Expectations for the British Columbian economy are looking good. The economy should grow steadily, if not extravagantly, this year and beyond.
The principal source for all this good news – which should lead to an increase in jobs and government revenue – can be attributed to resource-related developments, mainly the production, transportation and export of liquified natural gas (LNG). However, reaping the benefits will require a lot of capital. And whether public or private, before handing over their funds, investors will want assurances that their invested capital is safe and that they can expect an increase in its value. There are a great many risks that can deter investors, and while not all of them are under government control, there are steps that governments can take to encourage the needed developments.
Among these are:
•Ensuring that companies will be dealing with only one level of government
Now, getting all of our various levels of government on one page will not be easy. While Alberta and B.C. have started to play nice, serious discussions between the provinces and the federal government are needed and will succeed only if both sides agree to put the welfare of the country ahead of petty political grandstanding.
Even more challenging will be dealing with First Nations. Not all are 100% opposed to all investments, however, and most are willing to come to the table to ensure that any developments that do occur will provide their people with jobs and income, while respecting their values and traditions.
•Ensuring that environmental requirements will not change during development
If Canadian and B.C. laws and regulations are not doing the job required to protect the environment, they need to be amended. If they are needlessly complex, they need to be simplified.
They then need to be documented so that potential investors know the rules they will have to play by, with the assurance that they will not be changed mid-project. It must also be made clear that all laws apply to all people. While Canadians enjoy freedom of speech and assembly and can express their beliefs and opinions, it must be clearly understood that Canadians also have the right to engage in lawful business and other activities and should expect that governments will ensure that they can continue to do so.
•Ensuring that the tax rate will be known and fixed
B.C. and Canadian governments need to tax LNG-related production at a level that meets Canada’s needs and is a fair payment for the extraction of our resources. However, there are limits to tax levels. Too high or even just slightly higher than in competing jurisdictions and the capital need for development to take place won’t be available. It is also important that tax levels (and changes, if any) be known in advance. Rules about who is allowed to invest in Canadian resources must also be clear. Does that include sovereign wealth funds? From any country?
Investors can adjust to almost any tax regime and regulatory environment.
What they have real trouble with is uncertainty and unexpected changes. To develop our resources and our economy, B.C. and Canada have to compete for needed capital with many other places that seem hungrier than we are for the resulting jobs and income.
For a prosperous 2014 and beyond, all governments in B.C. and Canada first need to set standards and limits and then ensure that potential investors know that, within those limits, they can be confident that they can prosper. •
