The 9 Habits of Highly Effective Resource Economies: Lessons for Canada

The Canadian International Council released this whimsically titled but very serious report in 2012. The basic question it asked was: How can the country derive maximum benefit from its tremendous natural advantages?



Many experts were consulted including David Emerson, who is a member of the Resource Works Society’s Advisory Council. The text and visuals below are drawn from the report; for the full report download the PDF here.

1. Save your money (think sovereign wealth fund)

A growing number of countries treat resource revenues as capital and not income. Canada is not among them.

Governments must demonstrate that they are responsible stewards of public money. All levels of government in Canada with revenues from non- renewable resources should stop treating them as income to be spent and start treating them as capital to be saved or invested. Each province or territory receiving revenues from non- renewable resources should establish (if they do not have one already) provincial wealth funds. The federal government should do the same for the non-renewable resource revenues it receives from the territories and should investigate the possibility of putting corporate income tax revenues directly related to non-renewable resources into a fund. Treating resource revenues this way has implications far beyond the fiscal. It could potentially lessen currency volatility due to commodity price movements, help stabilize the economy through booms and busts, simplify equalization, and provide a source of investment income over the long term.

2. Don’t stand still. Add, extract, and build value.

We’re rich in resources but could be richer still if we did more with what we have. Government can help business find the answers.

‘How do we do more with what we’ve got?’ should be the focus of government policy on natural resources. While it’s up to business to find the answers, government’s role is to provide a solid foundation through modern infrastructure, education, and research systems. An additional role for government is to ensure that its policies do not hinder the growth of value-added industries.



3. Research together or fail separately.

Crisis is teaching Canadian resource firms the virtues of collaboration — a lesson their global competitors learned long ago. [This was written in 2012, as the world was still recovering from the 2008 global financial meltdown.]

If Canada wants to stop being only a hewer of wood and drawer of water and add, extract, or build more value around its natural resources, it must do a better job of collaborative research involving government, academe, and industry. To do this, federal and provincial governments must concentrate their funding for research and development on collaborative projects between groups of companies and academic institutions, borrowing the best ideas from existing models in Australia, Finland, and Chile, among others. Small-scale efforts such as the Centre for Mining Innovation in Canada, FPInnovations, and the Canadian Oil Sands Innovation Alliance provide templates for broader, national efforts.



4. Keep up with the world: put a price on carbon.

Canada must find a better balance between resources and the environment. Pricing carbon is a necessary first step.

Canada should bring in a national, revenue-neutral carbon tax. We should not wait for the United states to act, but move ahead with a plan that includes border measures to ensure that Canadian companies are not put at a competitive disadvantage. This will not only create more certainty for Canadian businesses but will give them the incentive they need to develop the greener products and processes that are increasingly in demand in much of the rest of the world. This should be done in consultation and co-operation with business and the provinces.


5. Get on the global boat and cast wide trade nets.

Trade patterns are changing. We need to go global and think less about finished products and more about value chains.

Canada should mount a sustained effort to diversify its trade and investment, building on its success in the U.s. market to become a more global trader. This means addressing not just trade policy but also policies that have an impact on the size and competitiveness of Canadian firms. In the absence of progress in the multilateral trade talks through the World Trade Organization, Canada should focus on negotiations involving the largest possible number of countries, such as the Trans-Pacific Partnership, and look beyond China so we do not repeat the error of putting all our eggs in one basket. Government can help companies plug into global value chains by removing impediments and securing the right trade and investment deals.



6. Don’t bar the gates: foster home-grown champions.

Governments must make it easier for Canadian resource firms to become global players. Keeping investment out is not the answer.

Resource companies operate in global industries. To be competitive, we need companies that are or can become global players. Governments need to change laws that impede the emergence of global players, especially securities laws. Imposing arbitrary limits on foreign investment would likely hurt our resource companies by increasing the risk of retaliation abroad and discouraging foreign investment in Canada. Not all foreign investments are welcome, especially if the investors do not operate on a commercial basis or Canadians do not receive reciprocal treatment in their market. But when potential investments are refused, the reasons should be public and transparent.


7. Use your aid to help strengthen good governance overseas.

Canada should play to its strengths with its official aid. Focus on resource governance and collaborate with like-minded donors.

Canada should bring coherence and focus to its resource-related aid and maximize its impact through collaboration with other resource-rich donors, such as Norway and Australia. The focus should be on poverty alleviation through strengthened resource governance in the recipient country. In order to practice what it preaches, Canada should implement the Extractive Industries Transparency Initiative.


8. Stop the temporary labour addiction, find a long-term cure.

Overuse of temporary foreign workers is a short-term fix. The solution includes allowing in more permanent residents and hiring more women and aboriginal workers.

The overuse of temporary workers has negative long-term consequences and does not attack the root cause of skills shortages, many of which are domestic in origin. A long-term solution includes better coordination between education systems and industry, stronger outreach to aboriginal Canadians and women, and welcoming immigrants as permanent residents, who will continue to contribute to society, rather than as temporary workers.


9. Make an inclusive national plan (hint: it’s more than just energy).

Other countries have been more strategic in developing natural resources. Federal-provincial infighting is holding Canada back.

Canada needs a national plan that will tie together efforts being made to develop its natural resources. The ultimate goal should be long-term, sustainable benefits for the whole country. The federal, provincial, and territorial governments should collaborate on a national blueprint for resource development that identifies the gaps to be filled — including in infrastructure, environmental protection, trade diversification, education, immigration, technology, and supporting sectors — and sets out how to address them, with achievable goals and deadlines. The federal government should convene and lead, but not dominate, the discussion. 



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