Budget 2008: Surplus? What Surplus?

No doubt, you remember the debt clock.

That was the little theatrical device finance minister Tom Marshall used during his trip around the province in what was euphemistically called a pre-budget "consultation".  Of course, it was pretty funny to call it a consultation considering that, as the Premier later admitted, budget decisions were already made or were being made as the finance minister attended the meetings.

The debt clock garnered so much attention it became the media story of the entire affair.  And that, as  Bond Papers noted, was the point of the exercise in the first place.

One would expect that consultations are supposed to be an exercise in soliciting opinions and ideas.  They are supposed to be about receiving messages.

In government practice  not just in this province but across the country, "consultations" have become more about government delivering a message to the people who show up for them and the reporters who get assigned to cover them rather than ministers collecting information.

It's fairly advanced doublespeak.

Kind of  like delivering a speech and then referring to the oration as an exercise in hearing:   "Joe Smallwood," the history professor noted, "was a masterful listener.  He sometimes listened to an audience for over two hours describing the economic accomplishments of Smallwood's government."

"Smallwood once said that he would single out the dimmest pair of eyes in a crowd.  He would then focus his listening until he saw that the brain behind those eyes understood what Smallwood was listening.  At that point, Smallwood could be sure the whole audience understood what Smallwood was hearing."

In any event, if we took the debt clock and the government pronouncements at face value, dealing with the public debt would be a major feature of government policy.

Take a closer look at the 2008 budget estimates, though, and you'll see a different story.

Right off the bat, the Estimates show a projected increase in total public sector debt in Fiscal Year 2008.

That's right.

An increase.

Not a decrease, which is what you would expect given the peril of public debt supposedly demonstrated by the debt clock.

In fact, that would be the third such increase since 2004.  Take a look at the table below and you can see exactly what the debt load has been and is. The figures come from Appendix III on page 243 of the Estimates link above.



Debt, in this case, is exactly what most of us think about when we speak of debt:  borrowings.

The phrase "total public sector debt" refers to the accumulated borrowings of the provincial government and its agencies.  The whole thing is laid out pretty clearly each year in the Estimates.  It was also discussed in a report from the province's auditor general just before the finance minister introduced the budget in the legislature.

At this point, minds are boggling.  Now if you are so confused at this point you are drooling like a spliffed-out Lab, in the words of Steve Macdonald, just grab your Bond Papers mug and hold it under your chin.

We're not done yet.

There's this idea of a surplus.  Now most of us think of a surplus as being money left over after all the bills are paid.

We've been told that that the surplus in 2007  was over $1.0 billion last year.  This year, the province's finance minister forecast a surplus of over  half a billion this year.

Find those figures in the Estimates.

Go on.

Be brave.

Take a look.

You'll find the answer in Statement I, which is on page iv of the Estimates if you've got a printed copy or page seven of the pdf link.

The real picture of government’s surplus or deficit is found in the estimates in a table called the summary of borrowing requirements.

You can find it usually in the first two or three pages of every budget. That table brings together all government revenue estimates and the spending plans and adds in the debt-related spending to give a total picture of how much money will be left over at the end of the year – a surplus – or how much has to be borrowed – a deficit.

If you go back and take that same statement from each set of Estimates, you'd wind up with a chart like this one:

Now there is a surplus on current and capital account of a slightly more than $1.0 billion for 2007.  Then there's an interesting adjustment. You have to subtract the $305 million in money from the 2005 offshore deal because it was already received.  That money shows up in another spot as revenue, but that's just for the accounting of the cash on the province's books. In order to get the accurate picture of revenues, you have to take that amount away.

Then you are left with about the true picture of  $737 million, which is still a tidy sum.  The only problem is all the financial transactions for the year aren't done. After repaying Equalization overpayments and a federal loan, retiring a bit of debt, putting some cash against the pension liabilities and contributing to sinking funds (to help pay off loans when they come due), the provincial treasury came up $88 million short.

Not a surplus.

A deficit of $88 million.

And if you take your eyes from the right hand side of that page and switch it to the left hand you'll see the estimated financial state for 2008.

Current and capital account will be in deficit by $54 million.  After you take away the advance cash from 2005, the Estimates project a deficit of $414 million.

Not a surplus.

A deficit.

Carry on with all those other projected financial transactions and the provincial budget shows anticipated borrowings of almost $800 million in FY 2008 in order to balance the books.

In order to produce a surplus of the size predicted  - but predicted only in political statements - oil prices would have to continue at double the figure of  $87 a barrel used to come up with the budget.  So far, it looks pretty good for oil to be somewhere over $130 on through the end of this year, but you never know what will happen with oil prices, especially after the American elections in November and the new president is sworn in late in January 2009.

The provincial government might wind up being right. The US Energy Information Agency predicted in early April this year that West Texas Intermediate will average US$101 a barrel in 2008 and about $10 lower in 2009.

If that forecast holds true, the provincial government won’t have to borrow quite as much as projected or it might not have to borrow very much at all.

Now as you finish wiping your chin or reach for another belt of coffee to calm your nevers, don't fret.  The provincial treasury isn't about to run dry next month.

Nor is there anything unusual about a government presenting its finances in the best possible light;  "best" being defined as fitting its own political interests or outlook.  Governments of all political stripes here and elsewhere in Canada have been doing it for decades to one degree or another and in one way or another.   Criticizing them for it is like slagging a dog for barking.

The full picture is usually there in the budget documents.

You just have to look to find it.

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Change and Challenge: Chapter Two - The Challenges

The economy of Newfoundland and Labrador is underdeveloped and economic disparities between our province and other provinces in Canada persist. In addition to these long-standing problems, the Province now faces new challenges as the result of global economic change. Thus, in the 1990s, the need to diversify the economy and to improve productivity and competitiveness has become critical.

A Changing Global Economy

The world economy is constantly changing, driven by profound changes in trade patterns, investment flows and technology. More specifically,

• the liberalization of world trade has contributed to rapid growth in export opportunities for manufactured goods and commercial services and, as a result, to increased international competition;
• the emergence of major multinational trading blocs within the world trading system has resulted in an increase in joint ventures, technology sharing and mergers between firms from different countries;
• in order to promote competitiveness within acceptable international trading guidelines, there has been a shift in national and provincial economic policy from direct government subsidies to government support in the areas of business development services, tax incentives, education and training, technological innovation and diffusion, and the provision of economic infrastructure;
• the technological advances made in transportation and communications have reduced the effective distance between producers and consumers. This wider market for our goods and services is also creating opportunities for the development of new products and services, but it means, of course, that we also face more international competition;
• employment opportunities continue to concentrate in urban centres even though traditional impediments to development, such as domestic market size and distance from export markets are playing a lesser role in determining where firms choose to locate;
• the gradual shift from labour-intensive to knowledge-intensive industries, particularly in developed countries where labour costs are higher, has required firms to invest in both new technologies and human resources to improve their competitiveness; and
• environmental considerations are becoming increasingly integrated into the decision-making processes of governments, industries and individuals.

These world-wide economic changes will intensify over the next decade as new technologies and increasing competition force existing industries to restructure and new industries to develop. These changes mean that Newfoundland and Labrador will have to strengthen and build on existing comparative advantages in our resource industries and also target strategic opportunities in new growth industries. If we ignore the realities of a changing global environment, local firms will inevitably find themselves unable to compete at home or abroad.

The Province's Economic Structure and Performance

There are significant differences in economic structure and performance between Newfoundland and Labrador and the rest of Canada, though during the last two decades, our economy has generally mirrored the direction - but not the magnitude - of Canada's economic growth.

Newfoundland and Labrador's economy is very "open", which means that it is strongly influenced by the level of economic activity elsewhere, largely because of our reliance on resource-based exports. As shown in Chart 1, the goods-producing sector (including the resource industries) accounted for 29% of the Province's gross domestic product (GDP) in 1990, while the services sector accounted for 71% of GDP.

Because Newfoundland and Labrador's goods production is concentrated largely in primary-resource industries, the Province's economy has pronounced seasonality in output and employment, low value-added production and a narrow export base from which to generate new economic wealth. These weaknesses produce persistently high unemployment and low per capita incomes (Chart 2). 

The amount of personal income available is a major determinant of economic activity and of the Province's living standards. The amount of tax revenue which is available to Government for expenditure on areas such as education, health and transportation infrastructure, for example, is also influenced by both the level and distribution of personal income. It is therefore important to understand the relative importance of the components of personal income, specifically labour, business and investment income, unemployment insurance (UI) benefits and other types of transfer income (Chart 3). 

Transfer payments to individuals, such as UI benefits, social assistance, family allowances, pensions and old age security payments, represent the second largest component of personal income in the Province. Some elements of transfer income, such as family allowances and old age security payments, are based on demographic and social factors, while others, such as UI payments, are related to employment (and especially part-year or seasonal employment) and the general level of economic activity in the Province. However, this over-dependence on government transfers is no longer acceptable to most people nor can it be sustained by governments.

The challenge now facing governments, business, labour and other groups is to make sure that this dependence is replaced by productive employment and more appropriate social programs. For the Provincial Government, in particular, this means using its financial resources more efficiently and effectively.

Chart 4 shows that for the fiscal year 1992-93, total gross capital and current account expenditures are expected to reach $3.5 billion. At present, only 8.7% of that amount, approximately $300 million, is directly targeted for the resource or economic sector. On the other hand, the social sector is expected to consume 65.4% of the budget - about $2.3 billion. Because some traditional social-sector areas, such as education, are directly linked to economic performance, the challenge the Provincial Government faces, now and in the future, is to ensure that economic development considerations influence expenditure decisions.

While there are many opportunities which can contribute to economic growth, they must be pursued within a framework which is realistic and attainable. Too often, when setting goals for economic growth in the Province, achieving the Canadian average has been adopted as a medium-term target.

This, however, is probably unrealistic: over the medium term (5-10 years) - depending on the Canadian rate of growth -the Provincial GDP would have to grow between 4.4% and 12.3% a year to reach the Canadian average (Table 1).

A more realistic target may be for the Province to attain equality with the Maritime Provinces. The levels of economic growth necessary to reach the Maritime average are shown in Table 2. 

The Importance of Productivity and Competitiveness

In the expanding global economy, international competitiveness has become the most important single factor affecting economic growth or decline. Many of the Province's prospects for economic development, therefore, hinge on our willingness, determination and commitment to work together to build a more productive, diversified and efficient economy. One of the greatest challenges is to become more competitive while simultaneously improving the living standards, employment opportunities and real incomes of our people.

Newfoundland and Labrador's productivity performance, in particular, will be a key determinant of our ability to compete, but between 1975 and 1989, the Province experienced one of the lowest productivity growth rates in Canada. As a result, the difference in productivity between this province and the rest of Canada has increased and our economic problems have been compounded. The factors contributing to this disparity include differences in industrial structure, increasing seasonality in the employment of labour and capital, a small, widely dispersed population, lower levels of educational attainment, inadequate investment in capital for technological change, and a lack of cooperation among governments, business and labour. If this trend in productivity is not reversed it will have profound negative implications for our competitiveness, our economic growth and our overall standard of living.

To change this pattern, both old and new businesses in the Province will have to use modern production methods, invest in new technologies, provide adequate training and re-training, and produce higher value-added goods and services. We will all have to be adaptable to a changing work environment and be committed to life-long learning. And governments will have to become more efficient in providing quality public services and ensuring that their policies, programs and actions create an environment that supports real economic growth and diversification.

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Chapter Three - Charting the Course

Professor of Creative Writing

labradore suitably skewers Patrick O'Flaherty's latest column which - for reasons known only to O'Flaherty  - tries to cast the democratic referendum  on responsible government in 1948 in entirely ethic and sectarian terms.

O'Flaherty is a fiction writer, it should be noted, not a historian so some of his comments in the column  -  like the stuff about resources - can be put to an inherent tendency to make things up.

For those who can't figure it out, labradore's  title for the post translates as "money and the ethnic vote."

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Refinery economics not subprime crisis affected NLRC plans

NLRC's plans to build a 300,000 barrel per day refinery in Placentia Bay to serve the North American and European markets ran into financial difficulties apparently due to changing refinery economics, not the shortage of capital or other reasons originally offered by NLRC's director Brian Dalton.

In an interview on June 18, NLRC director Brian Dalton spoke to The Independent.

For some reason, the Indy held the interview with Dalton until this week, even though they had it before press time last week. The interview, on page seven of the June 27 issue gives a completely different perspective on NLRC's problems although the Indy story doesn't reflect the importance of what they had. The NLRC story is inside the paper; a front page story quotes the Premier on his recent efforts in Qatar to save the NLRC project and to promote other local energy projects. The front page focuses on trivial issues rather than on the more serious economic ones.

Neither story is available on line, as of June 27.

"Most refiners in North America have not made money in six months," Dalton says, [in The Independent]...

And that would be about right.

In a Canadian Press story that appeared across Canada the same day Dalton gave that interview, MJ Ervin analyst Cathy Hay said that in May 2008, North American refiners were seeing margins of around 10 cents per litre, compared with 28 cents per litre in May 2007. That's also about five to 10 cents below the margins expected during the peak summer months.

A company would "have to take a hard look at the numbers and figure what's going to happen next year. Is this a trend? If it is, your economics may no longer work," said one industry observer who asked to remain anonymous.

Late last week, some media reports were attributing NLRC's financial problems to the subprime crunch in the United States. According to CBC News, Dalton said the refinery project ran into troubles "due to the deterioration of global capital markets."

In March, Dalton gave similar reasons to Bloomberg:

"Effectively, the debt markets are closed at the moment,'' Dalton said. "It's not a pricing issue, it's just a general availability issue.'' The start of construction "depends very much on when the markets open. We're not going to start it unless we know we can finish it, that's for sure."

None of that matches Dalton's comments on tight refining margins, although tight margins would give investors pause before embarking on a $5.0 billion greenfield project aimed at the North American and European markets.

North American markets are likely shrinking owing to changing American consumer demand, even if only in the short term according to the Canadian Press story.

New refining capacity plus the increased use of alternative fuels like ethanol may also narrow global refining margins according to one Wood Mackenzie analyst. Allan Gelder told Bloomberg in April 2008 that he expects tighter margins through 2012.

European refineries are also experiencing tighter margins. That situation isn't likely to change in the short term.

While demand may be continuing in Asia and other parts of the globe, it's difficult to see the logic behind approaching Middle Eastern and Asian investors for the capital to build a refinery on the opposite side of the world from where the refined oil products would be marketed.

ARAMCO is continuing with its plans to invest in new refineries but those are not planned for Europe or North America. One project, in the Red Sea, would be strategically positioned to supply portions of Europe as well as growing markets in the Middle East, Africa and Asia. Another project, cracking Saudi heavy crude, would refine 400,000 barrels per day. It is planned for Saudi Arabia.

Other companies are investing in expansions to existing refineries in Europe, such as one at Wilton, UK.

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Update: The Indy front page story is now online but the story with real information in it - the one with Brian Dalton held - for some bizarre reason from the week before - is only in the print edition.

Free speech wins: SCC backs Mair in defamation case

In British Columbia, they have real talk radio hosts.

They used to have Rafe Mair but he's been replaced by others who have the trademark ability to really lay it on the line and tell you exactly what they think.

None of this Crap Talk  in the afternoons for British Columbians. Mair is a former cabinet minister who actually recalls what he did while in politics

And Mair surely wouldn't have been entertaining a plum government job offer on the sly from the guy who went on to become premier, all the while staying on the air through a provincial election and for a long while after. Isn't there some CRTC regulation against that kind of conflict of interest?

Nope.

Mair speaks truth to power, as he sees it.

One such episode landed him in court in 1999 facing a defamation charge from someone who wanted to keep books out of public libraries which depicted gay couples favourably.  Mair tossed around words like Hitler, the Klan and skinheads.

Mair won the first case, lost the appeal but today walked away from the Supreme Court of Canada with a unanimous verdict in his favour. The decision is also a victory for free speech, since the justices established more clear rules about what constitutes fair comment.

No one should be afraid to voice their opinion.  No one should consider the threat of a defamation suit - the bullying tactics of the weak and cowardly - as reason to reconsider speaking frankly about any issue which is of public concern.

By the way, someone should ask John Hickey and Danny Williams what happened to the law suit against Roger Grimes over words which Danny Williams uttered but Roger Grimes didn't.

And as a last note, it is painfully obvious that since the provincial government stopped organizing callers for talk radio shows, the audience for two of the three daily shows has dwindled.  So bad is it that two of the shows are now taking a summer hiatus.  Crap Talk with Bill Rowe took its crap off the air today.

A couple of months of the Top 50 elevator music hits should be enough to restore the sanity of anyone who wound up listening to the former ambassador to Hy's blather on.

It should be time, as well, for the crowd who program NewCap to see if they could cut a deal with Mair to host a show in this province from the Wet Coast. 

Imagine Rafe and Danny locking horns in the afternoon over a plan to pay women public cash to crank out children in order to save The Race.

Geez, now there's something you could actually charge admission to hear.

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Fraser Institute survey ranks SK ahead of AL

Saskatchewan is now the preferred Canadian jurisdiction for oil exploration and development, according to the Fraser Institute's Global Petroleum Survey 2008.

The Global Petroleum Survey 2008, ranked Saskatchewan as the sixth most favourable jurisdiction out of 81 in terms of having low barriers to upstream oil and gas investment. Alberta was ranked 29th while British Columbia ranked 19th. Saskatchewan is the only Canadian province ranked among the top 10 jurisdictions.

And Newfoundland and Labrador?

Here are two quotes from exploration and development officials surveyed:

“We are bothered by political uncertainty, regulatory uncertainty, and business concerns regarding
government involvement and royalties.”

“The government needs to make a long-term commitment to create and enforce a stable business
structure.”

The funny thing with this survey is that if you take a look at the responses to specific questions on things like financial regimes and political stability, Newfoundland and Labrador gets positive numbers in every category.  The existing situation is either no deterrent to investment or a mild deterrent to investment. In security, this province ranks alongside Saskatchewan, British Columbia and Nova Scotia as providing a secure environment that is a stimulus to investment.  Newfoundland and Labrador ranked higher than Wyoming on security in this survey.

So if all that is the case, why isn't there more exploration investment?

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10 Euros to cross the Atlantic

It's hard to know which is worse.

RyanAir's chief executive officer making an entirely inappropriate comment at a Dusseldorf newser announcing the airline's trans-Atlantic service,  Bob LeDrew's title for his post on the newser, or the fact no one seemed astonished at the idea of getting across the Atlantic for a mere 10 Euros.

The discount airline is top of the list in passenger complaints, according to a report in the Irish Times. The whole issue has prompted a raft of Internet traffic which some are claiming is a brilliant marketing ploy by RyanAir. Looks more like a case of the marketing crew at Ryan having to scramble to defuse a bone-headed comment.

Anyway here's the video of the news conference and here a tip of the bowler to Bob who posted this originally.

No word yet on whether the provincial government is in negotiations to bring RyanAir's unique customer service concept to this side of the ocean. One can only imagine what that news conference would involve.

Forget-me-not

 

The official flower for Commemoration Day (July 1st).

 

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NLRC gets 30 days to sort out financials

NLRC has 30 days to sort out its financial affairs, a Supreme Court judge decided yesterday in St. John's.

NLRC sought court protection from its creditors last week, after SNC Lavalin sought payment of over $20 million it claims it's owed by the company proposing a second refinery for the Come by Chance area. SNC Lavalin subsidiary BAE NewPlan told the court payment on the company's design and engineering work stopped six months ago.

SNC Lavalin agreed to the reprieve but offered no public comment on its reasons.

Notice in the scrum [ram audio file] that managing director Brian Dalton uses  a couple of meaningless phrases to skip over the issue of the provincial government's role in funding his project.  No reporters probed the issue further.

There's also an interesting version of the recent corporate history. According to Dalton, the US market "closed very suddenly" earlier this year and as a consequence NLRC shifted direction elsewhere for investors. 

SNC Lavalin is a major contractor on the Lower Churchill development project.  Altius' proposal for an equity stake in the Lower Churchill project is reportedly still active.

The NLRC financial problems have had a dramatic impact on Altius, which owns almost 40% of the refinery venture.  Its stock plummeted last week on news of the bankruptcy proceedings but rebounded slightly with word of the stay. The NLRC - Altius connection figured prominently in many of the news stories running on the Tuesday court decision.

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Electricity prices to leap in NL on July 1

Electricity rates in the province will take a jump on July 1 as a result of a decision of the Public Utilities Board on Tuesday.

The average increase will be 5.9%, according to the PUB official statement.

No word yet on a benefit dinner to help the average consumer pay the increases.

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Fiscal bandwidth hog: the disproportionate growth of Knuckles 2

Strange as it might seem, the disproportionate growth of the Executive Council budget as a share of overall government spending is attributable to the Office of the Chief Information Officer.

The Executive Council went from 0.8% of the annual capital and current account budget to 1.6% in the space of two years, 2004 to 2006. It climbed up again in 2007 and 2008.

OCIO - or NLCS v. 2 - is the controller of all computer resources and personnel within government. Over 200 employees, mostly in St. John's, and a budget which is twice that of the entity to which it nominally belongs. Big Brother, it seems, is a fiscal bandwidth hog like few others.

To be fair, ICIO's budget includes the budgets that used to be distributed around various government departments; it's not surprising it is a huge cash sucker.

But to be even more fair, like all bureaucracies, OCIO will continue to accumulate staff and budget allocations using every advantage that comes from being the information controller for all government working directly for the most central of central agencies.

The cash levels and the staff allocations are - after all - the only performance indicators any bureaucracy worthy of the name actually understands.

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The disproportionate growth of central agencies

Going through Change and Challenge and working up the slides to accompany it prompted your humble e-scribbler to do a little comparison with the current day situation.

For example, there's a chart in Chapter Three (still in the works because of the slides) which shows each department as a percentage of overall capital and current account spending in the provincial budget.

A quick flip to the current budget showed the same break down of information. Make some minor adjustments for changes in some departments over the past 16 years and - vie-oh-la - there is a chart.

Bear in mind that in 1992, the provincial government's total budget was $3.5 billion. This year the combined capital and current account budget is over $6.5 billion.

For those who don't want to click and see a larger version, the chart shows figures - from left to right for - Education, Health, Justice, Social Services, Consolidated Fund Services (debt management), Executive Council, Finance, House of Assembly, Works, Services and Transportation, Development, Environment and Labour, Fisheries and Natural Resources.

Right away, you can see some fairly obvious things. Education takes up a relatively smaller portion of the budget today than it did 16 years ago. Health, on the other hand is obviously a larger share. Development - which from the current budget includes Business, INTRD and Tourism has dropped as a share of the budget. Natural Resources - mines and energy, forestry and agriculture has a larger share of the budget today than it did 16 years ago. CFS is significantly lower today as a share of the budget than it used to be.

Let's put some values on those numbers. CFS took up 15.3% of the 1992 budget; today it's 8.3%. health has gone from 25% of the budget to 36.2%. Development spending is half what is used to be, as a percentage of total budget spending. Fisheries is about one third what it used to be.

Take a look, though, at the two in the middle: Executive Council and Finance, the latter including Treasury Board. Those two are so-called central agencies. They co-ordinate or oversee the others.

Executive Council has gone from taking up one half of one percent of the 1992 budget to 1.8% today. Finance has gone from 1.5% to 4.0%. The growth in those two agencies dwarfs the relative growth of the others.

At this point, there's no way of determining what this means. It just becomes an interesting artifact; something to provoke further examination.

If the provincial government were following trends supposedly taking place elsewhere, such as in Saskatchewan by one account, one might expect to see something other than a trebling of spending on the Executive Council. Allowing line departments and deputy ministers to manage departments, co-ordinate with other departments on related issues and resolve inter-departmental disputes among themselves would require additional resources than what was available 16 years ago.

By the way, at this point you can pretty much rule out annual inflation as the cause of the growth here. Normal inflation wouldn't account for the change as a percentage over overall spending. Esecially in a situation where the budget has doubled, you'd pretty much have to increase spending on that particular agency to drive the share from 0.5% to 1.8% in 16 years. As a test, consider that the House of Assembly today has more statutory offices reporting to it directly than it did 16 years and yet its share of the budget is virtually the same.

On the face of it, the disproportionate growth of central agencies demonstrated by the table above does conform to Donald Savoie's description of government trends in his most recent book Court government and the collapse of accountability. Savoie contends, among other things, that since the 1970s the size of and influence of central agencies has grown. There are several reasons for the growth including increased centralization of decisionmaking in the first minister's office and the related cabinet office.

Leaving aside Savoie's provocative title, there seems to be some confirmation of his argument. The other point of view, from former Saskatchewan Premier Alan Blakeney (link above), doesn't match with what the table here appears to suggest.

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George Carlin: checking out the heavy mysteries from the other side

He made us think as much as he made us laugh.

George Carlin died Sunday of heart failure.

His most famous riff was probably the seven words you can never say on television, later expanded to a seemingly endless list of dirty words and phrases. Those links aren't work safe. They're funny.

For a guy who made a significant living reflecting on power, authority, religion and politics, his riff on the 10 Commandments might be the one that pulls all his beliefs together in one spot.

Pure coincidence, no doubt.

This one is a suitable tribute to one of the most influential comedians of the past hundred years. It's also work safe, that is unless your workplace is a church.

Change and Challenge: Chapter One - The Changes

The Changes

In the fall of 1990, the Government of Newfoundland and Labrador began the process of developing a strategic economic plan for the Province. This planning process involved three phases. During the first phase, government departments and agencies reviewed their activities, assessed the economy's strengths and weaknesses, and identified threats and opportunities within our existing resource industries as well as in our other strategic industries.

Further research and analysis concerning various sectors of the economy were undertaken during Phase 2, and a public consultation paper was published to give the people of the Province an opportunity to have a say in the vision, guiding principles and actions that have become the strategic economic plan. The Advisory Council on the Economy (ACE), an independent advisory group comprising representatives from business, labour and other groups, co-ordinated the release of nearly 11,000 copies of the consultation paper, and in the fall of 1991, public consultations were held in 16 locations across the Province.

Altogether, the public consultation process resulted in 15 public meetings, 15 meetings for formal presentations, 5 regional round tables, a provincial round table, and the submission of 261 written briefs. Government also held meetings with industry groups, and several submitted reports. A final report on the results of the consultation process was prepared by ACE and published in April 1992.

This process provided some sobering insights into the challenges the Province's economy must face and established that there is a broad consensus for change. Most people now realize that government spending is becoming increasingly limited, and that there must be less dependence on government transfers. Most also recognize that working together to establish a competitive economy is the key to strengthening our economic and social fabric.

Some of the fundamental changes that people said they wanted to see are:

• A change within people. There is a need for a renewed sense of pride, self-reliance and entrepreneurship. We must be outward-looking, enterprising and innovative, and to help bring about this change in attitude we will have to be better educated. During the consultation process, most people agreed that education is essential to our economic development.
• A change within governments. Governments (both politicians and the bureaucracy) must focus on long-term economic development and planning, while still responding to short-term problems and needs. Government programs and services must place a greater emphasis on the quality of the services provided and on the client. Changes in education, taxation and income security systems are also considered critical to our economic development.
• A change in relationships. To facilitate the necessary changes in the economy, new partnerships must be formed among governments, business, labour, academia and community groups. In particular, better co-ordination between the federal and provincial governments in the delivery of business and economic development programs is needed to eliminate duplication and to prevent confusion for those who use them.
  

The final phase - implementation, monitoring and evaluation -begins with the release of this strategic economic plan. The plan will be monitored and evaluated as it is put into effect, to ensure that it is working and that it is responding to new challenges and opportunities. Throughout this process, Government will continue to encourage public participation and to seek the advice of business, labour, academia, community groups and individuals throughout the Province.

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Chapter Two - The Challenges

Bond Papers stands for smart rss blogging

Show your support for blogs with this golf shirt, new from The Bond Store, in time for the summer.

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Province plugging project

[UPDATE! Premier Danny Williams and natural resources minister Kathy Dunderdale will be meeting with unnamed investors on Sunday and Monday in Qatar trying to bail out the troubled NLRC refinery proposal, according to vocm.com.

The news release announcing the trip by the Premier and minister gave no duration for the entire visit, but referred to unspecified meetings in Qatar after the CNA campus graduation ceremony. it appears the trip was planned all along to include specific representations by provincial officials on behalf of a private sector proposal.

On a humorous side note, the government news release still produces a banner at the top of your Internet browser referring to a summer basketball camp, four days after Bond papers first pointed out the programming SNAFU.]

Natural resources minister Kathy Dunderdale told the Telegram that she and Premier Danny Williams are promoting the troubled NLRC refinery project to potential investors during their trip to the Middle East.

"Part of what we are doing over here is looking for new investments and we'll be promoting the refinery in terms of attracting a partner, so hopefully this project's going to continue".

Last week, NLRC director Brian Dalton told an oil and gas industry conference in St. John's that NLRC was actively seeking investment in several areas of the world, including the Middle East, for the stalled project.

NLRC sought court protection from creditors on Friday. SNC Lavalin is seeking approximately $20 million in unpaid fees for engineering and design work done by the consulting firm for the refinery proposal.

In court documents filed Thursday, SNC Lavalin subsidiary BAE-Newplan alleges "NLRC is looking to sell the project without 'independent oversight, review and approval' by unsecured creditors, and made a questionable security arrangement with a related company."

NLRC involves Altius and several European investors in a proposal to build a 300,000 barrel per day refinery in northern Placentia Bay, Newfoundland.

Altius is involved in several mineral and energy developments in Newfoundland and Labrador and elsewhere.

The company lists a Lower Churchill equity stake as one of the projects it is actively pursuing.

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NLRC seeks bankruptcy protection

Newfoundland and Labrador Refining Corporation, proponents of a 300,000 barrel per day heavy sour crude refinery for Placentia Bay are seeking court protection against creditors.

One of the creditors, SNC Lavalin, served notice on Thursday that it was seeking a court declaration that NLRC was bankrupt.

In a statement issued Friday, NLRC said:

NLRC management is currently working with its advisors to determine the optimum method of restructuring, which may include the sale of its assets. A further update will be provided at a later date once key decisions are made.

Earlier this week, NLRC director Brian Dalton told the annual NOIA oil and gas conference that the company was seeking investors in the Middle East, India and the Far East.

The refinery project has been in trouble for some time.

NLRC acknowledged in March 2008 that it had been unsuccessful in finding investors in the United States. Comments at the time were similar to ones given this week to CBC News:

Dalton said the company's problems with financing are "due to the deterioration of global capital markets."

By contrast, as Bond Papers previously noted, Dalton told the Financial Post in April 2007 that the project would only succeed if the company could find one major oil player.

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Related:

"Oh to be in the Gulf now that the cash is in bloom" in which Danny Williams, Kathy Dunderdale, Rodney Macdonald and Gary Lunn all head to the Middle East around the same time.

"Refinery marginalia" (October 2006) which notes, among other things the similarity between a provincial government news release and one issued by NLRC.

"Curious refinery logic" (October 2006)

"Chances of second refinery in NL more remote" (October 2006)

"Two degrees of separation revisited" (August 2006) Altius, Aurora, Newfoundland and Labrador Hydro, Brian Dalton, Dean Macdonald, Danny Williams.

At the same time, Altius is also pursuing a feasibility study on a second refinery in the Come by Chance area. The study was announced in February by Premier Danny Williams and then-energy minister Ed Byrne. The announcement was highly unusual since government [apparently - ed.] played no role in the [apparently - ed.] entirely private venture.

Change and Challenge: a strategic economic plan for Newfoundland and Labrador, Introduction

When it was released 16 years ago this month, Change and Challenge marked a departure in the provincial government's approach to economic development and diversification. The document subtitled "a strategic economic plan for Newfoundland and Labrador" laid out a long term approach to diversifying the provincial economy. It called for a transformation of culture, away from a dependence on government initiatives and government control and toward one based on individual initiative and private-sector entrepreneurship.

The plan did not promise easy answers, nor did it fixate on one sector of the economy or on large megaprojects. Change and Challenge represented the result of a long development process that was itself crucial. The long period of discussion and consultation both inside and outside government helped to develop a consensus among those who took part in the discussions.

Development of the plan lay with a economic planning group, appointed by cabinet in the summer of 1990 under the chairmanship of the premier's chief of staff, Edsel Bonnell. The group brought together a diverse set of individuals with an equally diverse set of ideas. There were within the group contending ideas, as former chairman of the Economic Recovery Commission Doug House describes in his book Against the tide.

The process was not an easy one but the fruits of the group's labour proved substantial. It's echoes can be seen in government policy four administrations after it first appeared, even if the old fixation on resource megaprojects and government paternalism in all spheres has come to fill the vision of policy makers once again.

Unfortunately Change and Challenge has not been available online before now. When it first appeared the Internet was in its infancy locally and so no electronic version was produced.

To overcome that problem and to mark the anniversary of this historic achievement, Bond Papers will present the strategic economic plan, chapter by chapter, over the next several days. The original document contains charts and graphs, all of which were printed in black and white as a cost-saving measure. They are recreated here in colour, where possible. Other than that there have been no changes to the content.

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Change and Challenge:
a strategic economic plan for Newfoundland and Labrador
June 1992

A Living Document

Foreword by Premier Clyde K. Wells

On behalf of the Government of Newfoundland and Labrador, I am pleased to present the Strategic Economic Plan which will determine the focus and direction of the Province's future economic development activity.

This document is the result of nearly two years of research, analysis and public consultation by Government. On behalf of my colleagues in Cabinet, I wish to express our gratitude to the Advisory Council on the Economy for conducting and evaluating the public consultation process; to the 261 organizations and individuals who submitted formal briefs and to the many hundreds of people who participated in regional discussions; to the private sector working groups from specific industries who provided valuable background information and recommendations; to the Economic Recovery Commission and Enterprise Newfoundland and Labrador for their significant participation in the entire planning process; and to the many Government officials from various departments and agencies who worked diligently and effectively in the research, evaluation, and compilation of an enormous amount of economic data.

The Strategic Economic Plan, in its final form, is the synthesis of hundreds of other documents, including statistical reference works, reports, working papers, studies, and briefs. The objective of the Cabinet working group of senior officials (the Economic Planning Group) was to produce a final document that would be as succinct as possible without sacrificing essential supporting data or background material.

This is an Action Plan. The 134 action items in this document are not merely philosophical observations or even statements of intent; they are commitments by Government based on specific decisions of Cabinet. These decisions were made carefully, taking into account the representations made by special interest groups and the general public, and always in the light of our fiscal capacity to support desired economic initiatives. They are presented here in the context and sequence of the plan itself, and not in any particular order of priority.

Implementation of the Strategic Economic Plan has already begun. Many initiatives were undertaken during the process of preparing the document. Others will start with the announcement and release of the Plan, but there are some programs which cannot be ready for implementation for months or even years to come. The Plan does not promise overnight miracles, but establishes the basis for economic recovery through sound, effective, and focused long-term planning. This is the only approach that can have credibility, because the people of Newfoundland and Labrador indicated clearly in the public consultation process that they would not take seriously any schemes that promised "quick fixes" or band-aid solutions to our structural problems. Indeed, in the pages which follow it will be shown that even if the province's growth doubled the national rate every year, it would take 20 years of such economic performance simply to reach the Canadian average.

Finally, this document is not the end of the strategic planning process for Newfoundland and Labrador; rather, it is just the beginning. We live in a constantly changing global economic environment, and every day brings new challenges and new opportunities. Our economic strategy must always be flexible enough to accommodate change and to accept challenge.

Change & Challenge is, therefore, a living document for the Newfoundland and Labrador economy in the latter years of the 20th century and beyond 2000. It is a plan prepared not just by government and business, but by the people of every region of the Province. That is what gives it the best prospect of success in charting the course for economic recovery and future prosperity.

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Chapter One - The Changes

Tube lawyers

This week's provincial news brought reference to Perry Mason.

For those too young to remember, Perry Mason was a fictional defence attorney, played superbly by Canadian actor Raymond Burr. The weekly series ran from 1957 to 1966 and was reborn as made-for-television movies until 1993. Almost invariably Mason was able to beat his opponent, district attorny Hamilton Burger, by showing that someone other than Mason's client was guilty of murder. Mason didn't just do his thing in court: he solved the crime by bringing the real criminal to justice with help from Della Street and investigator Paul Drake.

If the stories weren't good enough for you, the show had one of the coolest themes of any television show, as this clip from the second season demonstrates.



For another generation, there was Ben Matlock. Southern charm. Southern cool music and the irresistable Andy Griffith. The show was drama leavened with comedy.



Then there's Law and Order. Say television lawyer and more television viewers across North America are likely to think of Jack McCoy than Perry Mason. Played by Sam Waterston, McCoy epitomizes what many people would like to think is the kind of person serving as the local prosecutor. A tough, relentless, principled guy outwitting the crook's hired guns, McCoy's gone too far at times but his heart always seems to be driven by a passion for justice.



Metaphors can be useful to help someone understand a point you are trying to make. Pick the one that resonates with the audience and your job is done. if the audience's frame of reference is already somewhere else, a poorly chosen metaphor can undermine an argument no matter how good it might seem to you.

Still, none of this is real. They're all just damn entertaining shows.

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Chief of Staff: "I can't recall"

It's not the one you think it is.

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