This article was written for Trade and Investment, Department of Industry Trade and Technology, Government of Newfoundland and Labrador.
FOR FIVE HUNDRED YEARS, SOME OF THE RICHEST FISHING GROUNDS IN THE WORLD HAVE SUPPORTED THE LION'S SHARE OF NEWFOUNDLAND'S ECONOMY. BUT THAT ALL CHANGED WITH THE RECENT COLLAPSE OF THE GROUNDFISH STOCKS.
BY ANDREW SAFER
With its fisheries on hold, this province with a population of 570,000 is aggressively moving to capitalize on its locational advantages as a centre of excellence in marine sciences, ocean engineering and communications technologies.
Newfoundland's location as North America's easternmost point, combined with its rich and rugged marine environment, have spawned a critical mass of specialized research and testing facilities and private-sector expertise that is unique in Canada.
At the hub is St. John's, Canada's oldest city, where the sun rises earlier than in any other city on the continent. Reflecting the fact that metropolitan St. John's (population 170,000) has one of the lowest crime rates in North America, it is one of the few cities in the West where police officers don't carry guns.
Much of the ocean engineering, fabrication and communications technical prowess grew out of the offshore oil and gas exploration in the early 1980s, and it has rapidly matured through the Hibernia project. Hibernia has pumped $900 million into the provincial economy and created 3,600 jobs on the island. Besides providing much-needed employment, Hibernia has also given companies such as Pro-Dive Marine Services and Terra Nova Marine a leg up in competing in global markets.
The Government of Newfoundland and Labrador's Strategic Economic Plan, which was released two years ago, earmarks ocean industries as one of the key growth sectors. It list strategic opportunities in marine communications, cold ocean research and technology, offshore oil and gas, marine-related education and training and marine-related tourism.
To make Newfoundland an "irresistible" place to do business, Premier Clyde Wells has reduced taxes and spearheaded an aggressive review of government regulations.
In 1993, the Premier reduced the corporate tax rate from 17 per cent to 16 per cent, and he will reduce it to 14 per cent in 1995. He lowered the manufacturing and processing tax from 17 per cent to 7.5 per cent and it will be further reduced to 5 per cent in 1995 - the lowest in the nation. Now, he plans to offer new and expanding companies a 10-year holiday from provincial corporate tax, payroll tax and retail sales tax.
Municipal taxes in Newfoundland and Labrador are 60 per cent lower than the Canadian average.
"Other than fuel tax, taxes are a burden to business," Premier Wells said in a speech to defense and aerospace contractors in Ottawa in mid-May. "They impair their ability to compete. We've got to realize that profit is not a dirty word, and make it a holy word, and recognize that business and investors survive on profit. We've got to give it the worthy importance and recognition that it deserves.
The Newfoundland government is currently reviewing more than 1,300 fees, licenses, and permits in order to simplify the regulatory environment. In April 1995, all regulations will be repealed, except the ones the government can demonstrate are necessary.
By rolling out tax incentives and simplifying regulations, Wells is sending a clear message - that his government is working hard to stimulate Newfoundland's private sector and to attract new business investment.
FROM FISHERIES IN NEWFOUNDLAND TO TRUCKS IN CHINA
The ability to parlay marine expertise to land- and space-based applications is the secret behind many success stories among Newfoundland's business community. It explains how revenues at NewEast Technologies Inc. grew to $5.2 million in eight years and enjoyed a whopping 94 per cent year-to-year jump in 1993.
In 1985, co-owners Derrick Rowe, who was 27, and Roderick J. White, who was 37, started up Ultimateast Data Communications Ltd. to provide communications products for the offshore oil and gas and fishing industries. They designed and built a data communications network that enabled the Canadian Coast Guard to track the position of its ships. Having adapted the switching technology for use in satellite networks, Ultimateast and its sister company, Sea Link Ltd. are now selling their products and services for the shipping, fishing and trucking industries internationally.
In the last two years, sales at NewEast (the parent company for Ultimateast and Sea Link) have spread into Norway, Britain, Spain, Brazil, Hong Kong, Thailand, and Malaysia. Besides Teleglobe International of Canada, the company is Canada's only provider for Inmarsat-C satellite communications.
In the spirit of Marconi receiving the first transatlantic wireless signal atop Signal Hill in St. John's in 1901, Rowe and White are bringing the tradition of technological innovation into the global wireless communications field.
Newfoundland is quickly developing a reputation for expertise in marine communications, radar and shipboard navigation systemsthanks to the combination of rugged environment, first-class facilities and a high-calibre work force.
"This is one of the harsher maritime environments," explains Herb Davis, NewEast's marketing manager. "If you can do well here, you can be pretty confident your products will work just about anywhere in the world. We saw that recently when we installed a reliable communications link for the Spanish customs authority that goes from the coast of Spain to the Azores and beyond.
"If you look at the telecommunications and software development industries, and the computer industry in general," Davis continues, "Newfoundland is a fantastic location, because the key component of that industry is brain-power. There are smart, bright, clever and committed individuals here." Davis adds that the local support industry has matured considerably in recent years. "Today I can walk down the street for a subcontract job and get excellent service. Three or four years ago, we would have had to go out of province."
Davis, who credits the province's education system, says that Memorial University of Newfoundland is producing "some tremendous, skilled people," particularly in the areas of mathematics, science and engineering.
And it's the quality of the work force in Newfoundland that Davis keeps coming back to when asked to spell out the advantages of doing business on the island.
Memorial University is the largest university east of Montreal, with 18,000 students and 1,000 faculty in the arts, science, education, medicine, engineering and applied science and business administration departments. The university graduates 2,000 students each year.
Memorial's Fisheries and Marine Institute, together with the province's technical and regional colleges, graduate another 3,000.
With campuses in St. John's and on the Avalon Peninsula, Cabot College is the largest post-secondary polytechnical school in Atlantic Canada. According to Hibernia's manager of government relations and public affairs, Bill Simpkins, "there is probably a student from Cabot College on every oil installation throughout the world. The training there is excellent."
Since the early 1980s, the lure of producing offshore oil has spawned the development of a cluster of specialized facilities whose client base has since diversified and extended overseas. These research institutes and test establishments are among the most sophisticated of their kind in the world. Simpkins of Hibernia reports that local facilities have served Hibernia Management and Development Company Ltd. in the areas of modelling the effects of ice on the gravity-based structure and using over-the-horizon ground-wave radar to detect icebergs.
The one-of-a-kind centrifuge at the Centre for Cold Ocean Resources Engineering (C-CORE) is used to model small-scale testing of civil engineering structures to predict full-scale conditions. This high-tech device is currently the centrepiece of a number of international projects. Andrew Palmer and Associates in Britain has contracted C-CORE to determine the degree of upheaval caused by transporting hot fluids through a pipeline for the North Sea.
The centre is also designing pipelines for ice-scoured environments off Russia for a consortium of U.S., Norwegian and Canadian oil companies and regulatory agencies, and it is designing electrical transmission towers for the Canadian Electrical Association and Newfoundland Hydro.
Over-the-horizon radar, a C-CORE innovation, extends 200 nautical miles by hugging the curvature of the earth, compared with a reach of 30 to 40 miles with conventional microwave radar. The centre has spun off rights to a shore-based station to the private sector through a licensing agreement with Northern Radar. Meanwhile, C-CORE is currently tailoring the radar technology for use on oil rigs.
Perhaps the most "up-to-date" facility is the Centre for Marine Simulations, which was completed in March 1993. The $12-million wonder simulates a full-mission ship's bridge as well as ballast control and cargo operations. The computer-generated ocean and approaching land mass are projected around the bridge, where a bank of 18 sloping windows provides 280 degree visibility.
Lighting is adjusted for time of day, and oceangoing movement becomes a "reality" as the structure heaves, pitches, rolls, sways, surges and yaws with the seas.
The six-degrees-of-freedom system makes the simulator the most advanced in the world, says Instructor Captain Robert Mercer, who says most facilities are equipped with three degrees of freedom: surge, yaw and sway.
The centre is a training ground for ship's crew, mariners, pilots and ballast control operators. The Canadian Navy and shipping firms including Canada Steamship Lines and Marine Atlantic have booked the facility until March 1995.
Compared with putting a crew out to sea on a frigate at a cost of $60,000 to $80,000 per day, seamen can be trained at the centre at considerably less expense. In Ottawa, William Lever, director of industry support and analysis for the Department of Defense, says; "This is an area that the department will be exploiting more than it has in the past for obvious reasons - because of decreasing budgets."
C-CORE, the Centre for Marine Simulation and other marine-related facilities, including the Institute for Marine Dynamics and the Canadian Centre for Marine Communications, provide an unparalleled environment for the development and commercialization of leading-edge marine technologies.
HIBERNIA'S RIPPLE EFFECT
Some 600 companies are involved with the Hibernia project, and more can be expected to participate as Terra Nova, the next offshore oil field slated for development, gets under way. This substantial infusion of capital has, to a large degree, counteracted the economic shock produced by the fishery crisis. Hibernia is largely responsible for a 0.4 per cent growth in real GDP in 1993, and the project is expected to inject $460 million within the province in 1994.
Hibernia is also providing a substantial boost to the growing marine technology sector.
One company that is benefiting from the offshore oil plays is Terra Nova Marine Co. Ltd. Until two years ago, the company was manufacturing marine electrical panels, switch gears and control systems exclusively for Newfoundland clients. but the downturn in both the shipping and fishing industries forced owner Stephen Whitten to look for business off the island.
Since then, revenues have climbed from $1 million in 1992 to $2 million as of June 1, 1994. Besides landing work in Quebec, Nova Scotia, New Brunswick and New Orleans, Terra Nova also teamed up with Securiplex, a subsidiary of SNC Lavalin of Montreal, to win the contract to supply the Hibernia structure with fire-fighting equipment. Terra Nova's multi-million dollar portion is to furnish the electrical, instrumentation and control systems. With the capacity to pump 30,000 litres of sea-water per minute, Whitten says, the system will be the largest of its kind in the world.
Whitten's staff completed four months of training in Norway in 1993, and Whitten reports a conversation he had with his counterpart overseas. "He said they were thoroughly pleased with our people, and that in some ways, they learned faster than the people with many years of experience. That's because our company has worked on every offshore facility in Newfoundland since the exploration stages in the early 1980s."
Asked if there are advantages to doing business in St. John's, compared to other Canadian cities, Whitten replies: "The inspectors who come to inspect the panels get to know and respect the company, the work we do and our technical skills. And the flexibility of the workers is a real bonus - their range of skills is tremendous."
He adds that there are stronger family ties in St. John's, that it's a good place to raise kids, and that the crime rate is low. "Being on an island is an advantage, in that it's hard to get to," he says. "If you're going to rob a bank, it would be a lot easier to do it someplace else."
INDUSTRIAL REGIONAL BENEFITS
While Newfoundland's manufacturing sector has traditionally focused on fish, pulp and paper and other natural resource products, non-resource manufacturing is on the rise. In 1993, 350 such firms operating in the province generated $550 million, a 9 per cent increase over 1992. Two companies that are enjoying dramatic growth are Steelcor of Buchans and NewTech Instruments of St. John's, thanks largely to a federal program that directs prime contractors to the region.
Steelcor, a five-year old sheet metal and machining manufacturing company, has seen revenues climb from $1.25 million in 1992 to #3.5 million in 1993. NewTech, an eight-year old subsidiary of NewTel Enterprises Ltd., produces electronic and electromechanical products primarily for the defense and telecommunications industries. Growth at NewTech has hovered between 30 and 40 per cent over the last three years, with 1993 revenues totaling $6.5 million.
Both companies attribute their first big sales to Industrial Regional Benefits (IRBs). The Canadian government set up the IRB program to encourage contractors bidding on federal Crown projects to allocate a percentage of their work to Canadian companies located in Quebec, Ontario, the West and the Atlantic provinces.
In 1988, it was the IRB program that drew General Motors Canada's Diesel Division to Newfoundland in search of a company that could produce parts for 199 light armoured vehicles for the Canadian militia. NewTech was awarded the contract and has continued to work for GM to this day. In May, GM's Diesel Division and NewTech added $850,000 to an existing five-year, $9 million contract to supply drivers' auxiliary and alarm annunciator panels for vehicles manufactured for the Government of Australia and for export markets.
Says NewTech president Donald Nickerson: "Without regional benefits, GM would never have dealt with us."
Nickerson takes pride in the company's custom-made circuit tester, which is what ensures that all of the electrical components in an assembly are in working order, and he boasts that Northern Telecom has not returned one of the 200,000 cables that have been delivered to date. While distance can be a disadvantage when it comes to shipping, Nickerson says that NewTech has been able to overcome the extra freight cost by having an unusually productive labour force and by maintaining high quality.
"We can compete with firms in North Carolina whose wages are the same," he says. "Some of our materials we even buy in Carolina, turn them into a finished product and then sell them at about the same price as firms in North Carolina." He points out that it was the Japanese automakers who proved that the distance disadvantage could be overcome.
Nickerson likes doing business in St. John's because, he says, all of the businessmen know each other. "If I need something from Canadian Airlines, I've met Craig Dobbin around town. If I need 100 gallons of paint in a hurry, I can get it. Most of us know the mayor. You can usually get a word in the right ear. It's much easier to reach to the top of government in St. John's than it is in Torontoand that's a function of size."
Until now, Newfoundland's vibrant marine technology and services sector has been a well-kept secret. With companies like NewEast Technologies and Guigne International at the forefront of their fields, and with Premier Wells opening up the doors to Canada's business community, maybe it's high time that Newfoundland is rediscovered.
DR. JACQUES GUIGNE
It may seem odd that a world-class scientist who is developing small acoustical systems for marine, terrestrial and space applications would live in a small town 10 kilometres from St. John's. Dr. Jacques Yves Guigne, who moved to Paradise (population 4,750) 15 years ago from Manitoba, begs to differ.
"I can't think of a more beautiful and more exciting place to do underwater acoustics," he says. "This location on the doorstep of Conception Bay gives me the ideal testing area."
Guigne, 40, who holds his PhD in physics from the University of Bath, England, and 13 physicists and engineers are hard at work in a converted two-storey house on the bay. Guigne and his team are currently negotiating projects for clients in the Netherlands, France, Australia, California and Canada. Guigne International Ltd. specializes in solving problems with acoustics, and the company's first fully instrumented underwater probe is now being used by the Department of Fisheries and Oceans to determine the effects of trawling on fish habitats on the Grand Banks seafloor.
By focusing acoustics in such a way as to levitate objects in space, Guigne's innovation quickly spread beyond the marine environment. When incorporated into the production process of glass and ceramics, it surpasses conventional methods in producing durable materials because it removes the need for contact with a container. the company is partnering with other researchers as well as glass and ceramics companies to develop high-performance products in association with the Canadian Space Agency.
The unconventional Guigne says that Newfoundland is the right spot for doing science. "From here, I can do work in the United States, the rest of Canada and into Europe," he says. "It's a very healthy place to do Renaissance science because we're at the doorstep of the Atlantic Ocean. And with electronic communication, you can do high-tech research anywhere in the world."
Guigne delegates authority for projects, and he relies on teamsa model, he says, for which Newfoundlanders are particularly well suited.
"A well-known characteristic of Newfoundland is that the people need each other," Guigne observes, "and I think that's why the people here are more open to working with groups. In addition to that, Newfoundlanders have always been resourceful in facing problems.
"It's also a place of a rather humble, pioneering spirit. That means you reflect more; you know clearly where your feet are planted, and you don't have illusions. But you've got to be bold. There's nobody here holding your hand."
KARL KENNY: MATRIX TECHNOLOGIES INC.
A native Newfoundlander, software developer Karl Kenny, 34, moved back to St. John's in 1989 from Seattle to escape the rat race. His company, Matrix Technologies Inc., is attracting international attention for innovations in electronic charting software, data compression techniques and image archiving. Kenny projects that revenues will jump from $1.8 million in 1993 to $2.5 million in 1994.
But it wasn't just homesickness that brought Kenny back home. "Software development is a creative activity," he explains. "It calls for an environment that cultivates creativity, not the 30th floor in a building with windows that can't open." He adds that Microsoft and Borland, two of the most successful software companies in the world, are spending huge sums to create "campus environments" for their staffs.
"They're building these places with trees and lakes and ponds and geese and walkways," he says, "and I've got that in my own backyard!"
Kenny's love for Newfoundland is fierceand it shows. "I firmly believe that Newfoundland is going to be discovered," he says. "Look at what happened on the west coast. It was the beautiful Pacific Northwest, and Californians discovered it. This could be the theme for 1997 (Newfoundland's 500th anniversary): Rediscover Newfoundland.
"For the first time in civilization, it's safer to go into the forest than it is to go into the city. You're more apt to be mugged or run over by a truck in downtown San Francisco or New York than you are to get bitten by a bear on the ass in the Great Northern Peninsula."
Kenny believes that Newfoundland has much to offer people seeking a balanced lifestyle. "People want to get out and live their lives. They want more than work. More than the BMW. 'Who's got the Hugo (Boss) and who's got the Armani'? That's crap.
"People are becoming more balanced on the human side. I recognized that a few years ago. I said, 'Look. I don't want to be in this madcap mayhem, faceless swarm of the city.' So I moved back here, where I can lead an informal, laid-back lifestyle, without time clocks."