s contribution to Canadian GDP could nearly double, and a third more jobs could be expected.

“Between 2012 and 2025, oil sands’ contribution to Canadian GDP could grow from $91-billion to $171-billion,” the IHS estimated in a report published this year. “This would be like adding an economy the size of Saskatchewan today to Canada by 2025. Oil sands could also add over one-quarter of a million more jobs, contributing to 753,000 jobs in Canada in 2025.”

To address the concerns around environmental impacts of oil sands development, Alberta already has in place stringent measures and more are expected. This should blunt criticisms brought forth by the environment-activists. As regards carbon emission issue, an independent group of scientists/experts are challenging the White House National Climate Assessment (NCA) issued in early May. In their view, the foundation of the NCA is a "masterpiece of marketing" that crumbles like a "house of cards" under the weight of real-world evidence.

And, in regard to the issue of opposition by the aboriginals to the various oil and gas and pipeline projects, the legal experts say that as for aboriginal communities, they need to recognize that their right to be consulted doesn’t negate the government’s power to make decisions.

Summary: Energy (oil and gas) is a vital component in the context of restoration and sustainability of Canada’s economy and standards of living associated with this first world country. The companies in Canada, who wish to implement the various oil and gas and pipeline projects, and the Federal and the Provincial governments must expedite the approvals’ process. The window of opportunity for Canada is NOT going to be there for ever, therefore, it would be a criminal folly if they fail to capitalize on the opportunities presented to Canada by the global situations.

CANADA’S CURRENT CHALLENGES AND DILEMMAS AND WHY CANADA IS STRUGGLING TO COPE WITH THEM?

Canada, a G-7 country, has had a good run – generally – in terms of progress and prosperity over the last four to five decades. Canada can be proud of the AAA rating of its economy, consistent ranking in top five or six in terms of best country to live in, happiest country, best cities and so on. Canada performed the best, amongst G-7 countries, during the recession of 2008 and subsequent years. All in all, quite a solid performance!

                

However, of late Canada is finding itself to be struggling to meet current major challenges and dilemmas. What are these major challenges and dilemmas? These could be summarized under the following buckets:

·       Economic

·       Political

·       Societal

·       Other

The main reasons Canada is struggling to cope with them can be distilled down to following:

-      Apparent conceit (misplaced and silly, of course) on the part of the members of the majority community of Canadians, who are in the decision making positions, that they know best, and their stubborn unwillingness to learn from others (other races, other countries)

-      Political expediency, and

-      Tardiness (including benign slothfulness of the populace psyche).

We would return to the effect of how these factors are negatively impacting Canada’s interests; however, let’s first look at the listing of challenges/dilemmas under the above four categories:

Economic: Canada is on way to balance its books – the present government is quite confident that it will present a surplus budget in 2015. On the surface things may appear to be quite hunky dory but when you dig deeper you would find some issues – issues that have the potential to cause deleterious effect of varying degree over the long run. These are:

-      Exports in general failing to pick up to the extent it was expected to (uneven performance)

-      Commodities’ export struggling (lack of outlets, lack of new market, drop in international demand)

-      Employment numbers moving more like stock exchange indices rather than in a predictable manner with decline in (quality) full-time jobs

-      Too much fiscal conservatism of Conservatives (which is proving more counter-productive than helpful)

-      Putting all eggs in one basket (too much dependence on US)

-      Over-dependence on consumption numbers of China’s economy and/or investment flowing from China to Canada (this brings in its wake concerns and apprehensions)

-      Sustainability of welfare schemes in its present form (due to changing demographics and consequent changes in revenues etc)

Political:

-      Party ideologies swinging from one end of the spectrum to the other (from very conservative/free market ideology to liberalism to confused egalitarianism)

-      Failure among Federal parties to align on where Canada’s interests actually lie

-      Ottawa and some Provinces failing to align on where Canada’s interests actually lie (misalignment on national priorities, action plans etc)

-      Unnecessary spats between Executive and Judiciary and supposedly autonomous bodies, like, Federal Election Office etc

-      Misalignment with prevailing leadership of USA (the President, its various Secretaries)

-      Lack of well thought out strategies vis-à-vis different global regions, countries, issues [often strategies appearing to be getting modified based on ideology (and interests) of party in power in Ottawa and/or Provinces rather than furthering Canadian interests]

-      Threat of radicalism (and the measures required to deal with them)

-      Not so competent politicians (e.g. ostensible lack of understanding of fundamentals of Canadian economy, lack of grasp of issues staring in the face and so on)

Societal:

-      Changes in age demographics (increasing geriatric component of the population which brings different set of challenges for the society)

-      Changes in population structure (growth of certain ethnic groups which could cause serious issues down the road)

-      Widening gap between the rich and the poor

-      Declining standards of welfare schemes, services (including pension plans, health care etc because of funds failing to keep pace with the demand)

-      Increasing liberalism on various issues like LGBT and questions/scenarios they are raising/creating

-      Atomicity of familial structures, changes in family concept

-      Activism carried out by different interest groups

-      Explosion of social media

Other:

-      Increasing income gap between rich and poor

-      Decline in the corporate leadership competence

-      Absence of deep pocketed Canadian investors

-      Global issues like climate aberrations (aka climate change)

It would be naive to expect that idealistic situation would prevail in Canada and there would be perfect harmony and alignment among political parties of all stripes – at Federal and Provincial levels – and all the issues would get sorted out nicely and smoothly, that there would be competent people at the right places at the right time and so on.  

But the reality is something else: there are some basic factors that seem to be exacerbating the situation. These could be traced to be stemming from three items listed at the beginning of this narrative. How these factors are negatively impacting Canada currently and can impact in future will be dealt with in a separate blog. Stay tuned! 

CANADIAN POLITICIANS: IT IS TIME TO FOCUS ON THE ECONOMY, COMMON MAN AND COUNTRY’S OVERALL WELL BEING

The Canadian economy is passing through a very critical phase wherein:

-      Canadian economy is looking up but still hobbling a bit moving forward with some unsteady steps: disinflation, less than expected increase in exports, and tardy rate of full time job creation being some of the issues staring in the face;

-      The global economic recovery is fragile, unpredictable;

-      Chinese economy is not going to be the locomotive of world economic rejuvenation;

-      US economy is just turning the corner but remains unpredictable due to political circus in Washington DC and gradual withdrawal of artificial respiration, i.e., Quantitative Easing;

-      European economy is far from having come out of the after effects of bail-out support provided to some its members to prevent them from sinking;

-      Emerging economies have their own woes to deal with and are clearly struggling;

-      International political scenarios are not providing any sense of calmness settling in.

At such a juncture, what is expected of the people who practice politics at federal and provincial level, i.e., politicians? Answer is simple: They need to focus on working together to strategize how to reinvigorate the Canadian economy, put it back on a firm footing, and in the process ensure continuation of a prosperous, happy, less stressful existence of the people.

If the country’s economy does not get the proper focused direction, guidance and support what could be the potential consequences? There could be:

-      Cuts in Federal and Provincial budgets for the various services Canadians have been benefitting from for many decades;

-      Cuts in Federal and Provincial budgets for many important sectors, like, education, health care, senior citizen care, child support, R&D and many more;

-      Deterioration of overall quality of life of Canadians which is matter of envy world over;

-      Delayed retirement of thousands of people;

-      Nucleation/initiation of social discontent/tension which may simmer and eventually stress the very fabric of social integration and diversity;

-      Cut in funding for international causes for which Canada has been a beacon of inspiration and support.

So, at such a crucial phase of country’s journey in this and future decades, the Federal and Provincial politicians’ paramount objective should be to close ranks and focus on the solutions, planning and implementation of strategies instead of diverting attention on issues which are:

-      Either nor germane to the above mentioned scenario – in other words, they are secondary; or,

-      Solvable in parallel while working on the PRIMARY issue of the nation, i.e., economy of today and future.

At the moment, the Federal parties seem to be spending their intellectual resources more on the secondary issues, like, mis-appropriation of Senate funds. There is another issue which can potentially divert the energy and focus of the Federal parities for next several months, and that is: Electoral Reform. This is an important issue, and some opposition parties may want more debate and analysis of the pros and cons but if all the energy of the policy makers gets diverted to this one – there may be some other issues too that may be thrown out there before the next Federal election in 2015 – it could herald serious harm because the policy makers would not be able to focus on the PRIMARY issue facing the country: economy.

Issues like electoral reform (and others which may be raising the passions of the political parties of different stripes) should be dealt with in parallel with the focus on the PRIMARY issue. While discussing the PRIMARY issue (economy), the parties need to close ranks and contribute all the wisdom they can marshal for getting the most effective strategy detailed out and implemented.

Canada does not have the luxury of time – the folks at Federal and Provincial level got to act fast. Whether it calls for laying out new policies, making decisions on critical matters, removing road blocks, facilitating coordinated action within and outside Canada, whatever they may be, they got to be done fast. There is no time to lose.

If the folks at Federal and Provincial level spend their time and energy on inter-party shenanigans, the ultimate losers would be Canadians of the present and the ones to come in future. Time and tide waits for nobody – if the politicians of today fail to see the need to act on the PRIMAY issue, there won’t be any point in ruing in future and wringing hands in despair and muttering “Alas, we had acted unitedly then for the sake of the country instead of frittering away precious time on secondary issues.” There is an old saying: God helps them who help themselves, hope politicians of today would realize this!!

CANADIAN ECONOMY 2014 AND BEYOND: ISSUES, AND ACTIONS REQUIRED

The Bank of Canada (BoC) gave its latest assessment of Canadian economy in its Monetary Policy Report of 22 January 2014; some of the key points of the Report are:

·       Inflation in Canada has moved further below the 2 per cent target. This is due largely to significant excess supply in the economy and heightened competition in the retail sector. The path for inflation is now expected to be lower than previously anticipated for most of the projection period.

·       The Bank expects inflation to return to the 2 per cent target in two years or so, as the effects of retail competition dissipate and excess capacity is absorbed.

·       The United States will lead the way, helped by diminishing fiscal drag, accommodative monetary policy and stronger household balance sheets. The improving U.S. outlook is affecting global bond, equity, and currency markets.

·       In Canada, economic growth improved in the second half of 2013. However, there have been few signs of the anticipated rebalancing towards exports and business investment.

·       While we are doing more work to understand the wedge between the level of Canadian exports and that of foreign demand, this remains difficult to explain. We are therefore taking a conservative approach to our forecasts for exports, and assuming the wedge will remain.

·       That said, the U.S. recovery is becoming more broad-based, including higher investment spending by companies, and that, as well as the recent depreciation of the Canadian dollar, should help to boost exports. This, in turn, should lead to stronger business confidence and investment here in Canada.

·       Meanwhile, recent data have been consistent with the Bank’s expectation of a soft landing in the housing market and a stabilization of household indebtedness relative to income.

·       Real GDP growth is projected to pick up from 1.8 per cent in 2013 to 2.5 per cent in both 2014 and 2015. This implies that the economy will return gradually to capacity over the next two years or so.

·       Although the fundamental drivers of growth and future inflation appear to be strengthening, inflation is expected to remain well below target for some time, and therefore the downside risks to inflation have grown in importance. At the same time, risks associated with elevated household imbalances have not materially changed.

Basics of Canadian economy:

-     30% of GDP comes from exports
-     >60% from internal consumption

GDP contributors by Sector:

-     ~11% of GDP comes from manufacturing
-     ~8% comes from mining, quarrying and oil or gas extraction
-     ~79% from service sector (including public administration)
-     ~2% comes from agriculture, forestry, fishing and hunting

Some salient issues vis-a-vis Canadian economy:

Ø  As BoC mentioned, the wedge between the level of Canadian exports and that of foreign demand;

Ø  Strength of Canadian Dollar vis-à-vis US Dollar and other major currencies including Korean Won;

Ø  Reluctance on part of big capital owners (companies, individuals) to invest (the reasons need to be understood and addressed – more on this later), hence lack of multiplier effect in the economy;

Ø  Dis-inflation;

Ø  Too much dependence on US economy’s health;

Ø  Sluggishness creeping in China’s GDP growth (hence impacting consumption of goods and therefore import of goods from other countries, including Canada);

Ø  Absence of federal government/manufacturing industry/agriculture/service sector coordination and policy making (there is reasonably good coordination between mining, oil and gas and federal government though);

Ø  Extremely tardy progress on providing finality re: investment/export avenues (e.g., oil export, LNG export);

Ø  Slow turnaround in European Union’s economic health.

Salient list of actions required by Federal/Provincial Governments to infuse more vigor in Canadian economy:

-     Review export items vis-à-vis existing export outlets and promote these exports through suitable strategizing and free trade agreements, bilateral trade agreements;

-     Review export items vis-à-vis new and potential export outlets and promote these exports through suitable strategizing and free trade agreements, bilateral trade agreements (look for new regions, like, South America, Africa and untapped Asian regions) and adding new items;

-     Devise policies that encourage manufacturing/production of those products that have export potential in existing and new markets (example, bitumen, natural gas, high-tech items);

-     Have more cohesive and inclusive federal government/manufacturing industry/agriculture/service sector coordination;

-     Promote innovation in the industry in a big way through incentives;

-     Encourage big capital owners to invest – have continual dialogue and make necessary adjustment in policies (conclude reviews quickly, conclude deals with provincial agencies, first nations tribes in an expeditious manner rather than a process that takes forever to complete, or, sometime, never reaches any conclusion);

-     New investments would result in more employment and hence have multiplier effect of higher consumption;

-     Subtly encourage consumption (not necessarily in housing sector but other areas which won’t load the national debt situation)

-     BoC may consider lowering interest rate and/or engage in some sort of quantitative easing;

-     Stimulus spending should be kept as one of many options of last resort;

-     Create an optimistic environment rather than that of impending gloom and doom (one of the key requirements would be that the political parties would need to talk less in inflammatory and fear mongering tone, less recriminations and uttering nonsense)

Summary:

Other countries too are facing similar situations as Canada faces and, therefore, they too are considering many of the abovementioned strategies and actions. Therefore, the window of opportunity is short and there is lot of competition out there. If Canada wants to maintain its pre-eminent position within the G-7 nations and international comity at large, Canada would have to act quickly and decisively both at Federal and provincial levels in a coordinated manner without the political ideologies inhibiting such coordination. There are already signs of wear and tear at some aspects of social support and quality of life which Canada is famous for and proud of; if Canada does not act soon, things would get worsened and some damage may be irreparable.

CANADIAN ECONOMY 2014 AND BEYOND: DARK CLOUDS LOOM AS POLITICIANS AND CORPORATE HONCHOS EXCEL IN INCOMPETENCE

Canada’s economy lost 45,900 jobs in December 2013 and the unemployment rate rose to 7.2% from 6.9%. The employment data released by Statistics Canada on 10 Jan 2014 was the weakest since March 2013. The report also showed hiring in 2013 was the slowest since 2009.

The worst part of the news is that all in all, 60,000 full-time jobs were lost - the monthly drop in full-time work is the largest seen since late 2011. It's the worst showing for jobs overall since March 2013 when Canada lost 54,500 jobs. As one economic analyst put it “the job losses announced on 10 Jan wiped out most of the gains over the last four months.” Further very disturbing aspect was that two major employment centres lost jobs - Ontario lost 39,000 jobs during the month and even Alberta, a source of recent strength, shed 12,000 jobs.

But what did the Canadian federal Finance Minister say about this serious setback? "We sympathize with those Canadians who lost their job last month. This is a reminder that the economic recovery remains fragile and we must stay focused on our plan to grow the economy and keep taxes low to create the environment where job creation can flourish."

What a meaningless stupid statement intended to obfuscate the crass incompetence of the leadership at various levels!! However, the grim situation that Canadian economy finds itself in currently is not due to the current federal leadership – it is the result of collective gross incompetence of the following:

a.      Politicians at federal level (of the three major parties)

b.      Provincial leaderships (British Columbia, Quebec, Ontario)

c.       Corporate leaderships (oil companies, pipeline companies, various manufacturing and commodities’ companies)

The abovementioned people failed the nation and are responsible for beginning of decline in Canadian economy and wellbeing at large (decline in overall health care and senior citizens care, falling educational standards, decline in innovation to name a few) that can become catastrophic if corrective actions are not taken quickly.

And, why are corrective actions required urgently? It is because of the reason that Canadian economy is dependent on (approx. percentages):

-           65% on domestic consumption (which is dependent on people’s purchasing power)
-           30% on exports
-           78% on service sector (which provides the solidity and basis to people’s purchasing power)
-           20% on manufacturing

The above data should intuitively nudge anyone’s common sense to comprehend that if the purchasing power of Canadians keep declining (due to loss of jobs, stagnating economy, lack of new projects, lack of new export avenues/products etc.) there would be potential for serious negative impact on Canada’s overall wellbeing and existence/subsistence as a wealthy, prosperous first world nation.

Let’s see in brief how the factors mentioned at ‘a’, ‘b’, ‘c’ mentioned above failed the nation:

Incompetence of federal politicians

-         The politicians failed to act proactively in ensuring that vital Canadian resources, like, oil and gas find alternate export outlets – the Conservatives woke up much late in the day to the realization that Canada needs alternative outlets for its oil and gas.

-        Finally when the Conservatives started to push for alternatives, the NDP, and to some extent the Liberals, kept damaging Canada’s cause (in regard to alternate avenues for oil and gas) by barking in unison with the fear mongering environmentalists (based on inconclusive aspects of global warming).

-         The self-serving politicians’ canine like in-fighting seriously damaged Canada’s prospects in getting a head start vis-à-vis its competition - the US have already stolen lead over Canada in LNG export. The foreign investors still do not know if the much touted LNG projects in Canada will at all reach the stage of fruition.

-         The federal level politicians failed to act proactively in identifying alternate markets for Canadian products. The head-in-the-sand attitude of federals folks prevented them from realizing that keeping all the eggs in one basket, namely, depending on only US as the export destination was suicidal.

-         The federal level politicians failed to kick on the back sides of the top corporate leadership to show more innovation and initiative in promoting/developing their major projects without hanging on to the coat tails of the politicians (more on this later).

Incompetence of provincial politicians

-         The provincial politicians in BC and Quebec displayed disgusting parochial and dog-in-the-manger attitude towards blocking potential oil and gas projects of Canada (e.g. Northern Gateway pipeline, Kinder Morgan Trans Mountain pipeline, West to East Pipeline, LNG pipelines, and LNG projects).

-         The obstructionist approach of the politicians of BC, Quebec and, to some extent Ontario (who later seemed to be more supportive to West to East pipeline project) caused and are still causing serious delays in decision making of some of the vital projects of national interest. These politicians seem too interested in their own power grabbing shenanigans and seem too willing to overlook what is potentially good for Canada.

Incompetence of corporate leadership

-         The pipeline companies’ leadership failed to be pro-active in engaging with local stakeholders (e.g. First Nations, provincial leadership) in the context of their major pipeline projects. They displayed pathetic propensity to hang by the coat tails of provincial politicians (Alberta) and Federal politicians in taking up the issues which these companies should have tackled themselves;

-         Some of the oil and pipeline companies displayed unfounded overconfidence that politicians would get them the necessary clearances in other countries (e.g. Senators/Congressmen would help out in US).

-         The oil and pipeline companies failed to proactively plan for alternate solutions. They are waking up 5 years late that alternate means of transport is needed to transport bitumen to US. The risk assessment and contingency exercises of these companies have been horribly third rate and complete failure.

-         The corporate leadership of manufacturing companies did little to keep the innovation edge going and/or to find new products and new markets.

-         The corporate leadership of some other commodity producing companies failed to anticipate coming changes in the world markets and were less than adequately prepared to face the challenges of change (e.g. Potash, Fertilizer, Gold, Uranium).

What to do now?

-         Learn the lessons from the above.

-        Get over the self-defeating notion of ‘we-know-the-best’ and ‘frog in the well’ mentality. Go out of Canada, see what alternative stuff is being done out there and bring back the knowledge to adapt the same to Canadian conditions.

-        Politicians of all stripes got to act unitedly in getting policies implemented which are in interest of Canada (and not invest energy in unproductive nonsensical debates stemming from self-aggrandizement fetishes).

-        Fast track projects that can create jobs in thousands, add to Canada’s GDP (all political parties must act unitedly in making them a success).

-        Further heighten the ‘commerce’ focus of the Federal ministries (implemented recently by the Conservatives).

-       Make sure the foreign investors are re-assured of the definitiveness of the proposed projects in Canada and their economic returns.

-        Crank up efforts to find alternate outlets for Canadian products, services (in Asia, Latin America and Africa)

-       Keep investor friendly environment in Canada and in Canadian provinces.

Consequences of not acting soon

-        The window of opportunity for export of Canadian resources would not remain open for ever – if the Canadian politicians, corporate honchos do not act quickly and decisively, Canadians would keep sitting on piles of their natural resources for the rest of their lives and keep sucking their thumbs.

-        The politicians must realize that dog-in-the-manger politics would not only consume the Canadians, the resultant implosion would wipe them out too.

-        Canada’s existence of being a successful, happy, good performing first world country would seriously get compromised.

-        Falling standards could trigger disaffection which could bring about potential serious fractures in the multi-cultural foundation of Canada.

Let’s hope the Canadian politicians and the people would rally round and come together to meet the current challenges.