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Leading Generational Change: The Case for Growth
Good afternoon, and thank you, John (Orr, CN), for your kind introduction.
I am extremely pleased to speak with you today, to offer my thoughts on Port Metro Vancouver’s future, and to invite you, for the next 20 minutes or so, to consider some alternatives to how we view ourselves. By looking at some fairly well defined opportunities and risks, I hope to make a clear case for the inevitability of growth in our industry, and specifically the requirement for growth at Port Metro Vancouver. I also hope to offer a new way to think about our role both as an industry, and in terms of what we really bring to our regions and our nation.
Let’s start with today.
As we find ourselves more than 12 months into a worldwide economic downturn, operating in a fragile business climate and questioning past best practices, I believe our industry and our economy will inevitably return to growth.
Many business leaders have expressed optimism and confidence in the future. Just one month ago, Warren Buffet unveiled a US$44-billion deal to buy out the Burlington Northern Santa Fe railway, declaring his move as “an all-in wager on the economic future of the United States.” You can’t get much more optimistic and confident than that. The National Retail Federation and IHS Global Insight recently reported that major U.S. ports would soon see their first year-over-year growth in nearly three years. And, regarding the economic outlook for British Columbia, just last month the Bank of Canada’s Deputy Governor, Mr. John Murray, said that major public sector spending on transportation and other infrastructure projects will continue to contribute to growth this year and in 2010.
At Port Metro Vancouver, we believe that it’s safe to say our overall declines have slowed. Some cargo sectors have experienced positive growth, and we do expect to see more of this trend over coming months.
While we all exercise due caution as we search for the metaphorical green shoots, I think it’s clear that we’re not back in positive territory quite yet. So, in the current context of economic contraction, why is Port Metro Vancouver talking about growth? Indeed, why do we talk about growth at all?
In the simplest terms, our Port grows in response to the needs of individuals and the economy. Let me give you two quick examples.
In 1970 – about 40 years ago, the Port handled approximately 27 million metric tonnes of cargo. The population of Canada was 21 million. This year, we estimate the Port will handle close to 100 million metric tonnes of cargo. According to Stats Canada’s real time population clock, this morning the population of Canada is nearly 34 million. In 40 years, the Canadian population has increased by 60%, and the total cargo volume at the Port has nearly quadrupled.
Here’s another example, this time in the container sector. In 1971 the port handled 66,000 TEUs (20’ containers). In August this year, the container ship ZIM Djibouti called at Deltaport. This vessel can carry more than 10,000 containers. Theoretically, we could handle the Port’s entire container volume of 1971 with about 3 full exchanges of the ZIM Djibouti. And, we could complete this in record time with North America’s largest cranes.
Underscored by these examples are a couple of important points:
Number 1: Population increase acts as a key driver for the growth of cargo volume – for demand-driven consumables on the import side, and for demand-driven commodities, that support our economy, on the export side.
Number 2: We are, quite literally, dependent on international trade for our quality of life. According to Professor William Rees of UBC, “the Lower Mainland can only sustain a population of 50,000 people,” based on what can be produced, manufactured, or grown locally. “That’s considerably less than the 2.5 million people in the region today. We are indeed mostly dependent on ‘elsewhere’ to provide the goods and services we consume, and to assimilate our wastes.” As David Baxter notes in his paper “Changing People Changing Places” delivered at the recent Outlook 2020 Forum: “There is no 100-mile menu for cell phones.”
We also know from Metro Vancouver’s growth strategy that more than 1 million additional people will move to this region by 2040. This will mean additional consumption, increased workforce and economic activity – all generating increased trade opportunities, and requirements.
Canada’s population growth drives international trade. We are a trading nation. And, most importantly, we can be confident that a return to economic growth is inevitable.
But, why just wait for an inevitable return to growth, when we can already start to plan and define a different and better future? We can change the way we think and act. If we move beyond just reactive response, our industry can lead a major change in thinking, and act to deliver a generational change — not only in key supply chain infrastructure, but in the way we understand and operate the entire supply chain, including impacts and benefits.
Let’s think about our own growth strategy. We want a future where growth is anticipated, enabled, considered; where pinch-points are understood in advance; where we tackle our challenges in the context of benefits. In our future, our responsibility to and for economic generation is understood, respected, and supported in host communities because we work together toward common goals; relationships are built and strengthened. Growth means integration resulting in capacity availability, congestion-free or manageable corridors, integrated road and rail interface, and sustainable growth solutions. Leadership replaces regulation. We do things because it’s the best business solution that brings with it the most positive environmental and social impact.
This future looks bright — because capacity accommodates growth, delivers economic empowerment and informs sustainable choices. This is, in fact, already happening on Canada’s West Coast.
In the past 15 years – less than one generation – we’ve witnessed innovation and experienced astonishing business developments, here and abroad: the explosive global emergence of container trade; and, the growing recognition that our own Gateway is an integrated system, greater than the value of its individual components.
In the Metro Vancouver Gateway, we are experiencing unprecedented public and private investment. Industry stakeholders have committed to spend more than $4 billion over ten years to develop the Gateway. Our senior governments are promoting trade and stimulating our economy by carrying out their responsibility of developing public infrastructure. Together, our provincial and federal governments have exceeded private sector commitments by identifying nearly $5 billion in program funding over the next several years.
Where is this public and private investment going? Let me give you a few examples. The Deltaport Third Berth will open in January and, along with its three new quad cranes, will increase cargo handling capacity at Deltaport by around 40%. Recently announced Trade Corridor initiatives on the North Shore, South Shore and from Roberts Bank-to-Langley corridor are underway. We have private sector terminal investment underway in the bulk sector. And, our proposed Terminal 2 project at Roberts Bank will increase the Port’s container terminal capacity by around 2 million TEUs in the longer term.
In total, these projects comprise terminal development, road and rail grade separations, route extensions, and other landside enhancements that will smooth regional traffic flow, improve access to port facilities, and boost Gateway competitiveness.
We have now moved from making a case for major investment — which was overlooked by senior governments for nearly a generation — to tackling the better challenge of delivering on that investment. Our new challenge moving forward will be continuing the momentum.
That’s why it’s up to us to leverage this investment —it’s our responsibility to plan for market, population and economic growth, to deliver economic empowerment, and to ensure Gateway success, in a sustainable way, by considering every business sector and identifying every emerging opportunity.
As a result of these substantial initiatives, Vancouver represents a well-established, strategic gateway for international cargo flows – import and export – across all business sectors.
We became a thriving international Gateway through forethought and planning; commitment, cooperation, collaboration; risk and investment from the private sector and government; a realization that economic, social and environmental sustainability are intertwined.
These approaches and qualities are all vitally important, as we accomplish nothing without solid working relationships kept in good order. But most importantly, we got here by understanding that growth is a fundamental premise, that it’s our responsibility to plan for market, population and economic growth, in a sustainable way. And, we got here by understanding that the Gateway is an integrated system.
We’ve proven we can grow, sustainably, and growth has come. Now we’re moving forward. But this forward movement is not without risk. All of this demonstrated capability, commitment and momentum might conceivably come to an abrupt standstill, immobilized by the inaccessibility of one precious finite resource: Land.
Without land – in the right geographies to continue to develop and enhance the Gateway — we would be left literally with no foundation, and, therefore, no possibility for economic growth.
Land availability, use, management, reclamation, leverage, is going to be the core of Gateway development going forward: to increase capacity, improve operational efficiency, manage supply chain reliability; and to manage community interface, buffer and mitigate inevitable impacts, helping ensure social license to operate, recognizing that port communities bear greater impact than other communities across the nation.
BUT not just any land. Not just land for port use, but land for all the related economic uses, and to provide the beneficial consequences the population demands. As David Baxter says, “it makes neither economic nor environmental sense to attempt to grow tea or coffee in BC.” There quite literally is no 100-mile menu for cell phones. We are dependent on trade for much of what we need and use, and land is required for the mechanics of trade — the supply chain — to operate.
We also need to recognize that land reclamation is not about just creating more concrete. If we can leverage dredged material from the Fraser River to develop or bank more habitat or more agricultural land, for more and wider benefit, this in turn will allow us to create more industrial land.
Our regional context in Metro Vancouver is that we’re Canada’s third largest population and growing. Around 600,000 jobs will be added to the region by 2040 — that’s 1.8 million total jobs. We need an adequate supply of land for all sectors of the economy: well-placed, integrated, accessible, serviceable; connected to a population base; offering choice, workforce, related services; maintained and protected to serve local and global markets as a foundation for trade and generation of economic value. And we must continue to be mindful of our responsibility for sustainability: where our development takes place; the goals for all activities in our region; and, being better neighbours.
We are also very much in a long-term business. As a landlord port, we plan infrastructure now, for the future. And to manage our future — as well as the inevitable and escalating demand of our population for a standard of living — we have no time for complacency. What and where are the Gateway land requirements? We are at the start of the next phase of this process.
We’re planning future supply chain requirements and considering how supply chains may change. We’re reviewing land availability and options, in earnest. We’re assessing physical constraints to growth – mountains, water, the border – finite land availability. We’re aligning with community requirements, regional needs and government. We’re recognizing competition from industry, commercial and retail use, housing, agriculture, leisure, green space and parks. We’re leveraging the current short-term recession for long term gain with strategic land purchases to prevent further erosion of industrial land bank and to preserve and expand the land bank.
For instance, we need to look at the Fraser River with completely fresh eyes. We need to protect the Fraser River asset economically, environmentally and socially. What is the value of this asset to Canada? In 2008, we handled more than 33 million tonnes of cargo and more than 200,000 TEU (containers) on the Fraser River alone. This represents $9.6 billion in economic output and more than 53,000 jobs, accounting for $2.6 billion in wages. By comparison, the St. Lawrence Seaway handled 40 million tonnes of cargo in 2008, and produced an economic impact in Ontario of $2.5 billion and $2 billion in Quebec. Why compare the two? To make the point that the Fraser River is a national asset, of a size with the St. Lawrence Seaway — and it’s in our back yard.
In 2006, Premier Gordon Campbell said this about the Seaway: “50 years ago, there was a vision in this country... it was called the St. Lawrence Seaway... a national vision of what we could do. In fact, it was called the “gateway to the world.”
Doesn’t that sound familiar? “Gateway to the world.” Fifty years ago, the Canadian government positioned the St. Lawrence Seaway as vitally important to the country’s future as a trading nation. But, in the intervening 50 years, the economic centre of gravity in the world has shifted from Canada’s East to Canada’s West — and now we are the Gateway to the world.
So, what has changed since Premier Campbell’s remarks in 2006? Well, three years on, we are more specifically focused. In our Gateway, we have demonstrated a well-established pattern of collaborative behaviour with industry stakeholders and governments. We have cooperation instead of division. We have engagement instead of disagreement. We understand and believe that the Pacific Gateway is of national interest – this is national infrastructure development, and we need to understand its significance the same way the nation looked at the Seaway 50 years ago.
Our senior governments have worked together in the past three years to align their infrastructure development priorities, to enhance the Gateway for the benefit of all Canadians. The Port is aligned with these priorities and we act as a major funding partner for many of these initiatives: we have quite literally invested in Gateway development, and we have a stake in its future. The Port’s focus used to be the marine interface. Now, we’re thinking very broadly across the entire national supply chain, while working locally to develop those national connections.
We have continued to move to more of a business model and, like any business, we need to demonstrate shareholder value, here and now. Our shareholder is the Canadian public. We must ensure we get an appropriate return on current and future investment in the Gateway.
We also need to manage risks. As I say, the lack of available industrial land could stop our ability to grow. But the lack of reliability is no less risky, as it stops us from leveraging full value from our significant investments. We do need to apply considerably more effort to ensure Gateway reliability and optimization.
Even as we contribute to and benefit from the significant government and private investment in components of the Gateway, the bottom line is that we must always perform. Our collective efforts will be squandered if our reputation for reliability and consistency does not match our customers’ expectations.
Good rail service is fundamental to the success of the Gateway. Whether we expand OR contract our supply chain, all our supply chain partners must act in concert with each other to minimize impacts on our users. We must agree to specific service commitments, and then keep them.
Another vital contributor to reliability is labour/management relations. While our Gateway has experienced relative waterfront stability since 1999, the mere opportunity for labour disputes is enough to cause damage to our reputation for reliability. Earlier this year, you will recall that even the threat of job action by ILWU foremen caused cargo diversions to US west coast ports. If our users worry about stability, performance or reliability, then our Gateway and our economy will suffer.
As we have seen just this week with the job action between CN and its engineers, represented by the Teamsters, all port-related labour disruptions threaten the Port’s reputation as a reliable port, damage the international trade reputation of the country, undermine the value of government’s and private sector’s continuing investments in expanding trade, and jeopardize the potential for future private investment. This strike may now be over, but Gateway recovery is just beginning, and will take some time.
As our Gateway approaches longshore labour force negotiations in early 2010, we recognize that, ultimately, reliability is essential, and it is reliability that rewards our shareholders, through proper asset utilization and economic growth.
We also recognize that economic activity generates impacts: traffic congestion, air emissions, noise. Along with performance reliability and land availability, increased community impacts represent a tangible risk to our future success. Moving forward, how do we enable economic activity while addressing the inevitable consequences? By working closely with all levels of government. By developing leading environmental programs that combine innovative mitigation initiatives and excellence in environmental stewardship. And by continuing community and aboriginal engagement.
When we think about 2035 or even 2050, we need to identify common themes or factors and advance the philosophy that has built our Gateway.
Quite frankly, we can choose to understand the Port any way we want. It’s perhaps about traffic — or actually about better mobility — in municipalities. It’s perhaps about industrialization — or actually about empowerment — of the region.
Or, we can look beyond municipalities and regions, to broader benefits for all Canadians, locally and across the nation. It’s about the vital market link for importers and exporters that generates economic wealth and jobs. It’s about enabling a population and delivering quality of life. It’s about the sustainable development opportunity the Port affords, now and in the future, combining economic growth, habitat protection and community-building partnership.
We can create a national competitive advantage by delivering a generational change in infrastructure development. To do so, we also need to deliver a change in our belief of who we are, and the value we bring to the nation.
The potential of the Pacific Gateway has ignited the imaginations of our political leaders and influencers, just as the development of the St. Lawrence Seaway did more than 50 years ago. In October, Prime Minister Harper visited the Port to make a funding announcement, and he said “the lifeblood of the [Canadian] economy flows through the heart of Port Metro Vancouver, and the Gateway Initiative is making that heart beat stronger than ever.” We need to leverage this commitment and continue building the foundations for our future success.
Let’s work to reignite our imaginations, to believe in the value of this endeavour, to build this national infrastructure – the Pacific Gateway – that benefits the entire nation. There is no time for complacency; there is no place for regionalism. By enabling sustainable growth, delivering a generational change in infrastructure development, and redefining our role, we can inspire the confidence to believe in and deliver the full potential of the Asia Pacific Gateway as Canada’s most precious national asset.
Before I close, I’d like to tell you a story. I was in Qingdao in 2002 with P&O. We were working on the framework to complete phase 3 of Qingdao Container Terminal – taking the terminal to a total of four berths and 24 cranes. I returned to Qingdao last month. In the seven years since I’d been back, they’ve opened the first part of phase 4 with two more berths that now have 37 cranes. These are 100-tonne lift cranes — larger than anything we see in North America. And, they’re planning to build a further eight berths in phase 4.
Ladies and gentlemen, the growth is going to happen, with or without us. The ships they handle in Qingdao are the same ships we handle at Port Metro Vancouver. Our economies are intertwined — and those ships that travel back and forth across the ocean are physical links between us.
So, for us to take charge and write our own future, what does the Port need to do?
We need to, and will, ensure the future that unfolds delivers planned, enabled growth, to ensure our, and Canada’s, economic future, and to minimize and mitigate community impacts.
We need to, and will, ensure we minimize risk around the availability and sustainability of port land, and further leverage its proper use by delivering performance reliability.
We need to, and will, move now to ensure that the next generation will look back and remark on the rewards and results of our continued development of Canada’s Asia Pacific Gateway.
I believe that we can advocate for improvement, collaborate with supply chain partners, invest in the network, deliver on our Gateway’s spectacular potential, engage our stakeholders, governments and communities, inspire confidence — and lead this generational change.
Thank you for your kind attention.