FPI, the South Coast, and the future of Newfoundland

By Peter Fenwick

Fishery Products International may have reaped the whirlwind when it tried to modernize its south coast plants in Newfoundland, but it was the hard times of the last 12 years that sowed the seeds of discontent. Like Cape Breton, the south coast of Newfoundland has seen its prosperous economy, and its skilled labour force, decimated by events it had no control over.

When FPI announced it was putting tens of millions into modernizing three south coast plants and would have to lay off almost half the work force, it was the last straw. When the politicians held hearings on the FPI act on the south coast the anger was real and the language abusive.

Last week the three party House of Assembly committee’s recommendations were made law in a mere three days of debate. The speed of passage reflected both politics and the fear that oppressive business legislation like that should be passed quickly before it raises much of a stink. Even Newfoundland politicians recognize bad law when they create it.

The company will be restricted to issuing 15% of all classes of shares to a single investor, it will have to agree to land all its Newfoundland quotas in its Newfoundland plants, and it will have to put up with a largely symbolic preamble to its legislation that notes its unique position in the fishing industry. Investors will also be enjoined from suing for any damages that might ensue.

FPI management pointed out that the restriction on preferred shares would force it to expand by borrowing, which would put the company into more danger of collapse that the issuance of preferred shares. It also views the restriction on landing fish in Newfoundland as unconstitutional, perhaps even in violation of NAFTA. But it was especially angry with the no-sue provision that would not allow aggrieved shareholders redress for damage done to the company.

But even these politicians saw some sense. The more obnoxious proposals in the Minister of Fisheries consultation document aimed at guaranteeing the jobs of the employees had to be dropped, along with a government appointed board member and a government oversight committee that would vet layoffs. Even a gung-ho committee of politicians with widespread support would not put a no-layoff provision in legislation governing a private company.

Paradoxically, the provisions may do more to eliminate jobs in the south coast plants than anything FPI was planning. FPI has to raise tens of millions of dollars if it is to modernize its groundfish plants and purchase a new fleet of trawlers. Without the ability to issue unlimited preferred shares to new investors, the company may have to borrow from commercial banks at significantly higher rates. Missing interest payments on these loans could sink the company.

The same week that FPI was being hogtied, Statistics Canada released the first results from the 2001 census. It was bad news. The significant population decline that had been worrying most Newfoundlanders for the last decade had accelerated significantly. Only 513,000 Newfoundlanders were counted, down from 560,000 a decade ago. Even when adjustments are made for undercounting, the province will see a population drop of more than 5% between 1996 and 2001, quite possibly the greatest decline in population ever experienced by any province in Canadian history.

But the carnage was worse on the south coast where FPI was planning its restructuring. The Federal district of Burin St. Georges had seen its population drop from 80,000 to 65,000 in a decade. That 19% population drop had the people of the south coast so frightened that any attempt to restructure the ground fishery and eliminate jobs was greeted like the devil incarnate.

But overall employment in the provincial fishery had not dropped substantially. The processing sector employed just as many people in 2000 as it did in 1989 before ground fish stocks collapsed. Unfortunately for the south coast most of that employment was in the shellfish sector, and those jobs were concentrated on other coasts. Those coasts also lost population, but at a lower rate.

Prior to the ground fish collapse the south coast had an unemployment rate in the mid teens, lower than the provincial average. In the last 12 years, however, the south coast not only lost population, but it started to experience higher and more prolonged rates of unemployment. Instead of the 13% unemployment, rate of 1989, the 1990s saw unemployment rates as high as 37%.

In a short decade the south coast of Newfoundland went through the same changes that Cape Breton had wrestled with for 40 years. The world had changed and the coast had not found a way to adapt. Desperately, most people on the south coast are awaiting a return of groundfish stocks to pre moratorium levels and a reactivation of their now idle shipyard.

Unfortunately new fish processing technology will keep fish processing employment at extremely low levels even if cod return to pre moratorium levels. The past will never return.

The provincial government is pressuring oil companies into using the Marystown yard for their offshore developments, which may reopen the shipyard. When the provincial government owned the yard it was threatened with closure if its productivity did not improve. But lower tariffs on European built vessels also threaten the yard. Without fundamental increases in productivity and without tariff protection, the yard may not stay open for long.

Ironically the provincial drop in population over the last five years occurred while the work force grew substantially. There are now more people working in Newfoundland and Labrador than ever before. The combination of employment growth and population loss puts paid to the theory that all that is needed are more jobs to counter population erosion. Newfoundland and, to a lesser extent, Nova Scotia and New Brunswick have a national black eye that seems to draw young Atlantic Canadians to other provinces even when new jobs are being created in their home provinces. In Atlantic Canada, only PEI grew in the last census period.

But now that FPI has been hobbled by the Newfoundland legislature, the future of the south coast is even more problematic. Modernization has to go forward if any fish processing jobs are to be saved, but how FPI will finance it under the new rules remains to be seen. But if the haemorrhaging of population from the south coast is to be staunched, it will only be by companies like FPI.