Report explores merits of Devine-era investment
A new Frontier Centre for Public Policy report explores the return on investment of a previous Saskatchewan government.
Balancing Elephants: Calculating Saskatchewan’s Return on Investment — Meadow Lake Pulp Mill (MLP) is the latest report reviewing investments made during the 1980s and early 1990s, when Grant Devine was the premier of Saskatchewan.
“The financial story of the Meadow Lake Pulp Mill causes many Saskatchewan residents to cringe and shake their heads in disdain,” reads a part of the report, authored by Gerard Lucyshyn.
Lucyshyn writes that Saskatchewan residents were led to believe the entire investment on the venture lost the province $1 billion, but in reality, the actual loss was only about 20 per cent of that.
“The Saskatchewan government’s actual loss was closer to $316.5 million ($259.1 million in investment and $57.4 million in operational losses) over 14 years. The rest was unpaid interest that was written off, $649.7 million that was acquired under the lending practice of negative amortization.”
The Meadow Lake Pulp Mill investment was one of the last major projects by Devine’s government before it was defeated by the NDP in 1991, which, according to Lucyshyn’s report, was around the same time world pulp prices began to drop.
“With all these changes playing out shortly after MLP began operations, what was once a good investment soon became clear that, in the changing world of the 1990s, industries such as pulp and paper would need to be much more competitive to survive,” writes Lucyshyn, who adds the Romanow government “failed to monitor the commodity fluctuations and instead focused on protecting 130-plus jobs created by the MLP.”
“The mistake was not the decision to build MLP, the mistake was the government’s hyper-focus on how much money it was ‘earning’ on its questionable lending practices,” concludes Lucyshyn.
The province’s investment in the pulp mill ended in 2007 and it now, through private ownership, produces 360,000 tonnes of pulp each year.
This is the third report in a series of Frontier Centre studies on Devine-era investments. The right-leaning think tank has also looked at investments made in AgWest Biotech and Saskferco.
Ag-West Biotech, Lucyshyn writes, was a small investment that “set Saskatchewan on the path to becoming a world leader in the agricultural biotechnology sector. This decision has provided Saskatchewan citizens an enormous return on investment.”
Saskferco, writes Lucyshyn, “enabled the province to capitalize on its abundant resources and diversify its economy” and “Saskferco is a truly remarkable story of investment choice in Saskatchewan’s history.”
Devine became the premier of Saskatchewan in 1982, during a time when the province suffered from drought and an economic downturn. His Conservative party government was voted out nine years later, plagued by scandal that saw 13 out of 55 of his MLAs charged with fraud-related crimes.