Kell Petersen

To whom this may concern 

Feb. 23, 2000

Scott Boswell and

The Board of Directors

Osoyoos Business and Community Development Centre

8711 Main Street 2^nd floor

P.O. Box 500

Osoyoos British Columbia Canada

VOH 1VO 

Dear Mr. Boswell: 

RE: Call for Proposal for Business Plan and Promotional Strategy for the Southern Interior Value Added Wood Cooperative, hereafter the Cooperative

Thank you for considering P&A.  We refer you to our previous letter of September 13, 1999, and the following comments.   

We would be glad to offer our services under the following conditions:  

In the event that government funding and tax transfers are used to form the Southern Interior Value Added Wood Cooperative and/or this project.  That there is a prudent Strategic Analysis that tests such government intervention to assure it meets recognized standards for government’s role and accountability to intervene in the private sector and pricing mechanism in our Canadian democratically governed mixed economy.   

As resources can only be spent in one direction at the expense of other aims in the community. That there is at least an assumption that the intervention and redistribution of income via tax to the cooperative’s members from other taxpayer will raise real income and not erode economic production and social satisfaction for other members of our society.  

After reviewing the Strategic Analysis upon which the Cooperative is formed, we would consider participation and the drafting of a proposal.  

In the event that there is no Strategic Analysis that supports the decision to establish the cooperative, then we are prepared to offer a Strategic Audit of the project.   A Strategic Audit would review the strategic issues the members of the cooperative are facing  - and which it is assumed the cooperative will solve.  

Hopefully, such strategic audit would find the cooperative project to be a sound initiative based on the reality in a – open - economy and marketplace.   We would hope that the Cooperative would assist the members to solve their market, financial and organizational issues, without eroding the ability for other members and enterprises in the community to solve theirs.  

Does the cooperative have the potential to increase real income in the community and reduce the high tax welfare transfer to this area?  Does this government intervention meet the basic rule for government intervention in the private sector and in the pricing mechanism; that the government is providing service the private sector fails to provide?  Is the cooperative formed merely because of special interests and because there is HRDC, FRBC or other transfer funds available? Who is benefiting from the transfers? 

Is it reasonable and of benefit to the community that some companies and sectors receive corporate tax transfer welfare while others do not?

As another option, we can offer to discuss a combination of an Audit of the Cooperative’s overall purpose and a subsequent monitoring of the Business Planning and Promotion process and standard against the Audit.   

If the issues had not been sufficiently defined, the audit would propose an approach to repair that void and identify the long and short-term strategic issues and formulate approaches to solution. That would subsequently provide the base requirement for developing the business plan and promotion plan.

The concern is when and how transfers are injected:   

If there is an identified need among the enterprises in the wood industry for a mutually owned entity that provides services such as market analysis, business planning, promotion, etc., nothing prevents the enterprises in the wood sector to join together and invest equity share capital to form a mutually owned corporation that can provide such service. The new corporation can then hire the expertise and experience necessary. It is not the role of government to use transfers to finance that process.  

As a footnote, I happened to have reorganized one of the largest cooperative organizations in Europe and while working with the Swedish government have studied numerous successful cooperative business groupings.  Such initiative seems only to work in a homogenous sector with a strong civicness as the driving force.  

It is never successfully driven by government and outside interests.  Strong civicness is more common in farming communities where the market, economic and organizational issues and the market determinants are much the same, and hence where many are facing virtually identical issues -- hence one standard solution can work for many. In more heterogeneous manufacturing sectors such as the value added wood sector, it is a different story.    

Some regions of Sweden, Germany and Italy have always had low unemployment and a better economy than the rest of the country despite declines in the overall economy.  This is because of a strong civicness-driven tradition of cooperation.  Instead of Company X buying a new machine that they may only utilize 60 percent, they will subcontract the work to a colleague or even a competitor that already has the necessary machine and idling capacity. Or two or more firms may co-purchase a machine and run the machine in shifts.  Likewise, instead of laying-off people, companies will exchange staff.  However that is based on an attitude and civicness developed over hundreds of years and not initiated by government.   Attitude is most difficult to copy. 

The bottom line is that it is not government’s role to use tax transfers to stimulate enterprises to pursue government transfer that will crowd out private investment and private firms.   Government’s role is to address the issues and discuss formulated approaches to solution with the private sector, before the issues become acute.

We have a situation in BC - in general and in particular in the forest sector - where government intervention (via HRDC, FRBC) has disabled the pricing mechanism and addicted companies to corporate welfare.  The sector will continue to struggle along on ‘life support’, until such time as the community decides to ensure that government meets its role and accountability, and restores the pricing mechanism by scrapping planned economic socialistic approaches.

It is no secret - as addressed in our September letter – that we have for many years been openly critical of government intervention such as by HRDC and FRBC that does not meet government’s role and accountability in a well managed democratically governed mixed economy.   With that criticism P&A has no expectation that our analysis and approaches to solution will be used in British Columbia.   

Nevertheless, our analysis has been confirmed the past few weeks by the well-publicized “HRDC boondoggle” case.   Particularly in Okanagan HRDC and FRBC, patronage driven transfers that lack prudent analysis, accountability and aftermath analysis are damaging the pricing mechanism and hampering investment. 

The local Sonax, Van Steywoord Woodworks cases and the disturbing lack an aftermath analysis, and accountability speaks for its self?  

We would like to offer our expertise and be able to work with OBCDC, as our criticism is not personal.  I trust however that OBCDC understands that we cannot both criticize government transfer programs and work with the program at the same time.  Nor do we wish to compromise our analysis and integrity,

We can however, continue to offer to contribute to solving the analysis and accountability issues from local level and in this case OBCDC to federal level.   We are always willing to participate in adapting the government’s intervention system to the standard the community needs in order to promote real income and social satisfaction in an open, knowledge-driven economy and marketplace.  

Again we are not members of a central planned economic system. The role of Government and quasi-government organizations such as OBCDC in our economic system must be restricted to provide product and service the private sector fails to provide, and to ensure a sound and functioning pricing mechanism.  Not to compete in the private sector. 

This is a nice community to live in because of its natural beauty. But is also a community where government and semi-government organization is failing it is role and accountability to society.  That is hampering investment in economic production and social satisfaction.  We have seen corporations stop considering need investment and fresh mindset in the value-added sector in BC because our government does not meet recognized standards for government’s role and accountability. 

We trust this further explains our position. We are bound by the policy and standards set out in our September 13, 1999 letter to OBCDC.  We realize in the present environment and mindset in BC that our position is not promoting work for P&A and me, and as long as that situation prevails, we do not expect any work for government or quasi-government organizations in BC.  

This is not an easy situation for us.  However, what is worthwhile is seldom easy, and we have chosen to ‘tack against the wind’ rather than compromise our principles by participating in outdated programs that erode job and social satisfaction.   It is our analysis that enough good members of society eventually will stand up and use whatever means necessary to force government to meet its role and accountability in our mixed economy from local to federal level.   

Please do not hesitate to contact us again. Eventually we are convinced that the standard will improve and we will again be able to work with government in BC, and contribute to solving issues such as those identified in the initial strategic analysis P&A carried out for OBCDC in 1998.  Including the purpose of economic development, as the focus of effort to pursue tax transfer is a dead end approach in an knowledge driven open economy, - rather devastating.  

We also take the opportunity to inform you that we are forming the Okanagan Institute for Strategic Development.  The initial focus is on Government’s role and accountability to society from local to federal level in a mixed economy.  Our comparable analysis including Government transfer systems as managed through HRDC, FRBC, etc., has been a strong contributing factor in the decision to launch the institute and the first project.  

Enclosed you will find a brief commentary that further supports our position.  

Yours truly,  

Kell Petersen 

cc:        Town Council

To whom issues addressed in this commentary may concern.

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