Recent predictions of stronger economic performance in British Columbia in 2004 and beyond have not been met with a universal sigh of relief throughout the province.

There’s plenty of excitement over The Conference Board of Canada’s prediction of 3.4-per-cent growth in the Vancouver metropolitan area in 2004, as well as a Business Council of British Columbia report of 1.5-per-cent real growth in the last quarter of 2003 and prediction of three-per-cent growth in 2004.

But while the metropolitan areas surrounding Vancouver and Victoria are beginning to enjoy the fruits of recovery, many communities and businesses in regional B.C. – Vancouver Island, the Interior, the North – are still scraping for economic crumbs to feed their bottom lines.

“The standard of living for the middle class outside the Lower Mainland has gone down,” says Independent Liberal Paul Nettleton, MLA for Prince George-Omineca, a sprawling, largely rural riding in north-central B.C. that has suffered a series of economic blows over more than five years. “Every sector has been hit. Jobs are drying up. Businesses are folding.”

With a few exceptions, it’s largely a grim economic story across the rural part of the province. Mining has been hit by depressed world prices and investor cold feet; forestry by the bitter softwood lumber dispute with the U.S.; tourism by the triple threats of terrorism, SARS and the strengthening Canadian dollar; agriculture by depressed prices and the mad-cow scare; and the service sector by the stock market meltdown that ate into retirement incomes.

Meanwhile, a cost-saving provincial government initiative is cutting 11,000 of 38,000 civil service jobs.
Although the cuts will happen across the province, they will have a disproportionate effect on smaller communities that have a greater need for public services and where the loss of these well-paying jobs and the goods they bought is more keenly felt.

The provincial government is trying to kick-start the rural economy.

In 2001, Premier Gordon Campbell established the B.C. Progress Board, an independent panel of business and academic leaders tasked with measuring the province’s economic and social performance, and helping develop a game plan to return B.C. to economic leadership in Canada by 2010.
Its reports resulted in the Heartlands Economic Strategy to revitalize the economy in the regions.

It hopes to do so by removing barriers to growth through eliminating obsolete regulations, levelling the playing field by scrapping business subsidies and attracting investors through corporate tax relief, says spokeswoman Rena Kendall-Craden from the Small Business and Economic Development ministry.

And the federal government announced a new $50-million, four-year federal-provincial Western Economic Partnership Agreement in December to fund economic and technological innovation in small and medium-sized businesses.

Results are starting to be seen in forestry, tourism, mining and oil and gas development in communities throughout the province, says Kendall-Craden. Forestry jobs have been created through expansion of mills and a sort yard in Houston and Prince George, while royalty changes for deep gas and marginal oil and gas resources resulted in B.C. setting a Canadian record for petroleum and natural gas tenure sales in September.

Of $418 million in sales, $360 million was attributed to royalty changes. Summer drilling was also up more than 100 per cent over the previous year. Overall, drilling in 2003/2004 is expected to increase 40 per cent.

Similar success is looked for in mining, where provincial and federal tax credits are hoped to encourage exploration; a provincial sales tax exemption on production machinery and equipment should encourage mines to modernize; and elimination of the corporation tax should free up capital for reinvestment and job creation. Coal mines will also benefit from new emission standards for coal-fired generation and a review of the 20-year-old Waste Management Act.

But many communities are not sitting on oil and gas fields, have played-out mines, are still smarting from the softwood dispute or are too far from large population centres to benefit from a growth in tourism even in the medium term.

Nelson, a west Kootenay town surrounded by alpine parks and deep, cold lakes, was once on its way to diversifying from its mining and forestry roots. It once had a university and was featured charmingly in the Steve Martin movie Roxanne. But mining has all but disappeared. Forestry has been hard hit. The university is gone and the Japanese language school that replaced it closed in the wake of Japan’s own economic turbulence.

“We lost 280 government jobs and when you have a town of 10,000 people, it’s a pretty serious blow,” says one downhearted business leader in Nelson, who asked not to be identified.

“Unfortunately at this point, there doesn’t seem to be anything to take that place. I hate to say it, but welfare is a large part of Nelson’s economy.”

The other leg of Nelson’s teetering economic stool, he says, “is growing illicit weed.”

He is one of the small town business leaders in B.C. who view politicians and political solutions with skepticism. Politics in B.C. can most charitably be described as divisive. Succeeding governments regularly undo policies of predecessors, and government after government is sidetracked by scandal.

“We lack the kind of leadership that instills confidence,” agrees MLA Nettleton, ousted from caucus in 2002 for breaking party lines on railway and hydro privatization.
As well, many can’t see how government strategies could help them. Although 98 per cent of B.C.’s
businesses are classified as small (having fewer than 50 employees), more than half of all small businesses are really small, comprised of owner-operators. They mostly don’t have the time and expertise to apply for government funds or work up proposals for ministries.

In some communities, business leaders have taken advantage of a developable local feature, such as the military air strip in Comox. Persuading an airline that business could support a regular direct flight between the central Vancouver Island community and Calgary has boosted the local economy. Tourism, real estate and the service sector have all benefited.

Others have taken advantage of the new, less restrictive, regulatory climate.

Kimberley, in the Purcell mountain range in eastern B.C., was able to take advantage of looser environmental and development restrictions to more
quickly shift its economic base from mining to tourism, largely from Calgary, a four-hour drive away.

Kimberley was expected to shrink drastically after the Sullivan Mine was exhausted. Once one of the largest lead, silver and zinc mines in the world and employing one of every 3.5 residents, it was played out in the 1990s.

“It was predicted our population would be half what it is now,” says Larry Haber, Kimberley’s director of
economic development. The mine officially closed at the end of 2001, about the time the Heartlands Strategy was announced.

Dire economic predictions about the area held back new development, says Haber. “Banks and investors believed the predictions and were reluctant to fund projects in Kimberley.”

But investors were won over, and the city now boasts golf courses, condo developments and a charming downtown Bavarian “platzl”.

Now, “we have our first million-dollar house,” says Haber.

“Most of the developers are from the outside and most of the money coming here is from Alberta . . . we’ve been ‘discovered.’”

Others are looking for help outside government. The Okanagan Partnership, a group of businesses, academics and government, has hired one of the brains behind the economic cluster idea that resulted in growth of the Silicon Valley. The partnership is banking that when communities develop a regional mindset, every community will benefit when business is attracted to any one of the region’s cities or small towns – a sort of Silicon vineyard approach.

Individual businesses are finding markets outside their depressed local trading areas. Regional B.C. was responsible for 76.1 per cent of manufacturing shipments in the province, while shipments from the two metro areas fell in the 1990s. This is the only one of 10 economic indicators in which regional B.C. clearly outpaced the metro areas.

“Improving our export performance – particularly our regional economies – is absolutely critical to improving
overall economic performance,” says Tim McEwan, executive director of the B.C. Progress Board.“As a small, open economy, this very much includes our traditional resource drivers (forestry, energy and mining) while broadening our base into other ‘niche’ activities. So the path forward will include leveraging locally developed products or – in the case of tourism – an experience to bring in what economists call ‘basic income’ from markets beyond our borders.”

Finally, some communities are banking on a simple change of view.

So long as coastal communities looked back to the days of plentiful resource jobs, they were not developing a vision to lead them into the future and growth was stunted, says Dave Allen, president of the Sechelt and District Chamber of Commerce.

Recent local investments in renovating and expansion has put a brighter face on the town centre, and new opportunities have arisen – a Shoppers Drug Mart is an anchor to “keep the downtown core alive.” And an FM radio station, expected to create 35 jobs “out of thin air . . . ups the ante in creating exciting options for our children and ourselves.

“Sometimes change is hard to take and adapting to change can be a real challenge,” says Allen.

“As our individual communities up and down the coast put that extra effort into . . . improving our lot, I am sure we will all come out winners.”

The Two B.C.s
* Between 2001 and 2003, employment was up by 8.8 per cent in the Fraser Valley, and down two to three per cent in the Kootenays, Cariboo and North Coast.
* The province’s population grew by 0.8 per cent in 2003 (behind Alberta and Ontario at 1.3 and 1.2 per cent, respectively). But eight of the 10 fastest-growing cities in B.C. are located in the Fraser Valley, accounting for 87 per cent of the province’s growth.
* Five of the province’s eight Development Regions saw population declines between 1997 and 2002, following five years of growth. The exceptions were metro Vancouver and the province’s two favoured retirement havens – the Thompson-Okanagan and Vancouver Island.
* New businesses prefer the brighter lights of the big city – 6.8 per thousand population were created in the Vancouver metropolitan area and 4.4 per thousand in metro Victoria versus 2.5 per thousand in the regions.
* The Greater Vancouver Regional District has more than half B.C.’s population, yet accounted for 44 per cent of personal and 37 per cent of business bankruptcies in 2003. These figures have been slipping steadily since 1995, when 51 per cent of
personal and 43 per cent of business bankruptcies were filed in GVRD.
* The metro areas clearly outperformed the regions in eight of 10 indicators studied by the B.C. Progress Board in 2003, including employment rate and income, housing starts and non-residential building permits, school and university graduates. (Retail sales per capita were slightly higher in the regions).
* While non-residential building permits in metro Vancouver and Victoria are 80 per cent of their 1993 values, they’re at 50 per cent in the regions.
* Since U.S. softwood duties were imposed in 2002, 18,000 of the province’s 85,000 forestry workers have lost their jobs.

What would make owners of two successful small-town bakeries close their doors? A sizzling export market for scones. Read all about it in the next edition of Business Edge (March 4).

(Sharon Adams can be reached at sharon@businessedge.ca)