Very little of political import in Newfoundland and Labrador gets done without some rhetorical flourishes. As provincial Finance Minister Tom Marshall rose from his seat in the legislature to deliver the Progressive Conservative government’s budget speech in late April, his capacity for drama was very much on display.

After stating that the provincial Tories’ goal is “to raise Newfoundland and Labrador to the full measure of its magnificent potential,” Marshall heaped lavish praise on his government: “Where once we dared only to dream, we now dare to believe. We have ditched, once and for all, the old defeatist stereotypes, the old self-deprecation, the old self-doubts that held us back from becoming all we were capable of being.”

Unfortunately, building what Premier Kathy Dunderdale has called a “sustainable” future is proving to be a lot more difficult for Newfoundland and Labrador than its politicians are willing to admit. The government continues to rely heavily on offshore oil revenue, the overwhelming source of the province’s decade-long prosperity.

However, not a single new commercially viable oil well has been discovered in almost 30 years of offshore exploration. The three existing offshore projects are all in decline, a situation that the Hebron field will only partially offset once it begins operating a few years hence. Unless new sources of oil are found soon, the sunset of this industry in Atlantic Canada is inevitable.

Marshall recognizes this fact and has proclaimed in his budget that all government departments must now find ways of reducing expenditures. But this has not stopped him from forecasting a $258-million deficit for this fiscal year and a further shortfall of $433 million in 2013-14.

So, new investment must be found if Newfoundland and Labrador is to avoid a reprise of the “dirty ’90s,” when provincial governments slashed spending and laid off thousands of civil servants in the wake of the moratorium on cod fishing that devastated the province in 1992.

The current government has begun seeking outside investment; but, so far, the results have been far from encouraging. Auditor General Wayne Loveys recently reported that the provincial government spent just 15% of the $137 million earmarked for economic diversification between 2006 and 2011. Last year, it spent 1.5% of a $29-million fund set aside for attracting business to the province, and only 20% of $3 million allocated for defence and aerospace industries. Marshall has now cut the budgets for both of these programs by half.

And when money has been spent, there has been little to show for it. Between 2004 and 2011, the now-defunct Department of Business spent $20 million on three programs that provided grants, loans and administrative support to companies in order to encourage employment. For that, fewer than 100 new jobs were created.

Whether any government can effectively attract investment to economically disadvantaged regions such as Newfoundland and Labrador is debatable. However, in the late 1990s, several telephone call centres established operations in St. John’s using the lure of public money. Most of these firms have remained, long after the grants and tax incentives have disappeared.

In contrast, the government has no discernible strategy for attracting jobs and investment to the province. With the carefree days of oil royalties drawing to a close and the spectre of structural deficits looming, the province has little time to waste in diversifying its economy. IE

© 2012 Investment Executive. All rights reserved.