Thank you very much, Mr. Chairman. It's my great pleasure to be in front of the committee today.
I'll be talking to you about the state of the B.C. economy and some of the challenges and opportunities therein, as well as giving you a bit of a thumbnail sketch of what we do in Western Economic Diversification in British Columbia.
Let me start with some of the basics of the structure of the B.C. economy.
B.C. hosts a dual economy. The Lower Mainland and Southern Vancouver Island’s broadly diversified service economies contrast with rural areas that largely depend on natural resources.
B.C.’s service sector accounts for 76% of GDP. The sector comprises industries such as finance, shipping, engineering, education, film production—which is very important—tourism and high-tech. B.C. has a relatively small domestic market, and wealth creation depends heavily on exporting natural resources, which account for about 75% of the province’s merchandise exports.
The U.S. remains B.C.’s largest customer, consuming 52% of export sales in 2015. However, exports to Asia have grown quickly recently. Asia now accounts for 38% of the province’s export sales.
Another key shift in B.C.’s economy relates to job creation. The province’s high-tech sector employs 87,000 workers, more than the province’s once dominant forest industry at 58,000 workers.
Public sector capital investments in major projects play a really important role in anchoring and driving expansion in the B.C. economy. Major projects in play include the site C clean energy project, port expansion proposals in Prince Rupert and at the Roberts Bank container terminal, the so-called T2 project in the Lower Mainland. There are of course energy projects that have been in the news: the Pacific NorthWest LNG proposal and the Trans Mountain pipeline expansion; and then there are transit proposals like the Massey Tunnel replacement and the Evergreen Line between Coquitlam and Vancouver.
With that economic context in mind, let me shift to talk about the performance of the B.C. economy. Our economy gained momentum significantly in 2015, posting 3.0% growth in real GDP. This is forecast to lead all provinces both this year and next.
That upswing is driven by a surging residential real estate market, which drives record-setting construction and renovation activity in the province, strong consumer spending, rising exports, that expanding tech sector which I mentioned earlier, a couple of really banner years in tourism, as well as shipbuilding under the national shipbuilding strategy.
Our economy in B.C. has been relatively less affected overall by the decline in oil and gas prices compared to the other western provinces.
Our employment growth is forecast to increase by 2.8% in 2016. In fact, so far we've already seen 87,000 new jobs created in the year to date in B.C. The unemployment rates in B.C. hover around 6% province-wide, relative to a national rate of about 7%. It's important to note, however, that those job gains have been concentrated in the Lower Mainland and in southern Vancouver Island. It's a very different situation in the rest of the province, where unemployment rates have crept up in recent years.
That increase in exports that I mentioned is driven mostly by wood products, as well as agriculture and agrifood products. Those have been partly offset by declines in natural gas and in metallurgical coal shipments.
Notwithstanding that relatively bright picture, B.C.'s economic outlook shows some increasing risks. In 2015, household debt in Canada was at a record level of almost 170% of disposable income. That's well in excess of historical norms.
A recent study by my good friend Mr. Jock Finlayson at the Business Council of B.C. estimated that the housing sector is responsible for somewhere between 35% and 40% of the recent economic growth in B.C. So that 3% economic growth, without the housing sector, would be less than 2%. That concentration of activity related to housing presents a real risk.
There's also a real risk associated with the uncertainty relating to the expiry of the Canada-U.S. softwood lumber agreement, as well as the reductions in timber available to harvest due to the mountain pine beetle infestation. We have rising skilled worker shortages across the province in many sectors. Final investment decisions on some of those major energy projects remain pending.
Let me point out a couple of key features that I think are important to distinguish B.C. from some of the other western provinces. I like to point out continually to my colleagues that B.C. is different. In addition to being the least rectangular of the western provinces, it is also, I would say, a bit more of a patchwork than other places in the west are. We're fragmented geographically, obviously, by mountains and rivers. There are seven very different economic development regions within the province. When it comes to the metro Vancouver region, as some of you might know, metro Vancouver has 22 separate municipalities. Of course B.C. is home to 203 first nations bands, which is about one-third of the national total.
In my opinion, there are couple of other salient features that make working in B.C. interesting. The province’s geographic position makes it Canada’s Pacific Gateway, a role of great national importance. While not a likely source of future growth, the forest sector is still a mainstay for many rural communities. Vancouver has a reputation for being one of the most Asian cities outside of Asia. It is also the province with the least coverage of final treaties with First Nations.
Now let me turn to what WD is up to in B.C. Firstly, WD is actively involved in delivering on a number of recent federal budget commitments. In particular, we have just completed a review of some 450 B.C. applications received under the Canada 150 Community Infrastructure Program, CIP 150, for 2016. We are working with other RDAs to double our joint investments in clean technology under a 2016 federal budget commitment to increase spending on clean tech to $100-million annually. Finally, we are supporting federal work aimed at engaging Canadians in consultations to define Canada’s innovation agenda.
Also, we are delivering on our core departmental funding and policy responsibilities against our four departmental priorities of innovation, trade and investment, indigenous economic growth, and defence procurement. The core funding also supports our western innovation program, or WINN, as well as a province-wide network of service delivery partners, including 34 community futures development corporations. We also serve as a delivery agent in support of some other federal initiatives. We're participating, for example, in the Department of Indigenous and Northern Affairs' strategic partnerships initiative that targets indigenous participation in economic development.
Last, from time to time over the years, WD has taken on the delivery of some large federal programming, things like temporary adjustment programs or infrastructure initiatives.
Going forward, there are some challenges that we're responding to in B.C. In innovation, a lack of capital is constraining commercialization of new products and services. Our response, the WINN program, is well oversubscribed, meaning that we have to turn down quality projects in industries like clean tech, life sciences, space, oceans, and information and digital technologies. As well, we have a real challenge in our traditional resource industries which are facing technological challenges. We're trying to increase the linkages between innovative small and medium-sized enterprises, for example, in the clean tech sector, to help address some of those issues in the resource industries. In trade and investment, only 3% of businesses in B.C. export at all. Among small and medium-sized enterprises, only 1.3% of B.C.'s businesses export.
We have an opportunity there to help firms become more export ready and position them to capitalize on opportunities presented by our international trade agreements.
In terms of indigenous economic growth, we know that capacity constraints limit participation of many first nations in the economy, and that leads to missed opportunities. We've worked successfully with first nations to support skills development and entrepreneurial training in preparation, for example, for opportunities in resource development and energy, as well as shipbuilding.
We've advanced clean energy projects in communities through the B.C. indigenous clean energy initiative. This is one of those projects that was financed through Indigenous and Northern Affairs' strategic partnerships initiative, SPI, funding. We're in the middle of going through those projects now, in partnership with the New Relationship Trust. We've received 51 applications for assistance under that program, including 14 from off-grid communities. Our budget there is only $4 million, so that's going to limit the extent to which we can respond to those opportunities.
Last, in defence procurement, we play a role in trying to match small and medium-sized enterprises in the west, in B.C., with the prime contractors, under Canada's industrial and technological benefits program. We help position those SMEs as suppliers to those prime contractors through events like our western innovation forum that is coming up this November in Vancouver.
So in closing, I would like to thank the Committee for letting me brag a bit about the great things that the WD team is doing in BC.
I will be glad to answer any questions that you have today.
Thank you, Mr. Chair.
Thanks very much for the question. As you correctly identified, it's one of the major issues facing B.C. right now.
I should probably start by saying that I've lived in British Columbia for eight years, and you are looking at an eight-time loser in the British Columbia housing market. Each one of those eight years would have been a really good time to buy a house, and I haven't, so you should probably take what I have to say with a grain of salt.
As I said, it is a real risk to the economy and it's not just the direct impacts on home sales and construction. The run-up in housing prices has had a number of other really important effects. For example, house renovations now actually outpace new home construction in terms of contribution to B.C. That's at risk.
The wealth effects that are associated with a run-up in housing prices would also be at risk. The wealth effects occur when your house is, as is the case for many people I know in B.C., worth three times what you paid for it, and you feel a lot wealthier and you're likely to decide to go to Cactus Club rather than to Tim Hortons. Your house prices come down and that's going to unwind seriously. It's those kinds of effects that were behind that estimate I gave that more than one-third of recent economic growth is at risk.
Regarding the measures that have been taken to cool off the B.C. housing market, honestly, it's too early to say whether those have had an effect or not. The volume of house sales in B.C. was dropping before the recent tax on foreign property transfers was put in place. It may accelerate that trend. It will be difficult to say, and of course, the mayor of Vancouver has been talking up the idea of a vacant home tax that could have much the same effect. But I will say this as well, that the business community is starting to view the run-up in housing prices as a serious break, or a serious mitigating factor, in the overall investment climate in British Columbia. There are increasingly few places in the world from which Vancouver looks cheap—in places like Singapore, Hong Kong, and L.A., Vancouver housing still looks cheap—but that list is growing shorter.
WD has no direct role, obviously, in housing policy or in the housing sector, but the housing affordability problem is at the root of the impact on the investment climate. People in B.C. are now faced with devoting something like 88% of their median income to a home purchase, which is far in excess of even the next hottest housing market in Canada, which is Toronto.
I mention that because the housing affordability problem has both a numerator and a denominator. It's house prices, yes, but it's also income, and B.C. has lower median incomes than the rest of the country. The kinds of projects we are working on, things like the wind initiative, which is aimed at increasing jobs in high tech start-up firms that have technology commercialization potential, that sector pays well above median wages, as much as 40% to 60% above median wages. When a company we fund succeeds, we're contributing to the denominator of the housing price problem.
You are describing a problem that is very serious in British Columbia and in the rest of Canada. We are talking about the future of the forestry industry.
If I may, I will answer in English. My softwood lumber vocabulary is somewhat limited.
I'm a former trade negotiator, and like everybody who has worked on trade policy in Canada, I've had my share of softwood lumber losses in the past.
In fact, just this morning I met with one of my colleagues at Global Affairs Canada, who is responsible for the softwood lumber file. It's fair to say that, with the way things are headed now, the expiry of the softwood lumber agreement is likely to lead to another round of countervailing and anti-dumping duties. That will have an impact on the forest sector, which will come on top of the impact of the mountain pine beetle infestation. If you overlay those two things in British Columbia, you have pretty serious impact for a lot of communities in the north.
My colleague Martin was recently in Quesnel, B.C., which is one of the communities that is really heavily forest dependent. He was there as a federal representative to a provincial government effort to help the community of Quesnel adapt and think about opportunities it will have as a community going forward, given the severe impact already of the decline in availability of fibre supply, as they call it, the annual allowable cut, or AAC.
The province will be declining drastically in that region. The products that it's able to export and the jobs associated with that are really at risk. The situation with the softwood lumber agreement will only come on top of that.
It's worth noting that in the past the federal government has allotted some serious consideration and resources to something called the community adjustment initiative. WD was given responsibility for administering that initiative, so it's at least conceivable that, unfortunately, we'll be in that same situation with the likely initiation of trade remedy actions in the United States over the next few weeks and months.
One of the finest parts of my job is that I get the opportunity to visit places like Prince Rupert. I understand your attachment to the area.
You're correct in saying that there's a lot of activity and there's a lot of hope in Prince Rupert surrounding things like the Pacific Northwest natural gas project. On the expansion of the port, as I noted, the expansion of the Fairview container terminal is one of those really significant developments on the horizon for Prince Rupert. WD was actually involved in delivering the federal government's contribution towards the establishment of the Fairview container terminal. That was just before my time at WD, but there was some $30 million contributed by the federal government via WD.
One of the things we had to do in connection with that was secure the agreement of the local first nations, who, as you know, were not all united on the expansion of the Fairview container terminal. It impacted different first nations communities differently. As well, it is an area of overlapping land claims, so it complicates the...frankly, that's common throughout British Columbia. The five major first nations organizations, bands, represented around the Prince Rupert area all had different views on Fairview, and it was a complex and difficult process to get them to the point where the benefits associated with that project were enough to offset some of the concerns.
That's the calculus for a lot of first nations communities, right? It's the economic benefits associated with these communities. Yes, first nations communities, most of them, are deeply interested in economic development, but it has to be done in a way that's environmentally sustainable and respects their traditional practices and cultures in their communities. There's been quite a bit of work already done in association with the Pacific Northwest project. It's not one that we're directly involved in at this point. Other government agencies are involved in it, but I know from my participation in interdepartmental meetings in B.C., for example, that they're working hard on addressing the concerns of first nations associated with it.
I did have another answer about what we've done for aboriginal youth. We have funded a whole variety of mobile trades training trailers, one of which we did with Northwest Community College. The idea of that is to bring some of the training opportunities directly into first nations communities. For some of these youths, moving out of their communities, moving out of a small community and going to a place like Smithers or Terrace, is a really big dislocation. If you can bring some of the training to them, you stand a better chance of their actually getting involved in the economy.
Thanks for the question.
You're right. Everybody is positioning themselves to be a leader in this area, so you're going to hear from me very much what you've heard from others. I'm going to back it up with some really hard facts, not that some of my colleagues necessarily haven't done that.
I'm talking clean tech generally but clean energy as well. The data on clean tech are hard to come by. It's not a sector in Stats Canada's national accounts, but some work is under way right now, which we are participating in at WD interdepartmentally. The best data source we have now is a report that showed 40% of the clean tech companies in Canada are in western Canada. Twenty-five per cent of them are in British Columbia, so the economic geography of British Columbia is highly favourable to clean technology.
Our WINN program is not targeted to a particular sector. The first three intakes of WINN have been open to any sector that has technology commercialization potential. Over half the money that we have ended up spending has gone to clean tech, not because we directed it there, but because that's where the opportunities lie.
In addition to being able to visit Prince Rupert, one of the best parts of my job is in looking over these applications that we get in for the WINN program from the clean tech companies in particular. When I see the entrepreneurial spirit and the smarts that are on display in western Canada, it blows me away.
Probably one of the best signs of that is clean tech projects that we haven't been able to fund. We've funded quite a few that I'm quite proud of, but we've also not been able to fund the clean tech projects that were, in my view, quite deserving of funding and have scored very highly in our assessment project in things like ore sorting, new materials based on biomass, landfill gas recapture, and in capturing waste from waste streams from agricultural activities. We've had a number of really fantastic applications in areas like that, which we haven't been able to fund.
What we have funded is a good sign of why B.C. in particular and the west in general is a clean tech hotbed. What we haven't funded is also a really good sign.
As you correctly identified, we are heavily oversubscribed, so more money would definitely make a big difference with the technology commercialization effort.
We could probably do a better job of the coordination of some of our efforts with those of other agencies involved, frankly. One benefit of WD working inside the broader innovation, science, and economic development portfolio is that we are doing exactly that. We are starting to do a better job of coordinating with agencies like the Business Development Bank and some of the other RDAs to that end, to try to get a better bang for the buck.
The Province of British Columbia has devoted $100 million to a venture capital fund. That fund will be operating on a fund-to-fund basis to support innovative companies in B.C. We could probably do a better job of lining up some of our efforts to make sure they're complementary to that.
We also work closely in consultations and in other fora with the venture capital industry in British Columbia. It was only recently that it was restored to a fairly dynamic state. VC in B.C, venture capital in B.C.—too many acronyms—is healthier than it was about five years ago.
We also have a strong network of angel investors in British Columbia. These angel investors are individual investors that support individual companies. We work closely with them.
One other area is either first or second in most tech sector conversations. The consultations the government has been running on the innovation agenda recently have produced, as either first or second, an emphasis on talent attraction and talent retention.
The tech sector in B.C. has deficits, although not so many, believe it or not, in science, technology, engineering, and math. Canada does a good job of producing graduates, skilled ones, in those areas. Where we need more flexibility is in the attraction of marketing, management, and C suite talent to tech companies. Tech companies can grow to a certain point of 10, 20, or 30 employees with the original founder involved. The original founder often is not a guy who has the necessary skills to take a company to the 500 and 1,500 employee stage. At that point you need serious professional managerial talent. A lot of that comes from Silicon Valley, let's face it.
Recently in Vancouver we had a conference called the Cascadia conference, which was jointly sponsored by the Business Council of B.C. and Microsoft Corporation. Microsoft has opened offices in B.C., and if anyone gets a chance to visit them, they are absolutely stunning. In the course of that conversation, a company like Microsoft sees potential in Vancouver and in the Lower Mainland in particular. The attraction of talent is something that needs to be done with a little more flexibility.
That said, did hear from the board members of Microsoft that what Canada has already done in the way of flexibility around immigration of talented individuals is a world-leading example. Microsoft is operating in countries all over the world. They wish more countries had a system that's as flexible as ours, but there's clearly more to be done.
Thank you, Mr. Chairman.
Good afternoon, everybody. It’s both an honour and a privilege for Karen and I to be here today. It is our first appearance before a parliamentary committee, so I'd say we're looking forward to it but I know you wouldn't believe me.
Thank you for the opportunity to appear before you today. I'm joined by Ms. Karen Skinner, director general of regional operations with ACOA Newfoundland and Labrador.
Newfoundland and Labrador is a vast land with a small population of just over half a million, whose settlement patterns reflect a reliance on the fishery, but also on mining and forestry. The collapse of the cod fishery in 1992 marked a turning point in the province, creating record unemployment and a dramatic population decrease, but first oil in 1997 marked the start of an economic turnaround. Oil prices reached record highs; unemployment decreased; the population stabilized, and gross domestic product grew. The province enjoyed record budget surpluses, losing its have-not status by 2008.
Following the boom and bust cycle typical of resource-dependent economies, the province is now being impacted by the downturn in oil and other commodity prices. Where oil once represented nearly one-third of provincial revenues, it now stands at 9%. This affects incomes, business investment, and the province’s fiscal capacity.
While the short- to medium-term economic outlook appears challenging, long-term potential, particularly in the energy sector, remains strong. While the agency’s mandate has always been to create better and more employment in Atlantic Canada, its programs have evolved to address specific challenges and realities, and with the Atlantic growth strategy, ACOA is committed to supporting a federal-provincial homegrown, prosperity-focused and evidence-based strategy to stimulate economic growth.
ACOA’s work reflects the government’s innovation agenda, including support for high growth and clean tech firms, as well as international business development. This alignment is reflected in strategic sectors. They are sectors like our information and ocean technology sector, and energy, mining, fisheries, aquaculture, and tourism. Just to look at a few of these, Newfoundland and Labrador’s ICT sector is mature, with approximately 130 companies, 3,500 employees, and annual revenues in excess of $1.62 billion.
I mentioned earlier Newfoundland and Labrador’s historic reliance on the sea, and while many residents have left their boats, they never left the water. Centuries of experience and expertise in harsh marine environments is now advancing the ocean technology, or OT, sector in several marine-related subsectors, including oil and gas, defence and security, fisheries and aquaculture, and marine transport, in areas such as weather forecasting, ice management, and ocean observation.
There are over 1,700 direct employees in the OT sector, which generates about $528 million in annual revenues and more than $30 million in public and private sector R and D expenditures.
ACOA recently invested just over $3 million to develop the Fisheries and Marine Institute of Memorial University of Newfoundland’s $19-million Holyrood Marine Base, a rural facility that will allow the institute to consolidate at-sea operations and R and D in one location. A spinoff is the town of Holyrood’s work to diversify its economy and capitalize on growing OT activity. Once a community reliant on the fishery, Holyrood is positioning itself as a place to conduct oceans-related business.
The province’s energy activities focus on offshore oil and hydroelectricity. Since 1997, the oil industry has contributed about $9 billion, or 28%, annually to nominal GDP and provided direct employment to approximately 9,200, including support workers.
The province has three major offshore projects, with a fourth under construction, and despite price uncertainty, exploration is increasing. The future of offshore oil development is dependent on several factors: exploration attraction, competitiveness with other jurisdictions for project development, and innovation, particularly in developing technology for Arctic and harsh marine environments.
To help ensure that long-term, sustainable, and local economic benefits are achieved from the energy sector, ACOA engages in a wide range of activities, including policy development and advocacy, strengthening supply and service capacity, and investing in R and D.
Newfoundland and Labrador's traditional fishery and growing aquaculture sector continue to be relevant and important. In 2015, the total value of production in the seafood industry reached a record high, exceeding $1.2 billion, employing approximately 17,500 people in harvesting, processing, and aquaculture operations. ACOA's investment in the fishery focuses on value-added processing and R and D to improve productivity. In aquaculture, the focus is on key publicly owned industrial infrastructure, training, and support for applied scientific research.
I echo the comments of some of my colleagues from ACOA who appeared before me that ACOA's greatest strength lies in its on-the-ground presence and in-depth local knowledge. The agency benefits from solid government programming, coupled with the flexibility to find solutions that deliver results. It has developed critical networks with provincial, municipal, academic, business, other federal and not-for-profit partners in order to focus on Government of Canada objectives.
Many clients, particularly small business and community-based ones, tell us that while the dollar investments are important, it's more often our staff's time, counsel, and guidance that they value most. ACOA's employees across the agency are deeply passionate about the work they do, have a genuine concern for their clients and communities, and are committed to helping them succeed.
I'll conclude by saying that ACOA works with companies, communities, aboriginal leaders, and institutions to help advance a strong and diversified economy and to help deliver Government of Canada priorities. There are shared themes across the Atlantic region that shape ACOA's programs and services, but the ability to provide local context and knowledge allows us to deliver a nimble, responsive approach to address unique challenges, leverage strengths to build a more innovative and inclusive regional economy, and maximize opportunities in each of our four Atlantic provinces.
Thank you again for your time today, Mr. Chair. I'll be happy to try to answer any questions.
Well, I think there are bright spots in the short to medium term.
Our tourism industry remains very strong. It's a billion-dollar industry. We have half a million visitors annually, and 36% growth in non-resident visitation over the last six years.
The aquaculture sector is strong as well, and shows great promise, especially on the south coast.
Our tech sector, and particularly our ocean technology sector, which I spoke about a little earlier, is strong as well.
Oil, as I mentioned, shows promise in the long term, too, especially in the Flemish Pass basin, where I expect our next field will be, a field that Statoil is looking at developing with 300 to 600 million barrels.
I think there are quite a number of bright spots in the economy, notwithstanding some of the challenges we face.
I really can't offer an opinion on carbon pricing. It's really beyond my purview, but I do think that some of the areas where we are concentrating our efforts, areas where we have possibilities for growth and expansion, will help the economy in the short term. I know it's a long-term to medium-term possibility, but oil prices will eventually improve, though likely not anywhere near where they were in the past.
Good afternoon, Chair and committee members. Thank you for the opportunity to be in front of you this afternoon to talk about FedNor. My opening remarks will attempt to describe the structure and conditions in which FedNor works.
FedNor is a regional development organization that is responsible for economic development, job creation, and economic diversification in northern Ontario. It delivers on this mandate through its programs and initiatives. We deliver it through our partnerships with all other federal departments, the Province of Ontario, and other stakeholders in northern Ontario.
FedNor has a very large service area. Northern Ontario represents 90% of the land mass in Ontario, but is home to only 7% of the population. Slightly more than half of northern Ontario's 833,000 residents live in the five major centres. The remaining folks live in smaller rural communities and in first nations communities.
In total, there are 150 municipalities, 80% with a population of 2,000 or less. The region is also home to 110 of the 126 first nations communities in Ontario. Close to 90% of those 110 first nations communities have fewer than 1,000 people. Of those 110 first nations communities, 29 are remote communities, accessible only by air or by winter road.
Northern Ontario faces a number of significant challenges. First, while progress continues towards building a more diversified economy, the region remains highly dependent on resource sectors, making northern Ontario's economy susceptible to global economic downturns and market fluctuations. We have seen these fluctuations in the mining industry, the steel industry, and the forestry industry, where there was a major downturn several years ago which we are now coming out of.
The second challenge has to do with the large number of northern Ontario communities that are small, rural, and remote. Many of these small communities lack the capacity, both fiscal and human, to take advantage of economic opportunities. They require support from FedNor to assist in laying the groundwork needed to support them in their efforts to spur economic development and economic diversification in their communities.
The third challenge relates to the small and medium-sized enterprises in northern Ontario. It remains a concern that these SMEs, and most of them are small, have a difficult time accessing funding for their projects, given that they are in rural areas, away from traditional funders. Moreover, because they are located in small, rural, and remote communities, potential lenders consider them to be higher risks. When they try to access traditional sources of funding, they are often refused for this reason.
In addition, northern Ontario's vast geography and low population combine to amplify challenges related to transportation, infrastructure, energy costs, ICT/broadband gaps, and access to a skilled workforce. For example, many companies continue to have difficulty finding skilled workers to replace retiring employees.
Two studies recently carried out, one in the northeast by Laurentian University and one in the northwest by Lakehead University, found that over the next five years in the mining and forestry industries alone there will be a need for approximately 40,000 new workers in each of these jurisdictions.
In regard to manufacturing, unfortunately, northern Ontario lags behind the rest of the province significantly. We have 880 manufacturers in the region of northern Ontario. This accounts for only 4% of manufacturers across the province. Of those, roughly 19% are involved in exporting their products outside the region, both nationally and internationally, compared to 42% in southern Ontario.
Our major industries—forestry, mining, and steel—are huge users of energy. No doubt you have been hearing about the energy costs in Ontario, and the energy costs in northern Ontario are higher than in other jurisdictions, affecting the ability of the companies in these industries to make investments needed to take advantage of growth opportunities and to continue to diversify their business operations.
FedNor, through its support of strategic projects, in collaboration with all federal, provincial, municipal, and first nations partners, continues to work to address these challenges and promote opportunities in the region.
These challenges are not new to northern Ontario. We have suffered these cycles in the mining and forestry industries time and time again. Stakeholders are, above all, resilient and continue to focus their efforts on opportunities for diversification, as opposed to simply putting up their hands and saying that the challenge is too great.
I would now like to turn my attention to the opportunities that we have in northern Ontario and that FedNor is involved in to a great extent.
A growing global demand for minerals, coupled with the region's rich mineral resources and reserves, as well as knowledgeable and innovative mining cluster, represents a wealth of opportunities in our mining sector. This includes the generational mining opportunity known as the Ring of Fire development, on which I would be pleased to speak to you in more detail later in the presentation.
The northern Ontario mining sector is innovative. It is world-class and world-renowned. It does business in many jurisdictions across the globe, and it finds itself in the very enviable position of being able to provide those kinds of services globally.
Emerging from a long downturn and facing the expiry of the softwood lumber agreement, the forestry industry is now making large investments in value-added forest products and new clean and green technology, resulting in operational improvements, growth in these companies and, bottom line, jobs being created in the communities in which they reside.
As an example, in Thunder Bay, a major strategic partnership is currently leading efforts to establish a wood-based biochemical cluster, a project that aims to hasten mass production and the successful commercialization of green biochemicals derived from wood in northern Ontario.
In a nutshell, rather than looking at a tree as a two-by-four or a two-by-six, we are now looking at a tree for the chemical compounds that it represents, and how it can add value into the chain of products that we see developed in the world. This is a major initiative, featuring a number of important industry players—Resolute Forest Products, a major international company; Natural Resources Canada; Sustainable Development Technology Canada; the Province of Ontario; Lakehead University; and FedNor itself—who have been working in collaboration to develop this innovative technology and bioproducts that can be marketed to the world.
This is a great example of what the future holds for the forestry industry, which we believe will continue to prosper and bring value-added to the communities in northern Ontario.
Agriculture is also on the rise in northern Ontario, in large part because of the affordability of land. With over a million acres of available agricultural land in northern Ontario, you can buy an acre of land for approximately $500, whereas in southern Ontario that same acre of land will cost you somewhere between $5,000 and $25,000. FedNor is working diligently with community and industry partners seeking to take advantage of this opportunity.
Longer growing seasons are enabling our agricultural businesses to grow different kinds of crops, creating a more productive and diverse agricultural landscape across northern Ontario.
The region is also home to other existing and emerging innovation clusters in areas including health care, research, and green technology. Again, I would be pleased to offer more comment in those regards.
Last, probably one of the most significant key opportunities that northern Ontario has involves the region's significant indigenous population. Again, 110 of the 126 first nation communities in the province are located in northern Ontario.
While the north's overall population continues to decline, if not flatline, first nations communities are seeing their populations increase. With 29% of the local indigenous population under the age of 15, it is clear that the contributions of indigenous youth will be vital to the north's future success. It's an opportunity to promote a more proactive and participatory approach to economic development in those communities, including the advancement of resource development opportunities in the far north where many of our remote communities are located.
In conclusion, FedNor has acted and will continue to act as the Government of Canada's lead economic development organization to help northern Ontario communities diversify their economies and prosper in the future. I believe that FedNor is well positioned to deliver on its mandate, the government's priorities, and to work in unison with all its partners to ensure that communities across northern Ontario are provided with the tools they need to help them succeed in the future.
Thank you for allowing me these opening comments, and I look forward to your questions.
Thank you very much for the question.
We certainly see great opportunity in northern Ontario. Some examples would include on the health front. We help to fund one of four cyclotrons that exist across the country. We have funded the Thunder Bay Regional Research Institute, which is a world-class research institute on health in Thunder Bay. We did this in partnership with Lakehead University, the hospital, the Province of Ontario, and a number of private sector companies that are now coming together to form a cluster around using isotopes that are formed from the cyclotron and using them at this point in time for non-human testing, but once it can get approval from Health Canada, moving them to human testing. It's a tremendous growth opportunity in that regard.
Similarly, in northeastern Ontario, we are working with the regional health organization and its research institute, and they are doing world-class work on vaccines. They have already attracted some 10 or 12 private sector companies to come and work with them in northern Ontario, and to establish themselves there to continue testing vaccines for the purposes of potentially growing that arm of the business.
Certainly, the mining sector, as I said earlier in my remarks, is a world-class cluster. We provide products and services to the world. If you want to know about robotics, you come to northern Ontario and talk to our companies. If you want to talk about deep mining two or three miles underground and all of the issues that go with that, you come to northern Ontario. While mining is still a fundamental activity in northern Ontario, it is the emerging technology coming from our experiences that are allowing us to continue to grow this industry. That would be another area of tremendous growth.
I spoke briefly about agriculture. It is a hugely emerging opportunity for northern Ontario. There are a million available acres in the Temiskaming area and in the northwestern Ontario, Fort Frances and Rainy River area. We will be able to compete with a lot of jurisdictions in terms of food products and growing food crops for the future. It is a huge area of opportunity for our first nation communities, particularly those that are remote, so they're very interested in partnering. We are working with indigenous communities to help them take advantage of business opportunities related to agriculture also.
Mr. Chairman, thank you for the invitation to appear before this committee.
As noted, my name is Janet King, and I am the president of the Canadian Northern Economic Development Agency, more commonly known as CanNor.
I am here to talk about Canada's North, specifically Yukon, the Northwest Territories, and Nunavut.
I am also here to speak of the work CanNor is doing to respond to the challenges the region is facing and to support opportunities.
The north covers approximately 40% of Canada's land mass. It includes 75 communities and 119,000 people, or 0.3% of Canada's total population. Forty-nine per cent of the population lives in the three territorial capitals, while the balance live in small and very dispersed communities.
The territorial economies are dominated by the public sector, which contributes 30% to the territories' GDP, and resource extraction, which contributes 19%. The balance is a mix of smaller sectors, led by construction, real estate, and transportation.
The territories experienced substantive GDP growth rates in recent years, spurred in particular by the mining industry. However, their growth is expected to be much more modest for this and the coming years, largely due to low commodity prices.
The recent territorial economic outlook from the Conference Board of Canada forecasts that real economic growth is expected to average only 1.8% over the period 2016-20, with Yukon's economy the hardest hit with the closing of its last large-scale mine. However, their longer-term outlook is expected to improve again as commodity prices recover and new mining projects come on line.
These cycles exemplify the importance of the resource industry as the current economic driver for the north, but also the importance and need to diversify.
The north is a region with much opportunity. About 23% of its population is under 15 years old, compared to 16% elsewhere in Canada. This young and vibrant population has much potential for the future, and is already advancing to productive roles and leadership positions.
The north also has a vast land area, with a rich and diverse resource potential still to be sustainably harnessed. The north also has wide-ranging opportunities to innovate, to diversify its economic activities, and to build on its natural assets. For example, the value of the fishery in Nunavut has more than doubled over the last 10 years; biomass and wind energy industries are being established in the N.W.T. and Yukon, contributing to green growth; and specific tourism segments, such as the market for viewing northern lights in the Northwest Territories, have been increasingly successful in recent years.
That said, there are real challenges to Northern economic growth.
The north has a significant infrastructure deficit that remains a fundamental barrier to growth. Over half our communities do not have year-round road access and, despite facing on two oceans, there is a lack of port facilities, large or small, to support marine-based activities.
Connectivity infrastructure is also lacking. Internet speed continues to lag behind levels elsewhere in Canada, and the cost of these services for users remains much higher.
As well, only half of working age Northerners—and only a quarter in Nunavut—have a grade 12 education, limiting their ability to participate fully in the economy. This leads to a lack of skilled professionals, and many businesses still depend on a fly-in fly-out workforce.
Mr. Chair, I will now take a few minutes to discuss how CanNor works to build on the north's opportunities and help address its challenges.
Created in 2009, CanNor has an annual budget of $55.4 million and a staff complement of 80. It is headquartered in Iqaluit, with offices in the three territorial capitals, as well as a liaison office in Ottawa. About three-quarters of our staff are based in the north, and one-quarter are indigenous.
The agency's mandate is to strengthen Northerners' ability to seize economic opportunities in the North and to foster the development of key economic sectors in the region.
Allow me to provide members with an overview of CanNor's current funding activities and how we are investing to foster economic activity and diversification in the north.
Through our strategic investments in the economic development program, known as SINED, a program focused on promoting economic diversification and growth, CanNor supported 60 projects totalling $17.4 million in contribution funding this past year. This also allowed the agency to help new and emerging industries, as well as capacity building in small and medium-sized enterprises.
Funding in these sectors leverages investments from our partners. We work routinely in partnership with the territorial governments, indigenous organizations, and the private sector, allowing impacts to be maximized. Last year, for example, this meant leveraging investments close to a ratio of 1:1 with our northern partners.
CanNor also invests directly in the growth of indigenous businesses through our northern aboriginal economic opportunities program, which is funded at $10.8 million per year. In 2015-16 alone, we supported 63 projects, including three equity funds to be used to support indigenous businesses across the north, delivered through local service partners already established in the communities.
Demand is increasing and we believe that CanNor funding makes a difference. Mr. Chair, I'm pleased to report to this committee that 79% of the indigenous businesses that CanNor helped with foundational support are still in operation today.
Through our northern adult basic education program, delivered with the three northern colleges, CanNor has invested in improving the literacy, numeracy, and other essential workplace skills of indigenous adults. To date, this program has helped over 3,400 northerners gain important skills needed to participate more fully in the labour market.
CanNor also delivers regional components of national programs, such as the Canada 150 Community Infrastructure Program.
Mr. Chair, I will now discuss a business line unique among the regional development agencies: the northern projects management office, referred to as NPMO. This office supports efficient and transparent environmental assessment processes in the north. It does this through coordination of federal regulatory departments' involvement, advisory and pathfinding support, and coordination of federal crown consultations.
The NPMO is currently working with over 50 companies and tracking over 30 major projects engaged in environmental assessment processes. These projects represent the potential for more than $22 billion in capital investment and more than 10,000 jobs for the north, if realized. The NPMO also works very closely with the communities to help them plan and prepare for nearby resource development so they can maximize the economic benefits and manage the impacts the projects may have on them.
In closing, Canada is stronger when our north is stronger. CanNor's goal is to foster and support a prosperous and resilient north. We will continue to invest in development and diversification and to assist with effective environmental assessment processes.
I thank you for the opportunity to speak with you today. I will be pleased to answer any questions you may have.