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Business in Vancouver: B.C. budget 2016: challenges ahead threaten upbeat projections

[Excerpt] B.C. led the country in economic growth in 2015 and is forecast to have the highest growth again in 2016. But as the BC Liberals prepare to introduce the provincial budget later this month, economists warn there are more clouds on the horizon than those projections might suggest.

Challenge No. 1: Confidence

B.C. might have relatively upbeat gross domestic product growth projections approaching 3% for 2016, but Canada’s economic prospects are dismal. 

“It’s an [economic] environment that has a lot of risks, more than the usual,” said Jock Finlayson, executive vice-president and chief policy officer of the Business Council of British Columbia. 

“Canada is struggling. All the data I’m looking at tells me that Canada is going to be challenged to really get any growth at all in the economy this year, and that’s largely due to the collapse in commodity prices and weakness in emerging markets.”

Finlayson expects a relatively upbeat economic forecast from Minister of Finance Mike de Jong, but he thinks a key challenge for the government will be to reinforce confidence in B.C.’s economy. 

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Business in Vancouver: Low head-office count makes B.C. ‘a province of small businesses’: report

Metro Vancouver’s high cost of living and fractured regional governance is doing it no favours when it comes to attracting corporate offices, according to a report from the Business Council of B.C. (BCBC).

The study found Vancouver’s reputation for not being a city for global business, coupled with a “cumbersome” immigration system, is keeping corporations from establishing offices on the West Coast.

The BCBC examined Statistics Canada data tracking the number of head offices throughout the country.

In 2013, Metro Vancouver was home to 242 head offices, Calgary had 216, Montreal had 392 and Toronto had 702.

Employment at head offices in B.C. amounted to 17,000 direct jobs in 2013, or 7% of the national figure compared with 12% of the province’s share of the national population.

The report found B.C. “punches well below its weight” with just seven head offices per 100,000 people compared with Ontario’s 8.4 head offices per 100,000 people and Alberta’s 10.3.

“These findings affirm that British Columbia is predominantly a province of small businesses,” the report said.

But the BCBC pointed to two initiatives — Vancouver International Maritime Centre (VIMC) and HQ Vancouver — that are helping to reversing the tide.

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Vancouver Sun, Barbara Yaffe: Both west and east coasts have to face reality on future of pipelines

When Montreal Mayor Denis Coderre recently rejected an oil pipeline through his city, it sparked a firestorm in Parliament and across the West. Yet Vancouver’s Gregor Robertson regularly disses the notion of shipping bitumen through Burrard Inlet and no one bats an eyelash. What gives?

That double standard was discussed earlier this week at a gathering of some 50 economists and government representatives, sponsored by the Conference Board of Canada and Vancouver’s Board of Trade.

“Alberta is going to have a stranded asset if it cannot get access to tidewater,” Ken Peacock, Chief Economist and Vice President at the Business Council of B.C., told the group. “It’s something we really have to deal with, as a nation.”

Both Coderre, opposing the Energy East pipeline proposal to ship Alberta crude through Montreal and on to New Brunswick, and Robertson, opposing expansion of the Kinder Morgan pipeline to Burnaby, have been speaking parochially for their constituencies, reflecting canny politics.

But they are not championing the greater economic good, the capacity for Canada to get top price for a commodity that, until recently, was the main driver of this country’s prosperity.

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BC Business: B.C.'s economy will have 'wind in its sails' in 2016

The B.C. economy has "wind in its sails," thanks to the promise of one or more LNG export terminals and the Vancouver real estate market—according to a forecast panel hosted by the Conference Board of Canada on Tuesday.

While a number of the proponents—Petronas, Shell—have yet to make final investment decisions on their LNG plants, the construction of just one could boost the province's GDP by 1 per cent, said Pedro Atunes, the Conference Board's deputy chief economist.

As for the Vancouver housing market, while there's "a fair amount of risk," he is forecasting a stable 2016 bar a big interest rate hike. "We don't feel there's a bubble," added Ken Peacock, an economist with the Business Council of B.C. who is forecasting a four per cent increase in consumer spending in the province in 2016 thanks in large part to the fiery housing market. And one group is benefiting in particular, he said, quoting a colleague: "real estate agents are making money like B.C. makes water."

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Globe and Mail: Canada's carbon challenge: Turning promises into reality

[Excerpt] Some experts worry that the premiers are creating a balkanized climate regime, particularly in the electricity system where provincial governments have long isolated their markets to favour government-owned or local utilities. Ontario and Quebec and Manitoba are co-operating under the cap-and-trade plan, and all premiers agreed last summer on a Canadian energy strategy that pledges co-operation. But provinces are still prone to protectionism and acting in isolation, Jock Finlayson, executive vice-president at the British Columbia Business Council, said in an interview. Premiers agreed on a Canadian energy strategy but he said there are still far too many barriers.

“I call it climate mercantilism at the subnational level,” Mr. Finlayson said. “We need to link these markets. Everybody who can count to 10 recognizes that you can lower abatement costs by co-operative effort involving multiple jurisdictions rather than having little markets [on their own] trying to find the most cost-effective ways to get emissions down.”

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Vancouver Sun, Peter O'Neil: B.C. proposal aims to have First Nations own chunks of major projects

A B.C. First Nations-led proposal to unlock billions of dollars in natural resource wealth across the country has received seed funding from the federal government, The Vancouver Sun has learned.

And if the First Nations Major Projects Coalition can persuade Prime Minister Justin Trudeau to go a step further and accept their biggest request — loan guarantees to allow aboriginal communities to buy equity stakes in major projects — that could lead to a historic breakthrough, say its backers.

The loan guarantee idea has been endorsed by the B.C. Business Council and the Macdonald-Laurier Institute, an Ottawa-based think-tank.

Both said the proposal could resolve one of Canada’s and especially B.C.’s most daunting challenge — how to get approval for pipelines, mines and other projects after a landmark 2014 Supreme Court of Canada expanded aboriginal land title rights.

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B.C. Business Council’s Jock Finlayson said his organization supports the proposal in principle, even if a loan support program could pose risks for taxpayers if a project falls apart and the band is unable to repay its debt.

“It’s important to recognize that taxpayers in Canada are already devoting many billions of dollars to the First Nations file each year, very little of which encourages, let alone helps to kick starts economic development,” Finlayson said.

“If done right, allocating a modest sum to an initiative that makes more capital available to First Nations that are keen to advance projects and accelerate economic development in their communities could pay significant dividends for everyone — aboriginal and non-aboriginal alike.”

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Business in Vancouver: Apparel companies that start up in Vancouver grow, prosper — and opt to stay

It’s no surprise that Vancouver, with its healthy outdoors lifestyle, inspires designers to start up innovative companies focusing on premium and performance apparel. What’s new and noteworthy — and perhaps contrary to expectation — is the decision by these companies, having achieved major success, to maintain their headquarters here rather than relocate to bigger cluster cities.

The option of a stodgy, by-the-books move to a Cleveland or a Chicago just wouldn’t make sense for British Columbia’s apparel sector. In designing, manufacturing and retailing clothing and footwear, these high-quality technical performance and premium brands — Arc’teryx, Aritzia, lululemon athletica, MEC (Mountain Equipment Co-op), Herschel Supply and Kit and Ace — reach markets worldwide.

The sector also includes the boutique and mid-tier brands Obakki, Native Shoes, John Fluevog, Minimoc and Tatum & Olivia; specialized brands Dayton Boots, Mustang Survival and Watson Gloves; and manufacturers Garmatex, GE Garments, Tamoda and Winner Sportswear.

Contributing $14.6 billion to B.C’s GDP, these companies draw on Vancouver’s vibrant setting and culture to create, in the words of lululemon’s mission statement, “our products create transformational experiences for people to live happy, healthy, fun lives.”

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B.C. now has North America’s fourth-largest apparel sector, with 600 businesses generating 7,000 jobs in the province and 14,000 jobs globally. The sector ships $3 billion in goods to over 50 countries.

Business Council of B.C. President/ CEO Greg D’Avignon says, “With our gateway to Asia and proximity to U.S. retail markets, B.C. is a destination for these innovative companies to locate and grow this cluster in technical apparel and design. Our province’s economy is diverse in part because of companies such as lululemon and Arc’teryx, who are choosing to start and grow their business as an integrated part of B.C.’s brand, which exemplifies a healthy, environmentally conscious and globally connected lifestyle. These companies are innovative, technology-driven and offer well-paying, highly specialized employment opportunities.”

Another reason for staying: thermal-gloved hands down, this is the most practical site for production.

Clothes and gear that can handle B.C. weather can handle weather anywhere.

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CKNW: BC Business Council says slumping energy prices hurting province’s LNG dream

The BC Business Council says the provincial government’s LNG dreams is getting hammered thanks to the slumping energy prices.

BC Business Council Vice-President and Chief Economist Ken Peacock says the Premier’s LNG promises now have some question marks.

“There is a big question mark on that because LNG prices have come down. They are linked to oil prices and so obviously with the precipitous decline in oil prices it is a little bit of a question mark as to when we will see, and perhaps if we will see, a major LNG project proceed in the province. I think we probably will at some point but timeline at a minimum will be pushed back.”

Natural Gas minister Rich Coleman has said recently he has one final investment decision on an LNG facility with three more possibly coming this year.
 

The Asian spot price for LNG tumbled to its lowest levels since 2010 and have fallen by more than half over the last year.

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CBC: B.C. could lead Canadian economic growth in low-loonie era, economists say

Many of B.C.'s industries will benefit from the low Canadian dollar, making it likely the province will lead the country in economic growth this year, say economists.

The Canadian dollar dropped again Friday to 68 cents US, fuelling concern that the growing downward momentum means tough times ahead for the country.

But some experts say B.C.'s diverse economy means enough sectors will benefit from the low loonie to boost the province's outlook overall.

"One thing that really is emerging from the current environment is the fact that B.C. is doing relatively well precisely because we are more diversified," said Ken Peacock, vice-president and chief economist at theBusiness Council of British Columbia.

"B.C. is doing very, very well, probably will lead the country this year in terms of economic growth." 

 

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Vancouver Sun, Barbara Yaffe: B.C. becoming Canada’s economic darling

[Excerpt] The Conference Board’s generally rosy outlook for B.C. is shared by the Business Council of B.C., which notes that west coast tourism will see gains from a lower Canadian dollar.

In a list of things to watch for in 2016, the Business Council cites agricultural exports, which it characterizes as an underappreciated sector, one that has become “one of the province’s major export engines,” growing by more than 20 per cent last year.

The council is predicting less-robust economic growth for B.C. than the Conference Board, at 2.8 per cent after inflation in 2016, but again, ahead of all other provinces.

It points to persistently weak commodity markets, with lower earnings from coal, copper, gold and natural gas, all of which translates into lower government revenues and poses challenges for communities beyond the Vancouver area.

For example, natural gas exports fell 40 per cent last year, generating $1.5 billion compared to $4 billion a decade ago.

The council says population growth is helping B.C.’s economy, fuelling both consumer spending and house buying.

In the third quarter of 2015, B.C. experienced a net inflow of 6,300 people from other provinces — the strongest third-quarter tally in two decades.

The Lower Mainland is to remain B.C.’s “key economic growth engine” this year. The Business Council says cities such as Victoria and Nanaimo will also do well as urbanization continues, partly in response to lower resource revenues.

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Vancouver Sun, Pete McMartin: The eggs-in-one-basket economy

[Excerpt] B.C. led the country in job growth (2.3 per cent in 2015 compared to Alberta’s minus-0.6 per cent). Interprovincial migration was up close to 18,000 by the third quarter.

“Most forecasters, including my own shop,” said Jock Finlayson, chief economist of the Business Council of B.C., “project that B.C. will lead Canada in GDP growth in 2016. Once the final numbers are tallied for 2015, they are likely to show B.C. topping the growth charts last year as well.”

No better time then, Finlayson said, for “a stepped up public policy” to promote industries outside of the natural resource sector — tech, tourism, advanced manufacturing, knowledge-based businesses. And time, too, to pour money into our schools, rather than war on them.

“On higher education,” he said, “it is worthwhile noting that virtually all successful jurisdictions are allocating additional resources to expand and strengthen university and college education, technical training, and related research.”

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CKNW: Plunging loonie creates winners and losers

For the first time since 2003, the Canadian dollar has dipped to under $0.70 U.S.

But beyond an abstract line on a graph, what does that mean for every day British Columbians?

 The effects aren’t being  felt evenly. Some are having the wind knocked out of them, while others are seeing windfall. 
 

Winners:

Resource sector

It’s a classic maxim for economists: Anyone who exports is going to do well off the plunging loonie.

In B.C., among the biggest exporters are the resource sector.  Ken Peacock, Chief Economist of the BC Business Council says that’s good news for the mining industry, which has been hard-hit by low commodity prices.

But he says the big winner will be forestry.

“Our lumber products and some of the panel products that are produced here in B.C. will be sold in greater quantities into the U.S. because of the increased competitiveness.”

Agriculture

B.C. exports more than $1.7 billion in agrifoods every year, and about about three quarters of that goes to the U.S.

Peacock says the sector is already seeing results. He says greenhouse producers and other farm products are seeing sales up about 20% year over year in 2015, something bound to accelerate as the dollar drops.

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National Post: B.C. Premier to pitch byelection voters on the fruits of austerity: financial ‘dividends’ through services

[Excerpt] But B.C. has twice revised downward this year’s budget forecast, most recently projecting a $265-million surplus on a $47-billion fiscal plan. Even if the surplus grows unexpectedly — as it did last year when $184 million turned to $1.7 billion by the end of the year — Finance Minister Mike de Jong has said the money goes first to paying off B.C.’s debt.

Economic experts predict B.C. could book a larger-than-expected surplus this year, but not by much, said Jock Finlayson, executive vice-president of the B.C. Business Council.

“I could see there’d be a little bit more flexibility over the next couple of years, if the overall economy performs as we’re forecasting and the province keeps a tight rein on the expenditure side,” he said. “But we’re not talking multiple billions of dollars.”

Clark’s move to reopen spending comes after Prime Minister Justin Trudeau won last fall’s federal election with a plan to boost federal spending while running several years of deficits.

Clark has refused to entertain a deficit for B.C., but admitted Trudeau picked up votes based on his optimistic promises.

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Vancouver Sun, Barbara Yaffe: Ignore First Nations at your peril, says chief

B.C’s Assembly of First Nations regional chief delivered a bold message recently to the province’s business community, asserting aboriginals want not just to partner economically with resource developers, but to own the companies overseeing those developments.

“Our longer-term goal is to own those companies,” Chief Shane Gottfriedson told 400 business people attending a conference sponsored by the Business Council of B.C. “We want to own those major projects. We are getting beyond being mom-and-pop, band council operations.”

Gottfriedson was elected to his position last June, replacing Jody Wilson-Raybould, now the Liberal MP for Vancouver-Granville and federal minister of justice.

Gottfriedson served notice to the business crowd that the rules of the game have changed.

“We’re open-minded. We’re business-minded. We are looking at creating a better future for our communities. We are the poorest of the poor, the most disadvantaged. Everybody’s got to win in this process.”

In a riveting address, the former chief of the Tk’emlups Indian Band in Kamloops lamented that aboriginals have become experts at “managing poverty”. Now, he says, they “need to become good at managing wealth.

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Vancouver Sun: Election looms, B.C. premier ready to spend

[Excerpt] But B.C. has twice revised downward this year’s budget forecast, most recently projecting a $265-million surplus on a $47-billion fiscal plan. Even if the surplus grows unexpectedly — as it did last year when $184 million turned to $1.7 billion by the end of the year — Finance Minister Mike de Jong has said the money goes first to paying off B.C.’s debt.

Economic experts predict B.C. could book a larger-than-expected surplus this year, but not by much, said Jock Finlayson, executive vice-president of the B.C. Business Council.

“I could see there’d be a little bit more flexibility over the next couple of years, if the overall economy performs as we’re forecasting and the province keeps a tight rein on the expenditure side,” he said. “But we’re not talking multiple billions of dollars.”

Clark’s move to reopen spending comes after Prime Minister Justin Trudeau won last fall’s federal election with a plan to boost federal spending while running several years of deficits.

Clark has refused to entertain a deficit for B.C., but admitted Trudeau picked up votes based on his optimistic promises.

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Maclean's: The death of the Alberta dream

[Excerpt] To be sure, the oil crash isn’t yet deep or dark enough to have actually lowered Alberta to the status of federal welfare case, qualifying for equalization payments. It still remains a wealthy province, with the highest average weekly income in Canada. “It’s still not that bad relative to the rest of the country,” says University of Calgary economist Trevor Tombe. “I think we were just used to things being so good that we lost a little bit of perspective.”

But, to Jaster’s point, there is much his province used to have that now seems gone. Most noticeable is Alberta’s eroding status as the Promised Land for so many Canadians from other parts of the country. Over the last decade, net interprovincial migration by 18- to 44-year-olds, the key working demographic, swelled Alberta’s population by 200,000, according to a report by a rather envious Business Council of British Columbia. (That province netted fewer than 40,000 over that stretch, while all other provinces were net losers.) The momentum has shifted. While 1,200 more Canadians still moved to the province than left it during the third quarter of 2015, that was the smallest gain since 2010—when the province was recovering from the 2009 oil price collapse—and less than half the average of the last 50 years.

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Business in Vancouver: Economic Outlook 2016: B.C. to fly above resource mire

2016 will be a tale of two economies: the still-struggling mining and energy sectors will likely fail to see any significant lift in depressed commodity prices, while it’s a much rosier outlook for non-resource industries.

That dynamic explains why in forecast after forecast, economists are predicting British Columbia will lead the country in economic growth, even as Canada’s economy will see little expansion thanks to the falling price of oil.

 While resources still play an important role in B.C., the provincial economy is much more diversified than those in provinces like Alberta and Newfoundland and Labrador, which have relied heavily on oil production to boost wages, employment and government revenues.

 “We do have a very diverse economy in B.C., probably looking across the country the most diverse, and way more diverse than Alberta,” said Ken Peacock, vice-president and chief economist at the Business Council of British Columbia.

 “We do have the resource base but then we also have this urban-based economy where you see development of high-tech and tradable services and other pieces of the puzzle.”

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But as export growth to Asia has waned, B.C. is once again heavily dependent on exporting to the U.S. So one risk to B.C.’s economy would be a slowdown south of the border, although all signs point to continued U.S. economic growth, Peacock said.

 As resilient as the B.C. economy seems in the face of low oil, coal and natural gas prices, there’s no question that resource doldrums are causing economic pain, especially in the northeast and Interior. Mines have closed in the northeast, causing significant job losses, and more than 800 B.C. companies that supply equipment or services to the Alberta oilsands are being adversely affected, Peacock said. Exploration work for oil and gas and for mining is almost nonexistent.

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Globe and Mail: Co-operation among cities crucial to Vancouver region’s economic prosperity

[EXCERPT] The new Metro initiative is getting praise from the Business Council of British Columbia, which has been begging the region to get itself together for years.

“We’ve got a third of the head offices we should have for a city this size. We have lower wages, fewer jobs, less tax revenue,” said president Greg D’Avignon said.

The lack of a co-ordinated agency or effort in the Lower Mainland is one of the reasons behind the region’s low economic performance, he said.

“I was in Hong Kong in November and three different municipalities [from the Lower Mainland] came through, all with a different message. We need a common brand, a common strategy,” he said.

The business council, which supports a federal initiative started in February called HQ Vancouver, has found that many businesses considering coming to the region are confused by the multiple cities that seem to be operating independently.

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Langley Times: Lowly loonie means winners and losers in B.C.

The dramatic dive in the loonie that has put the brakes on cross-border shopping and driven up the cost of U.S. imports is far from over, according to the Business Council of B.C.

The council predicts the Canadian dollar will continue its slide down through the 70-cent threshold before bottoming out at around 67 cents U.S.

"All the pressure on the dollar is down and I think it's got further to fall," said BCBC executive vice-president Jock Finlayson, who expects the loonie to languish between 67 and 75 cents for the rest of this decade, barring a major rebound in energy prices.

"I think we're in a world where the Canadian dollar is going to stay quite low for as far as the eye can see."

The impacts of the spectacular currency swing will be felt much more strongly in 2016, he said.

The loonie's descent from the heights of three years ago – when it was above par – to below 72 cents today already translates into savage math for anyone buying U.S.-priced goods: it costs Canadians roughly 40 cents more to convert each U.S. dollar than it did in late 2012.

The loonie's "stunning" drop is the steepest decline of any three-year period.

"It's an enormous shift in buying power," Finlayson said. "We're significantly poorer in a global sense."

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The Leader: Lowly loonie means winners and losers in BC

[Excerpt]

The dramatic dive in the loonie that has put the brakes on cross-border shopping and driven up the cost of U.S. imports is far from over, according to the Business Council of B.C.

The council predicts the Canadian dollar will continue its slide down through the 70-cent threshold before bottoming out at around 67 cents U.S.

"All the pressure on the dollar is down and I think it's got further to fall," said BCBC executive vice-president Jock Finlayson, who expects the loonie to languish between 67 and 75 cents for the rest of this decade, barring a major rebound in energy prices.

"I think we're in a world where the Canadian dollar is going to stay quite low for as far as the eye can see."

The impacts of the spectacular currency swing will be felt much more strongly in 2016, he said.

The loonie's descent from the heights of three years ago – when it was above par – to below 72 cents today already translates into savage math for anyone buying U.S.-priced goods: it costs Canadians roughly 40 cents more to convert each U.S. dollar than it did in late 2012.

The loonie's "stunning" drop is the steepest decline of any three-year period.

"It's an enormous shift in buying power," Finlayson said. "We're significantly poorer in a global sense."

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