Looking back at 2016 in the Alberta business world, one word comes to mind: diversification. With oil and gas prices in the tank, everyone wants to see Alberta businesses find and develop new products and find new markets to help nudge the province away from its heavy reliance on the energy industry.
The road to a more diverse economy inevitably leads to, in part, manufacturing – and thankfully there’s a great deal of strength in the sector. There’s strength, but also significant challenges. We’ve seen through this downturn that the impacts of low oil prices have sent shockwaves throughout the supply chain, and the discount our energy producers receive for their products due to lack of pipelines to seawater undercuts the competitiveness of our oil and gas assets.
But at the end of the day, it’s about being tied to one commodity. While the economy is more diverse than many give it credit for, there’s still much we can do to build a more resilient economy.
Canada’s global ranking in terms of manufacturing output has been declining since the 1980s. According to the United Nations, Canada was the 8th largest manufacturing producer in the world. By 2014 we fell to 14th spot, sliding behind countries like Mexico, Brazil, Russia, Spain and Indonesia – largely due to cheaper labour and few environmental, health and safety standards.
So what have countries that are outperforming our own done to improve their output? Advanced economies like the United States and Germany are embracing new, advanced manufacturing technologies to create new products and to improve productivity, quality, speed and flexibility in their processes. This gives them a competitive edge.
That’s not to say there aren’t some incredibly innovative manufacturers already in Alberta. Alberta Enterprise Group member DIRTT – a Calgary company that uses three-dimensional design, configuration and manufacturing software to build prefabricated interior structures in-house – immediately springs to mind. We just need more DIRTTs in Alberta.
So how we get there? According to a recent study by Canadian Manufacturers & Exporters, one of the top issues facing the sector is attracting or retaining skilled labour. Now, with unemployment the way it is currently in Alberta, that might sound a little bizarre, but manufacturers play the long game and many see labour as a key issue.
While governments and the private sector can partner to develop the workforce of the future, access to skilled labour will never be our comparative advantage over the likes of Indonesia and Brazil. Canadian companies need to outpace our competitors in terms of developing and implementing new technologies.
Companies need cash to invest in new technology, and they need to recoup that investment relatively quickly. This is where government can play a positive role – both levels of government can help design tax policy that incentivizes investment in new technology.
Let’s hope business and government can work together to create an environment wherein a prosperous economy can develop.
Alberta Enterprise Group is a member-based, non-profit business advocacy organization. AEG members employ more than 150,000 Canadians in all sectors of the economy.