June 13, 2008

Lack of infrastructure investment could stall Saskatchewan economy, report finds

RICHARD GILBERT

staff writer

Saskatchewan is experiencing an economic boom driven by the agriculture and commodity sectors, but the province must address specific challenges if this growth is to be sustained in the long run, according to a major Canadian bank.

Saskatchewan was one of the leading provinces in Canada in terms of GDP growth in 2007. A Statistics Canada study released this spring reported that real gross domestic product (GDP) increased 2.7 per cent nationally in 2007, while the Saskatchewan economy increased 2.8 per cent — a turnaround from a 0.4 per cent decline in 2006.

The Saskatchewan economy is expected to expand by 3.7 per cent in 2008, according to a report released this month by TD Economics. It estimates that real GDP growth in Saskatchewan will average 3.5 per cent per year, in the period 2008-2010. This “Saska-Boom,” is driven by a resurgence in agriculture and a broad range of commodity-based industries.

The first major constraint on long-term economic growth in Saskatchewan identified by the TD Economic report is aging infrastructure.

“Underinvestment in the province’s system of roads, highways, water & waste-water facilities and sewers during the 1970s, 1980s and early 1990s has generated significant deficiencies,” said TD economists Derek Burleton and Don Drummond in the report.

A study by Statistics Canada released early this year found that Saskatchewan had the third-oldest infrastructure in the country in 2007, exceeded only by Nova Scotia and Manitoba. This was mainly attributable to the fact that the province has one of the oldest highway and road systems in the country. Despite this, the average age of all assets combined was reduced from a peak age of 19.4 years in 2001 to 17.6 years in 2007.

“I wouldn’t say that the roads themselves are a major issue. There is a lot of existing infrastructure that is old,” said Rob Otway, director of Merit Contractors Association in Saskatchewan. “I would say the biggest issue is people and a shortage of skilled tradespeople,” he said.

We have been a net exporter of people over the years. It’s a challenge to get people to come back. They are waiting to see if this growth is long term or just a short term blip.”

According to Reed Construction Data economist Alex Carrick, Saskatchewan’s top international export is crude oil, accounting for 35 per cent of the total. Agricultural products are 30 per cent of the province’s total exports, with potash (15 per cent) and uranium (5 per cent) also contributing significantly. Saskatchewan also supplies about 30 per cent of the world’s uranium.

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