A once surging and prominent province in Canada, Ontario currently faces a whopping $12.5 billion CAD deficit. What was, in the past, a reliable province has become dependent on equalization payments from the federal government to provide sufficient programs and services on behalf of Ontarians.
The 2008 global recession triggered economic hardships within the manufacturing sector in the province. As a result, a prosperous manufacturing industry boasting companies such as Blackberry and General Motors has now become a precarious sector in Ontario. Recent auto bail-outs and the collapse of the Blackberry Corporation have caused structural shifts in the economy leading to high uncertainty and sky-rocketing unemployment rates.
Kathleen Wynne, Ontario’s Premier, has promised to balance the books and eliminate the deficit by 2017. One of the promises that remains a key pillar of her platform is a pledge to commit $130 billion CAD to improve transportation infrastructure. From this amount, the Wynne Administration is prepared to commit $1 billion CAD for transportation infrastructure for the Ring of Fire in Northern Ontario and is currently lobbying the federal government to match provincial commitments.
The Ring of Fire is a mining and smelting development project in a mineral-rich area located approximately 400 KM Northeast of Thunder Bay in the James Bay Lowlands. The area has significant amounts of chromite deposit, nickel, copper, and other rare minerals that could be pivotal in enabling Ontario to become a global leader in mining and mining technology. Chromite is an essential component of stainless steel and these deposits in particular, which hold a value between $60 billion and $100 billion CAD are considered to be the first of their kind in North America.
“The Ring of Fire is one of the most prominent mining opportunities in a generation,” says a report from the Ontario Chamber of Commerce. The report also indicates that within the first ten years of development, the Ring of Fire has the potential to generate $9.4 billion CAD in Gross Domestic Product and create over 5,000 jobs. This will, without a doubt, boost Ontario’s struggling economy and benefit the federal and municipal governments. Nevertheless, the Ring of Fire is faced with a number of criticisms and hurdles that stand in the way of moving this project forward.
The first, and perhaps biggest, obstacle is the location of the James Bay Lowlands. There is insufficient physical infrastructure to allow mining companies to extract the deposits and move it to potential buyers. To that end, “modern transportation routes capable of handling Ontario’s tough winters and the weight of mining trucks must be built,” says David Caplan, former MPP. Secondly, as is the case with many major projects involving multi-level governance, a rudimentary environmental assessment must be completed to satisfy a number of conditions ahead of construction.
A third issue focuses on establishing effective relations with First Nations communities located around areas that could be negatively affected by the construction. In this case, it would be imperative to facilitate effective training, education and open dialogue between First Nations, government and mining companies. Once the environmental assessment gives a green light, the project still faces one more major roadblock – who will finance it? The tough question of financial solutions requires collaboration between the government and private mining companies to propose innovative financing strategies such as Private-Public Partnerships, otherwise known as P3s.
Private-Public Partnership has been on the rise since the 1980s with a focus on New Public Management techniques across government departments in an effort to be more efficient and cost-effective. Highway 407 in the Greater Toronto Area is an example of this Private-Public Partnership, wherein the province leased out the provincial highway to private Canadian and Spanish investors for $3.1 billion dollars. Consequently, many criticized the Ontario government on the 99-year lease, erroneous charges and increasing tolls. Therefore, Ontario should learn from its mistakes and advise equitable solutions to aid the financing of the Ring of Fire.
“In a successful P3 model, the sector that can best assume the risk does so. Policy risk, for example, is best assumed by the government partner. The financial risk is best assumed by the private-sector partner,” says David Caplan. Collaboration between the public and private sectors is significant in identifying efficiencies that can facilitate the project, while emphasizing accountability and shared responsibility in a fair and transparent manner.
Securing effective Private-Public Partnerships for the purposes of the Ring of Fire project would stimulate Ontario’s economy and assist Premier Wynne in tackling the enormous deficit. Politicians, First Nation Communities and mining companies working together to realize the full potential of the Ring of Fire will have a positive impact on the local and national governments; and also on the international marketplace. This could eliminate Ontario’s astronomical deficit and guarantee that it maintains its competitive edge. Furthermore, the province could become a global leader in the production of stainless steel taking advantage of such rich natural resources and become less dependent on the manufacturing sector in generating revenue in Ontario.
“The Ring of Fire is an economic development opportunity with multi-generational benefits, so it’s important that we get it right,” concludes Michael Gravelle, MPP of Thunder Bay – the region at stake. Evidently, the Ontario economy is in disarray and the Wynne camp is effectively trying to resuscitate it. Through innovative financing and strategic private-public partnerships, the Ring of Fire could be the prescription the province so desperately needs.