Newfoundland and Labrador needs more than oil sector for economic prosperity

OTTAWA, April 16, 2015 /CNW/ - Newfoundland and Labrador has experienced tremendous economic and productivity growth over the past 15 years. But, when oil production peaked in 2007, labour productivity and economic growth peaked along with it. A new Conference Board of Canada report released today examines Newfoundland and Labrador's strengths and weaknesses relative to its closest competitors and suggests that the province needs to focus on improving its competitiveness and maintaining productivity growth in order to sustain economic prosperity for future generations.

"Oil brought an economic boom to Newfoundland and Labrador, but that boom is ending, which means the province will not be able to rely as heavily on this industry to drive economic growth or fund government program spending," said Pedro Antunes, Deputy Chief Economist, The Conference Board of Canada. "Focusing on improving the province's competitive business environment will help mitigate some of the negative effects."

HIGHLIGHTS

• Despite major economic and productivity gains over the 1997-2007 period, Newfoundland and Labrador's economy faltered on these measures more recently.
• The provincial government is too reliant on revenues from the oil sector.
• The province has the oldest population in Canada and is not attracting enough immigrants to replace retiring workers.

"Private sector business is the engine that drives our economy. Creating a more competitive business environment will create jobs and contribute to long term prosperity for all Newfoundlanders and Labradorians," said Richard Alexander, Executive Director, Newfoundland & Labrador Employers' Council. "It is time for Newfoundland and Labrador to look outside our borders and aim to improve our economic and business environment not just in absolute terms, but in terms of our direct competitors. This study shows that while our province has come a long way, we can do more."

The report, Achieving Sustainable Prosperity: Benchmarking the Competitiveness of Newfoundland and Labrador, benchmarks Newfoundland and Labrador's competitive performance against nine national and international competitor jurisdictions: two countries, two U.S. states, and five Canadian provinces. In total, 32 indicators were benchmarked in the areas of innovation, investment, labour market, and the business and policy environment. The report reveals that:

• Newfoundland and Labrador performs above average when it comes to productivity levels, though productivity growth has stalled in recent years.
• Newfoundland and Labrador performs poorly on all innovation indicators.
• The province ranks low on the education and skills indicators and—despite strong recent job creation—its labour market underperforms overall relative to its competitors.
• Investment indicators showed generally mixed performance with Newfoundland being successful at attracting foreign direct investment, but investing relatively little in public infrastructure.

Recommendations to help Newfoundland and Labrador meet the upcoming challenges and improve its competitiveness include:

Innovation

• strengthen links between higher-education institutions and the private sector;
• increase competition by lowering trade barriers and by promoting innovation through government procurement.

Investment

• create an equitable and efficient tax system for capital;
• increase investment in public infrastructure.

Human capital

• boost immigration and corresponding recognition of credentials;
• increase education levels and match skills training with labour force needs;
• retain and engage older workers and under-represented groups.

Fiscal policies

• reduce government reliance on funding from oil revenues;
• keep debt in check by reducing program spending, especially in public administration;
• create a sovereign wealth fund so that future programming can rely more on interest income and less on royalty revenues.

Funding for this research was provided by the Newfoundland and Labrador Employers' Council (NLEC).

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SOURCE Conference Board of Canada