First off Happy New Year everyone.
I hope you all had a relaxing Christmas time and are ready to get back. For me and my family Christmas time was pretty quiet, something we needed after all the travels in 2015.
Seeing how 2015 unfolded for Canada (crude oil price, currency sinking, stock market debacle…), I can only wish 2016 will have something better in its sleeve for our beautiful country. But what could that be? We can’t really hope the good old times will come back anytime soon, so we must engineer our own comeback if we want to reverse the trend, at least in the mid-to-long term. So let’s look at some of our key industries:
- Oil & natural resources: with Brent down (again) at around $34, 2016 looks to be a very painful year for Alberta and Canada as a whole. Analysts predict a sub-$40 a barrel for a pretty long time, much more than what workers and their families can sustain without enough income. Other natural resources? They all linger in the shadow of China and its slowdown, which is expected to continue for the foreseeable future.
- Residential Construction: this one is a big mixed bag… Some residential markets (mainly YVR and GTA) continue their ascent in pricing to dangerous bubble-levels, with the FED rate hike in December threatening to stop the party on its tracks. YVR has recently seen a slowdown based on the Chinese stock market crash early in Jan. Other markets like Alberta follow the oil price – enough said. And then there’s the eastern provinces and prairies which continue a slow descent into reasonable market pricing. Canada is know to be an economy with too much weight on the construction sector and the recent market conditions seems to be reducing that percentage.
- Manufacturing: this was once a stronghold for Canada – a highly qualified workforce capable of providing a flexible business environment for large corporations such as auto. Unfortunately, the world has moved on and those jobs are long gone to Eastern Europe or emerging countries such as Brazil or India. Unless our newly formed government takes radical action to change the rules of the game with more flexible working regulations, further incentives etc we can’t expect the trend to reverse.
So seeing the dark picture from above… What can Canada do to re-invent itself? My experience tells me that we no longer should focus on a handful of industries to sustain our country, but rather apply the ‘Long Tail‘ theory to our new economic and social environment, this is, develop a very large number of small and medium-sized industries with the ability to compensate for the demise of the big-ones. These ~100 SMS (Small and medium sectors) are already in the Canadian economic fabric, but don’t actually receive the regulatory, economic, social and cultural support other – and larger – sectors do. These new SMSs should be aligned with what’s called ‘Global Megatrends‘: trends across the globe that are transforming the world as we know it. Some examples:
- Entrepreneurship: this is a major global trend currently reshaping the world. Vancouver is a good example of Canada moving into this new space, but there is no reason why this couldn’t be replicated and enhanced in other major cities such as Toronto or Quebec. The economic output from these entrepreneurs should not be dismissed or underestimated.
- AI – Artificial Intelligence: Canada has a strong pool of scientist and computer research experts, lined up with capable Universities and Training centres to link them with the industry. We should be able to provide early funding for this Megatrend which is becoming a race between some industrial superpowers around the world. Our government should provide the wind and the mainframe for entities to capitalize this emerging industry. If we’re able to do so and put Canada in the top 5 worldwide this might easily become a major breakthrough for our economy in the next decades.
- Robotics: okay, this is a big pool and actually linked to AI, but I believe it deserves a spot on its own. The highly technical workforce fro. The oil sands is currently looking for ways to apply those skills somewhere else. Look no further than North Dakota, where the state government has quickly moved to position itself as the Silicon Valley for the drone market: vast unpopulated areas, research institutes nearby, qualified professionals and the right regulatory and economic environment has created a major new industry in a matter of years. There’s no reason why Alberta, Manitoba or Winnipeg could not do the same there.
- Information Technology: with the demise of Nortel a large pool of highly qualified professionals found themselves looking for new opportunities. Down the road, this and other factors drove the creation of many other IT companies. Further deregulating and capital investment in strategic areas could lead to a rebirth of the IT sector in Canada: manage information across the world should not be left to our neighbors in Silicon Valley.
These are just a few examples of large buckets where many more small and medium sectors could be developed with the right action from our government, both at federal and provincial levels. We all share a responsibility to help develop Canada into the 21st century, but our government has the ability to kickoff this by implementing a de-facto economic, regulatory and social environment. Might just need some help throwing the first stone!
So what do you think. Do you you think there are other opportunities Canada could capitalize?
Photo by: Maria Victoria Heredia Reyes - Unsplash.com