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A MANUFACTURING ACTION PLAN FOR

SASKATCHEWAN

Five Steps to Drive Investment, Improve Competitiveness and Create Jobs

Canadian Manufacturers & Exporters Derek Lothian | Executive Director, Saskatchewan Manufacturing Council Phone: 306-713-3765 | E-mail: [email protected] www.cme-mec.ca | www.saskmanufacturing.ca

A MANUFACTURING ACTION PLAN FOR

SASKATCHEWAN Five Steps to Drive Investment, Improve Competitiveness and Create Jobs About Canadian Manufacturers & Exporters Canadian Manufacturers & Exporters (CME) is Canada’s largest and longest standing trade and industry association. Founded in 1871, CME is the only organization of its kind to be formed by an Act of Parliament, and has offices in every province across the country — with the exception of PEI — as well as international representatives in Washington, Latin America, and Europe. As the voice of manufacturing and global business in Canada, CME works to promote the competitiveness of Canadian manufacturers and the success of Canada’s goods and services exporters in markets around the world. Our core focuses are advocacy, intelligence, business opportunities, best practices and networking. For more information, visit www.cme-mec.ca.

About the Saskatchewan Manufacturing Council Established in January 2013, the Saskatchewan Manufacturing Council is a CME-led initiative that brings together more than 35 leading industry executives to speak with one voice on priority issues impacting manufacturing in the province. The council is currently chaired by Tom Kishchuk, President & CEO, Hitachi Power Systems Canada Ltd. For more information, including a list of members, visit www.saskmanufacturing.ca.

Manufacturing matters to Saskatchewan: More than 27,000 employees, wages 15 per cent higher than the provincial average, $14 billion in annual sales, and the largest economic multiplier of any industry — $3.15 for every dollar in total output. But these are more than just numbers — they tell a story of a sector at the forefront of global competition, innovation and technological change. The companies within it, however, are also competing with the world’s best; and to succeed, they require a business climate that is equally world-class. Other jurisdictions are moving aggressively to attract investment, grow their value-added manufacturing base, and create high-paying jobs. Saskatchewan, too, needs an action plan for manufacturing — a plan to nurture the province as a preferred destination for manufacturers to locate, invest, export from, employ, and grow. These five priority focuses, endorsed by the Saskatchewan Manufacturing Council — an exclusive group of more than 35 of the province’s leading industry executives — establishes the recommended framework for that vision.

1. Boost productivity performance amid a growing skills gap Background t’s no secret that Saskatchewan is booming. Manufacturing is as well. In 2012, manufacturing sales in the province topped $14.1 billion — an increase of roughly 11 per cent from 2011 and 28 per cent over 2010. Over the past five years, meanwhile, the sales-per-employee of Saskatchewan manufacturers — a key indicator of productivity performance — has spiked more than 23 per cent. But the growth in production output has not kept pace with capacity. More than half of manufacturers (51 per cent) already face labour and skills shortages, which cost them an estimated $1 billion in lost business each year. In fact, according to the results of the 2012–13 CME Management Issues Survey, if these labour market conditions don’t improve, within the next five years, 19 per cent of Saskatchewan manufacturers will shift production or investment to other provinces, while 31 per cent will look to other countries. To be successful, manufacturers must continue doing more with what they have. That will require a dynamic, simultaneous effort, with complimenting measures to grow the workforce, encourage new capital investments in more productive machinery and equipment, and improve access to training and best practices.

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Recommendations A. Fund or co-fund the three-year, $8.1 million Manufacturing Our Future proposal, currently before the provincial government. Through a diverse programme of education, engagement and capital cost sharing (delivered through a ‘Centre of Excellence’ model), this proposal aims to:

•  Generate $118 million in new manufacturing sales, and $371 million in new economic activity; •  Facilitate $1.4 billion worth of productivity improvements; •  Maintain 700 high-paying manufacturing jobs and create 300 more in the services and support sectors; •  Stimulate at least $7 million in direct capital investment; •  Increase the awareness of manufacturing- and exporting-related careers amongst Saskatchewan youth by 30 per cent; and, •  Strengthen the provincial workforce by encouraging labour market participation amongst underemployed and underrepresented groups, such as women in the trades and First Nations. B. Support the formation of the Saskatchewan Workforce Development Partnership — an action group of industry organizations jointly exploring short- and long-term strategies that ease labour market pressures, including cohesive advocacy on key policy issues, such as: •  An expansion of the province’s quota under the Saskatchewan Immigrant Nominee Program to 6,000 by 2015, and 7,000 by 2020. •  Improved reliability and access under the Temporary Foreign Worker Program; and, •  New resources for the creation of affordable housing solutions.

2. Enhance the image of manufacturing Background ver the past quarter-century, manufacturing in Saskatchewan has undergone a significant transformational shift that has helped propel the industry into one of the most modern and economically influential on the planet. It is no longer smokestacks and sprockets — it is highly mechanized, technologically advanced, and innovative beyond imagination. It is also a source of well-paying, exciting career opportunities, and a foundational part of our communities. This is a message that needs to be shared — particularly with Saskatchewan youth and other underemployed stakeholder groups, but also with policymakers and everyday citizens. This includes general public education and improving access to hands-on learning.

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Recommendations A. Expand the mandate of the Saskatchewan Youth Apprenticeship program by investing in ‘education for the educators,’ and enhancing public promotion (particularly in the digital space).

B. Leverage up the successes of the Saskatoon Industry Education Council (SIEC) by establishing a strategic investment fund for the programming of this and similar joint partnerships, such as the new Regina District Industry Education Council. C. Encourage government to work with industry groups, such as the Saskatchewan Manufacturing Council, to create an agile platform for provincial ministers to publicly support manufacturing investment in the province — chiefly through earned media coverage and interdepartment cooperation. D. Commit to minimum required industry-related education curriculum for all students in grade six through grade 10, with an emphasis on providing innovative hands-on learning opportunities.

3. Better align public R&D and training investment with the needs of industry Background askatchewan manufacturers are fortunate to have at their disposal some of the best publicly funded innovation and training resources available, including world-class post-secondary institutions, a progressive apprenticeship program, and other unique initiatives, such as the Saskatchewan Research Council. As the realities faced by manufacturers change, however, so must the expectations placed upon these investments. Today’s industry needs a responsive framework that continuously realigns the types of supports being provided with the real-time needs of modern manufacturers.

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Recommendations A. Implement an annual consultative review process with both the Saskatchewan Apprenticeship and Trade Certification Commission (SATCC) and the Saskatchewan Institute of Applied Science and Technology (SIAST) to: •  Evaluate the apprentice-to-journeyperson ratio for in-demand trades, with transparent policy guidelines surrounding safety and education quality commitments; and, •  Align post-secondary trades programs with the needs of industry through a formal critique of curriculum and intake. B. Incentivize manufacturers — ideally through the introduction of a voucher program or tax credit — to better leverage public research and development assets, such as post-secondary institutions and the Saskatchewan Research Council, in product or process commercialization efforts. This would also

help counter the five per cent SR&ED tax credit discrepancy with our neighbours in Manitoba. C. Introduce an apprenticeship training bond to encourage individuals to remain with their employers after journeyperson status has been achieved. D. Create 500 new apprenticeship spots by 2015.

4. Ensure a balanced approach to infrastructure renewal Background hen the Government of Saskatchewan released its Action Plan for Growth through the year 2020, the word infrastructure appeared in the official 66-page document 83 times. And by no mistake. By almost every measure, the province is ill prepared to meet the demands it will face over the next decade. SaskPower alone has earmarked $10 billion worth of updates over the next 10 years. But with this much-needed renewal comes the need to carefully manage spending. Saskatchewan manufacturers already face a myriad of global pressures, and cannot afford to add significant new costs to their balance sheets when it comes to public services and utility rates. All levels of government must exercise fiscal prudence, while ensuring these major capital projects also translate into new supply chain and export opportunities for manufacturers.

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Recommendations A. Limit non-essential Crown Corporation spending to ensure utility rates are benchmarked and globally competitive. B. Proactively support Saskatchewan manufacturers in the identification and preparation of Crown procurement opportunities in light of more than $2.5 billion in new infrastructure spending over the next three years, specifically: •  An enhanced programme of supply chain development forums, similar to that hosted by the Ministry of the Economy in May 2013; and, •  The creation of a publicly accessible online curriculum of supply chain readiness workshops and related tools. C. Expand the mandate of the new SaskBuilds Fund to reduce the financial burden facing municipalities that are

investing in large capital growth projects, with special credence to investments in key rural corridors where manufacturing is a major employment sector. D. Continue to support the Global Transportation Hub (GTH) Authority to promote the GTH, its value proposition and its available services to small- and medium-sized manufacturers, both in Saskatchewan and across Canada.

5. Improve the general business climate for manufacturing competitiveness Background askatchewan needs to continuously review and improve its business policy to ensure the province remains a world-class destination for manufacturers. This is not just a responsibility of the provincial government; it is a responsibility of decision-makers at all levels of government, as well as stakeholders in education, industry, and — yes — manufacturers themselves.

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Recommendations A. Continuously evaluate municipal and provincial spending efficiencies to limit tax creep and ensure manufacturers have access to the services they need to be successful. It is worth noting that, in a recent CME survey, 38 per cent of Saskatchewan manufacturers say municipal tax conditions have worsened over the past three years, compared to only 13 per cent at a provincial level and nine per cent at the federal level. B. Establish a one-window access point to assist new residents with both employment and non-employment relocation processes, such as the recognition of certifications and the transfer of health insurance. C. Transition the Manufacturing & Processing Investment Tax Credit (ITC) to include installation and proprietary upgrades only, and remove the Provincial Sales Tax (PST) from both new and used production machinery and equipment — making it a permanent (and less costly) part of the tax system and aligning Saskatchewan with other jurisdictions, such as British Columbia and Ontario. D. Expand the mandate of the Saskatchewan Trade & Export Partnership (STEP) with new strategic funding commitments through 2020.