Thank you, Mr. Chair.
I'll present ideas at the back end of a situation analysis.
Alberta has about 9,400 manufacturers, about $68 billion in sales annually, and accounts for about 11% of national production. Sales growth has been down in the last couple of years, and we have a recession in the province.
There are about 100,000 people unemployed, and the energy supply chain affects a lot of the manufacturers in the province. The manufacturing sector in Alberta includes food manufacturing, beverages, tobacco products, textiles, petroleum, chemicals, coal products, computer electronics, and so on. It's quite a variety of manufacturing. It tends to be concentrated in Edmonton, Calgary, Red Deer, and in some of the smaller centres. It employs about 140,000 people, but this has gone down because of our recession in the last couple of years.
I'll go to the challenges and then to the recommendations. As I said, we have a recession. About $23 billion of annual cash spending and investment has been pulled out of the energy supply chain. That has affected a lot of businesses. Another challenge is a lack of export knowledge and export support for SMEs in the province. That's a challenge. We're also getting more competition from trade agreements.
Competitiveness and productivity are issues. Alberta has to compete with other competitors, such as Korea for steel products or China for other products, and we have many trade agreements that are being implemented.
Costs have risen in the last few years but are under rapid decline in the province right now.
There are some barriers to diversification. We need to diversify the economy more in manufacturing.
Another issue is the small scale of manufacturers in the province. We have many with fewer than 10 employees. Some of them are larger, but we have many small-scale manufacturers.
We also lack a manufacturing policy that focuses on a variety of things that need to be done. There are many unknowns that manufacturers are facing, such as climate policy. In 2017, a carbon tax will be implemented in the province. We have new competitors through trade agreements, and then technology disruptions can occur as well.
There are a couple of big issues. Oil prices are down, so cash flow is down tremendously, and about $23 billion of annual investment has been pulled out of the supply chain. That has affected many of the manufacturers in the province.
I'll go to the key themes of what we think needs to be done.
From the Alberta Chambers of Commerce, which represents about 24,000 businesses in the province, the first theme would be something called “do no harm” to the manufacturing or business base. We recommend that current manufacturers not see any increases in fees or taxes, or any new taxes or fees implemented. They are currently in a fragile state. A number of them have closed. Utilization rates are from 50% to 70%, let's say, so they're not fully utilized right now.
The second theme is support for small manufacturers. The Alberta Chambers of Commerce think that because we have a lack of sales, there is a need for more marketing to build demand for these manufacturers to hire more people, and so on. A growth management approach or a growth management strategy for helping these SME manufacturers grow will be needed, and something new, such as a voucher through the IRAP system, could help.
IRAP currently supports technology companies in the province with research, but in this time of building up sales, a growth management voucher might help to get more people employed and to build more understanding of international markets and international business and so on.
In terms of export capacity, another requirement would be to understand how to access global supply chains and how to become more competitive within a global supply chain. In domestic opportunities, another area would be looking at ways to enhance the public procurement process so that our manufacturers can access that more easily and take advantage of some of the opportunities that others are getting.
Another area would be looking at the innovation system and looking at more regional innovation centres that could help small-scale manufacturers. A good example is the American manufacturing extension partnership, MEP, offices, which total about 400 across the U.S. They're specifically put in place to help manufacturing with competitiveness, adaptation and product design, human resources, export marketing, and so on. We don't have a similar system here, and that's a deficiency.
The next one would be in the area of scale-up and building bigger manufacturers at a Canadian or North American scale. We have to develop a system. One of the ideas might be a manufacturing business network or consortia working together to access international markets or market share at a scale, scope, and speed of bidding on other contracts that they can't otherwise get. They have to become bigger to compete, as we have other companies coming in from other countries to compete. The scale of many manufacturers is too small.
The final two areas that I will talk about are under a broader policy mandate to look at accessing and improving the way intellectual property and the research from the research and development system are provided for manufacturers. Many times intellectual property is patented and not made available. We need to commercialize these technologies if we put money into their R and D system.
In Alberta, for example, $800 million a year is spent in R and D, and about $735 million of that is the research side versus the development side. Development means commercializing products, taking them to market, and so on. We need to do more on that end of it if we're going to build a strong pipeline of products.
Another final point would be the re-establishment of the accelerated capital cost allowance for the oil sands and their related supply chain so that we can get more investment back into the industry. Currently Alberta and the Fort McMurray area are not being seen as preferred locations because of the distance from markets, lack of market access through pipelines, and so on. Hence, capital has gone elsewhere.
We have a deficit in the province of about $23 or $25 billion annually, and that has hurt a lot of people in the manufacturing sector in the province.
Those would be my main points. I would be happy to discuss them as we go through.