Fall from grace

Complacency is no friend to capital markets, and neither is incompetent government. Sadly, the government of British Columbia is so riddled with incompetence and scandal that it seems barely to notice the exodus of capital and talent from the province. It is so complacent and comatose that it has not even raised a fuss about the plans of the Canadian Venture Exchange to consolidate its head office in Calgary, a move that would relegate Vancouver to regional centre status.

It wasn’t supposed to happen like this. When the grand plan to merge the Vancouver Stock Exchange (VSE) and the Alberta Exchange (ASE) was announced a year ago, Vancouver was designated the operations office, with Calgary selected as the administrative office. However, this delicately negotiated, dual-office concept was recently ditched when CDNX CEO William Hess made it clear that control of the exchange would be consolidated in Calgary. It was not unexpected: Hess is the former chairman of the Alberta Securities Commission, and CDNX Vice-President Gerry Romanzin is the former executive vice-president of the ASE.

The cheers from Calgary were immediate. Kevin Gregor, president of the Calgary Chamber of Commerce, told The Vancouver Sun newspaper that the city is emerging as Canada’s second-most important financial centre. “This is where the business is,” he crowed. “This also is where the investment money is. That’s where the exchange needs to have its head office.”

The silence from Victoria was deafening, with nary a word about Vancouver’s longstanding status as the venture capital centre of the world. Against this backdrop of government indifference, we’ll take the liberty of reminding our readers that, in the mining game, Vancouver has delivered success after success, making Calgary’s track-record look negligible by comparison. The Hemlo gold camp in Ontario might not exist had it not been for Vancouver’s well-established money machine, and, in all likelihood, neither would Canada’s emerging and highly lucrative diamond mining industry; Voisey’s Bay would be undiscovered and undeveloped (instead of just undeveloped); Pierina might be a patch of Peruvian hill; and Tanzania’s Bulyanhulu might be a few drill holes and not a mine. When it comes to raising money to find mineral deposits, Vancouver has no equals.

Granted, Vancouver has had its share of scandals, as critics never fail to point out, but most of these were in non-resource ventures that were difficult to monitor. And most occurred before the 1990s, which has been relatively scandal-free. The VSE’s surveillance team is among the best in the world, having seen just about every trick in the book at least twice. Alberta, on the other hand, was only recently struggling to deal with the likes of cooked assayers from Utah and phantom gold deposits in the jungles of Borneo.

Quite frankly, Vancouver does not deserve to be demoted to regional centre status. It does not deserve the bad government that is allowing this to happen without a fight. It does not deserve to become a has-been on the financial scene, which may well happen unless steps are taken to restore confidence in the province’s failing and floundering economy. It does not deserve its fall — or, more correctly, push — from grace by a government that has been more focused on building flawed expensive ferries and delivering cooked budgets than on building upon the cornerstones of the province’s economy.

In all fairness, Calgary has earned its place in the sun as a major financial centre, and it deserves its reputation as a good place to do business. Premier Ralph Klein has done a remarkable job of creating a pro-business climate. Even booming Ontario is forced to acknowledge that this western province is annoyingly successful, even when oil prices are not as strong as they are now. Alberta is doing things right and, in the process, gaining new head offices and attracting corporations to set up shop because of its low taxes and favourable business environment.

British Columbia, on the other hand, is a case study in doing things spectacularly wrong. Indeed, one reason the CDNX announcement did not register on the radar screen of the New Democratic Party government is that it is preoccupied with other matters, including the widely publicized “fudge-it budget” lawsuit. In recent weeks, residents of B.C. have watched in amazement and horror as former cabinet ministers blamed each other for a scheme to claim balanced budgets or better when, in fact, the government was deep in the red. The suit was launched by a citizen’s group that is seeking to have three members of the legislative assembly lose their seats for fraudulently misrepresenting the province’s finances to voters in the 1996 election.

If that weren’t bad enough, B.C. is reeling under massive operating deficits and a debt of mammoth proportions. There is little confidence in the government, and investors are wary of making commitments, particularly in the resource sector. What’s more, the new premier — the third in less than two years — seems no more financially astute than the two who had kept the seat warm before. Never have so few socialists done so much damage to an economy as those who have been governing British Columbia for the past eight years.