New infrastructure projects will not provide a quick fix for Canada's struggling economy, warn business leaders.
While Ottawa and the provinces have pledged to provide more capital for public-works initiatives to stimulate the economy, business leaders say previously approved projects that have been awaiting financing, and upgrades to existing roads, bridges and transportation systems should be given priority.
Bert Clark, managing director of global infrastructure finance for Toronto-based Scotiabank, says the government would get a bigger bang for its buck on existing big-ticket projects.
"These are all projects that still have to go through the bidding process, and that takes a while, but they're near-term works projects," says Clark.
In Ottawa, the Harper government said last week that it will pour $7 billion into infrastructure as part of an economic stimulus package.
Transport Minister John Baird said $4 billion will be spent over two years on provincial and municipal projects that are ready to start, including roads, bridges and sewer systems.
About $2 billion will go to maintenance and construction at colleges and universities, and $1 billion will be spent on green infrastructure.
The federal and Ontario governments have also agreed to finance a new $1.6-billion access road linking Highway 401 to a planned new bridge at the Detroit-Windsor border crossing. The Detroit River International Crossing Group, a binational committee seeking to improve trade flows between Canada and the U.S., estimates the project would create 12,000 jobs.
"It's hard to snap your fingers and have a project tomorrow of any size," says Clark. "If you really want to have significant, well-planned long-term benefits, then it does take a little while to put that out to tender and just go through the process of getting it out."
The Federation of Canadian Municipalities (FCM) has released a list of 1,000 infrastructure projects that are "shovel-ready.”
The group, which includes mayors and councillors, says efforts would contribute $14 billion to the economy.
Michael Atkinson, president of the Ottawa-based Canadian Construction Association, which represents 15,000 non-residential builders across the country, is calling for the economic stimulus money to be put toward the FCM's list.
He says it's a great place to start on infrastructure investment and would create jobs for communities as quickly as possible.
"It's a good range of projects that have been identified by municipalities as projects that can get underway very quickly," says Atkinson.
He adds refurbishment and rehabilitation projects will make the quickest impact because they do not require lengthy environmental and other government approvals.
Michael Smith, a spokesman for Mississauga, Ont.-based EllisDon Corp., one of Canada's largest construction companies, says his firm hopes to gain in all areas of the infrastructure initiative. "We benefit in all aspects of the design, construction and long-term maintenance," says Smith. "We're also engaged in the financing of these ventures."
While the firm is wary the lengthy procurement processes could delay infrastructure investment at a time when it is badly needed, he adds the investment will still provide a big boost to his company's core business.
Finning International Inc. is hoping for a good chunk of government infrastructure spending to land in Western Canada, envisioning a welcome boost after sweeping cuts that have hit the heavy-equipment industry.
"There are significant infrastructure dollars that could be announced in Western Canada that we believe would be a strong stimulus in the economy to create jobs,'" said Mike Waites, president and CEO of Finning, the world's largest dealer of Caterpillar heavy-construction vehicles and equipment.
His comments came after Caterpillar Inc. announced it would cut 20,000 jobs, or about 18 percent of its workforce, as customers scale back purchases amid slumping commodity prices and tight credit.
Jock Finlayson, vice-president of policy and chief economist for the Business Council of British Columbia (BCBC), says Canada's policymakers face "something of a dilemma" as they decide which types of projects to push forward.
"There's a tension between wanting to move ahead quickly with infrastructure expenditure - because there's a need to get the shovels in the ground quickly, not 15 or 12 months from now - versus wanting to put the money into projects that are going to make the most sense in terms of delivering long-run benefits," says Finlayson.
"There's a trade-off between speed versus maximizing the opportunity."
Infrastructure projects could provide considerable work for construction companies and suppliers hurt by declines in housing starts and overall activity as well as engineering, design, architecture, legal, tech firms and banks and other financiers.
But now is not necessarily the time to start large new projects, Finlayson notes, because they will likely take too long to give a sufficient stimulus.
For example, new transportation corridors could take 24-36 months to get engineering work and regulatory approvals done.
"The same goes for municipal sewage and waterworks upgrades, although that's less complicated," says Finlayson. "If the challenge is to support the economy in the next 12-18 months when we're going to be going through a fairly significant recession in Canada, then it will be helpful to have the spending take place fairly quickly."
The FCM says hundreds of public-transit projects now on hold, which require $8 billion worth of new investment, would create up to 90,000 jobs. Water and wastewater projects pending approval would require a $30-billion input and create 30,000 jobs, while roads and bridges could generate 25,000 jobs for an investment of $2 billion.
Jane Peatch, executive director of the Ottawa-based Canadian Council for Public-Private Partnerships, says governments could also help the economy by moving up P3s that are scheduled to start procurement in the next four years.
She adds refurbishments would provide construction and service firms with work while larger-scale P3s make their way through the procurement process.
Darcy Rezac, managing director of the Vancouver Board of Trade, says B.C. always has a need for port, airport and border upgrades. But it also has many other pending projects that need financing.
Rezac is also calling on Ottawa and the provinces to speed up the environmental approval process so that more transportation projects can be completed and bottlenecks can be reduced.
"Fix the roads, upgrade the Trans-Canada Highway and upgrade our roads (in Vancouver)," says Rezac.
The BCBC's Finlayson says small service firms could benefit from an increase in retrofit work. But any gains would be relative to a decline in private-sector demand.
"It'll be a net gain relative to what would otherwise occur, but the Canadian economy is in recession, so demand is going to be dwindling in a lot of industries," he says.
In other words, $20-$30 billion worth of infrastructure projects won't be enough to offset an overall recession in Canada's $1.6-trillion economy.
"What an infrastructure program would do, really, is offset some of that decline in private demand," says Finlayson. "But it isn't necessarily going to create some miraculous new utopia for companies. I mean, people have got to be realistic here."
- with files from The Canadian Press (Monte Stewart can be reached at monte@businessedge.ca)
