Edmonton and Calgary are fast becoming islands of prosperity in a global economic storm.
Market churn and waves of bad news from a depressed economy are battering big cities in Canada, North America and abroad.
But the multi-faceted economies of Alberta’s two largest centres are jewels of growth that will continue to dazzle, economic experts and analysts predict.
“Things are deteriorating (economically) around Alberta,” says Louis Theriault, associate director of the Conference Board of Canada’s Metropolitan Outlook, a quarterly review of metropolitan economies.
“But Alberta and Calgary and Edmonton are really in a different league . . . it’s pretty amazing.”
Edmonton and Calgary will be ranked No. 1 and No. 2, respectively, in Canada again in projected economic growth in the next Metropolitan Outlook report, due mid-September, Theriault said.
In May, the Conference Board review forecast that Edmonton’s economic growth would surge by 4.8 per cent this year – the fastest in Canada – to a GDP of $30.6 billion in 2001. Calgary was close behind, with projected growth of 4.3 per cent and a GDP of $34.8 billion this year.
“It’s a wonderful situation for both cities to be in,” said Garry Stamm, urban and regional economist at Stamm Research Associates in Toronto. “They’re superbly positioned (for the future), and not just in Canada.”
Three main engines are driving Edmonton and Calgary’s fast-moving economic trains, experts say. They are the Alberta government’s fiscal policies, recent record-high prices for oil and natural gas, and both cities’ success at diversifying.
“We have to give kudos to the provincial government for really developing the kind of business environment that is so attractive,” said Georgine Ulmer, president and chief executive of Promoting Calgary Inc.
Alberta’s introduction this year of a single flat-tax rate gives the province the lowest personal income tax in Canada, Theriault noted. It’s the most recent addition to the Alberta Advantage that includes low corporate taxes, a deregulated energy sector and a pro-business regulatory regime.
Capital spending in Alberta will rise 14.2 per cent to $39.6 billion this year – nearly doubling the 7.9-per-cent increase expected in second-place Ontario, Statistics Canada reported last week. Most of Alberta’s growth is fueled by an unprecedented $25.4 billion in oil-and- gas sector spending.
“A lot of what’s happening now in Alberta is back to fundamentals. It’s back to resource development and then developing the value-added (businesses) from the resource development,” said Stamm, a former Edmontonian.
Calgary’s economic growth, in particular, “is coming because the oil and gas industry is doing so well,” said Frank Atkins, a University of Calgary economics professor. “It’s just spreading through construction and retail and so on.”
In Edmonton, businesses engaged in industrial machinery and control systems, metal fabrication, electronics and oilfield-related services, are benefiting from more than $30 billion of investment in new oilsands projects.
Theriault said Edmonton’s construction sector should thrive over the next few years thanks to the oilsands and projects like Shell Canada’s $1.7-billion bitumen upgrader.
But Edmonton and Calgary’s economic engines don’t run on oil, gas and coal alone anymore.
“Both cities, but Edmonton more so than Calgary, are well diversified and therefore able to get their economies cooking with local value-added products,” Stamm said.
The rest of the world is finally catching on that Alberta is a very low-cost producer of important value-added materials from its natural resources, he said. For example, Alberta is home to the world’s largest production site of ethylene, used to make film and plastics.
“It’s no longer (a province of) just hewers-of-wood and drawers-of-water,” Stamm noted.
Greater Edmonton’s economic diversification has been spurred by the city’s strong post-secondary education institutions, said Ted Chambers, director of the Western Centre for Economic Research in the University of Alberta’s business faculty.
The U of A is one of Canada’s most research-intensive institutions, NAIT is a highly regarded technical institute, and most of Athabasca University’s resources and staff are in the Edmonton area, Chambers said.
Last month, California computer giant Sun Microsystems Inc. designated the U of A campus as a centre for e-learning.
The U of A has incubated and spun off 38 startup firms over the last five years. The public companies among them have achieved market capitalization of $2 billion.
Meanwhile, Calgary enjoys a growing reputation as Western Canada’s business and technology centre.
Calgary has captured about 60 per cent of Alberta’s high-tech business market, while the rest of the province – including Edmonton – has about 40 per cent, according to Calgary Technologies Inc. figures.
Calgary’s diverse high-tech community includes global players such as TELUS, Nortel and Panasonic. But the city also has homegrown wireless firms including CSI Wireless, Wi-LAN, Cell-Loc, Waverider Communications and Harris Canada, along with biotech startups such as Oncolytics Biotech and Synsorb Biotech.
Like the U of A, the University of Calgary is strong in research, including world-class work in medical sciences that’s supported by the Alberta Heritage Foundation for Medical Research.
“We think that we’ve got many assets that will continue to strengthen (the community’s) position,” said John Masters, president and CEO of Calgary Technologies Inc.
For the last 20 years, Calgary Technologies and its predecessor, the Calgary Research & Development Authority, have been dedicated to promoting and nurturing the city’s high-tech growth, Masters noted. “There is no city in Canada that’s had that focus.”
Barry Rempel, president of the Calgary Chamber of Commerce, points out that in the early 1980s, the oil and gas sector accounted for 40 per cent of Calgary’s GDP. That’s dropped to about 22 per cent.
“And that’s not because oil and gas has gone down,” Rempel added. “It’s just because the diversification of our economy has really taken hold.”
Calgary’s manufacturing sector, for example, now generates more than $12 billion in annual revenue and accounts for about 11 per cent of the city’s GDP.
Situated at the crossroads of the Trans-Canada highway and the Canamex corridor, Calgary has also become Western Canada’s transportation hub. Canadian Pacific Railway, WestJet, Trimac and Canadian Freightways all have their head offices in the city.
“We’ve become a very, very strong warehouse headquarters for western Canada,” said Ulmer, of Promoting Calgary.
Edmonton in the last decade faced more of an economic challenge than Calgary. The capital city was hit hard in the mid-1990s by provincial government restructuring and cost-cutting.
“We’re (still) short at least 10,000 well-paying jobs that also had a ripple effect of professional services and all kinds of things that enhance a community,” said Jim Edwards, president and chief executive of Economic Development of Edmonton.
The silver lining was that Edmonton weaned itself from depending on government activity and diversified, Edwards said.
In fact, he noted, the development authority’s preliminary statistics show Edmonton is overtaking B.C.’s Lower Mainland as Western Canada’s leading manufacturing centre.
As for high tech, an estimated 300 software firms call Edmonton home.
They include data storage specialists YottaYotta and process-control software maker Matrikon, which has doubled its employee base to 220 and now has branch offices in the U.S. and Europe.
Edmonton engineering firm Stantec is another huge success story. The company led the team that built the 12.9-kilometre Confederation Bridge linking Prince Edward Island and New Brunswick, and employs 500 people in Edmonton.
Downtown Edmonton, where 71,000 people still work, has started to revitalize by converting its vacant offices into upscale condominiums.
One cloud on the long-term horizon is the cities’ ability to manage the financial inflation, social problems, infrastructure woes and other growing pains that come with good fortune.
In Calgary, where the city’s economy has expanded faster than Edmonton’s, that rapid growth has increased traffic congestion. But in Edmonton, too, the city is looking for ways to improve road access into its downtown.
“The general infrastructure problems are substantial in both cities and need to be addressed,” the U of A’s Chambers said.
For Calgary, however, the experts say the broader challenge is planning and co-ordinating the city’s next stage of growth.
“There is this appearance at the moment that Calgary is a bit confused about economic development,” U of C’s Atkins said.
The Calgary Chamber of Commerce’s Rempel agreed, saying: “What we really need in this city is leadership that is able to take the pulse of the people and . . . create a vision of what this city can be.”
Greater Edmonton, on the other hand, had no choice but to find a way to get its 22 far-flung regional municipalities all on the same economic track, said economic development chief Edwards.
Metro Edmonton hired ICF Consulting Group, an international consulting firm based in Fairfax, Va., to identify the region’s best-performing industrial clusters and recommend ways to expand their success stories.
ICF Consulting has conducted similar work for the city of Ottawa, about 40 U.S. cities and a nationwide U.S. study.
In Edmonton, the 18-month exercise involved 1,200 members of the broader metropolitan community. Eight key industrial clusters were identified and 36 “action initiatives” developed to help grow them, Edwards said.
One of Edmonton’s clusters, for example – the advanced manufacturing group – is the fastest-growing cluster of its kind in Canada and is outpacing the North American average by 8.5 per cent.
Inspired by Edmonton’s experience, the Calgary region has hired ICF Consulting out of San Francisco and embarked on an $800,000 cluster strategy called “C-Prosperity.”
Leading the initiative is Promoting Calgary Inc., the city-funded umbrella organization with an $8-million budget to oversee economic development efforts. The organization and 13 economically linked communities around the city have partnered to form the Calgary Regional Partnership, said Promoting Calgary chief Georgine Ulmer.
Calgary is the first of the North American cities engaged in a cluster strategy to include “quality of life” as a key determinant of future economic growth, she noted.
Quality of life includes a low crime rate, it’s superb educational system, affordable housing, east-of-mobility, and a vibrant culture scene.
Initial findings of the ICF Consulting study, released last week, confirm Calgary’s strengths in several new-economy sectors such as information technology, geomatics and wireless technology. Between 1999 and 2000, Calgary’s annual employment growth rate in wireless telecom, for example, was 10.2 per cent compared with just 1.2 per cent for all of Canada.
Primary work on the strategy should be completed by the end of December, with actions to increase growth to start in January, Ulmer said. The overall strategy “will be based very much on a partnership with private sector.”
There are downsides to the “islands-in-the-stream” prosperity that Edmontonians and Calgarians enjoy.
Alberta’s inflation rate is the highest in the country, at a time when living costs have taken their biggest jump in more than a decade, according to Statistics Canada.
Edmonton and Calgary are both experiencing a skilled labour shortage and will likely see increasing pressure for wage hikes, Theriault said.
Some unforeseen calamity, such as a major collapse in world oil prices, could also change the sunny economic forecast. But even when the energy sector slows down, Theriault said, given the pace of diversification in both cities, “a major revision downward is not in the cards.”
