Investing in Remote [Canadian] Regions: Building the Business Case – by Livio Di Matteo (September 19, 2011)

Livio Di Matteo is Professor of Economics at Lakehead University in Thunder Bay, Ontario. Visit his new Economics Blog “Northern Economist” at http://ldimatte.shawwebspace.ca/

Out of the Canadian Chamber of Commerce comes a new report titled” The Business Case for Investing in Canada’s Remote Communities,” which argues that Canadians need to start looking at remote communities somewhat differently. 

Despite the perception (and often the reality) that remote communities are dependent on government assistance for their survival, the new reality is that as the demand for resources rises and the international community flocks to Canadian resources in remote areas, these remote communities are wealth generators that will enhance the living standards of all Canadians.  Moreover, the aboriginal population is concentrated in these areas and resource development is an important tool to improve their economic welfare.

There are of course challenges.  As the report notes:

“There is no doubt that many remote communities-which are often difficult to reach, have challenging geographies, harsh climates, limited infrastructure and sparse populations – face significant challenges to their long-term social and economic sustainability.”

At the same time, the presence of natural resources in these remote regions offers an opportunity for future economic development but investment is required for these communities to take advantage of the resource opportunities.  This investment need not necessarily be from government – there can be business investment in remote communities.  According to this report, business investment can bring more effective, faster and less costly economic development but to build the case for business investment, these communities must have marketable products as well as a skilled workforce and capital infrastructure.  Public policy is critical here in ensuring education, access to health care, transportation and communications links.  The challenge in an era of deficit reduction to providing this critical infrastructure can be met according to the report by having government and business build partnerships.  For example, federal and provincial infrastructure projects should consider the commercial benefits of location when considering their human capital and infrastructure investments in remote areas.

Their spending should be seen as an investment rather than a subsidy particularly if linked to the exploitation of market opportunities by the private sector.  The report goes on to make a number of recommendations – first of which is for the federal government to review and improve the funding formula for aboriginal education to ensure parity with the provincial funding model in each province.  Education for First Nations is critical given their young demographic profile and their concentration in remote resource areas.

This report is of course advocacy for Canada’s remote communities but it makes an important point.  Canada has a vast geography with a wealth of natural resources that are in growing demand but to access and harvest and process those resources, people do need to live in remote areas.  It is bad for business to have remote communities without adequate transport or broadband links, poor schools and hazardous drinking water.  About 15 percent of Canadians still live in areas considered rural/remote – nearly five million people.  Five million is a lot of people to have treated as second-class citizens, particularly given they are indispensable when it comes opportunities on Canada’s resource frontier.

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