Northeast could be target for next hostile takeover.

The government has a problem. It owns a company with huge assets, but negative growth. Call it the North-Eastern Ontario Holding Company (NEOHCo). It owns all the natural resources in Ontario north of the French River and east of White River. It has an income sharing agreement (called the Income Tax Act) with everyone who lives in the region. Over the last century this company has generated trillions of dollars for the people of Ontario, but now performance is lagging and population is falling. If NEOHCo were a private-sector firm it would be a prime candidate for a hostile takeover.

Takeover specialists look for value that the old management is missing. If they see brand names that can be exploited or markets that have been ignored, they can buy out the owners, change the management, and make a profit.

We all know that NEOHCo's major strength is in exporting natural resources, but forestry and mining both face declining employment. The takeover specialist needs a strategy that increases employment. That-means a strategy that uses the natural resource industries as a springboard to get into new markets.

The big new market for the northeast is the mining supply and services sector. There are now 300 companies in Sudbury alone supplying local and foreign mining firms. This cluster developed because Inco and Falconbridge provided a reliable local market. It expanded because Sudbury provided an ideal combination of location, international recognition, skilled workers and related companies.

NEOHCo also has an asset that the current management does not appreciate; NEOHCo owns a world-famous brand name.

Sudbury has instant name-recognition in the mining world. Visit a steel mill in Sweden, the mining centres of Australia, South Africa, or Malaysia, or the mineral engineering school in Beijing. You will find people, who know Sudbury.

What is a brand name like this worth? Billions. It is the key to launching a whole sector of high-tech firms. Dr. Greg Baiden, director of engineering at Laurentian University, claims that there are only three places in the world capable of becoming; major centres for mining supply, research, development and training. One is Johannesburg in South Africa, one is Kalgoorlie in Australia and Sudbury is the third.

Our takeover specialist would jump at the chance to turn Sudbury and the northeast into a major supplier for the world mining industry.

The Smart Growth Panel for the northeast was supposed to come up with a revised business plan for the current management Instead it produced a list of projects designed to please everyone. The strategists at the Ontario Ministry of Northern Development and Mines are trying to promote an imaginary Ontario Mining Cluster. They are afraid that if Sudbury is acknowledged as the main mining supply and services centre for the province, some companies and communities will feel left out. Politically sensitive bureaucrats are frittering away the value of the Sudbury brand. Minister of Industry, Allan Rock, is making the same mistake. He does not want to designate Sudbury as the centre for the mining supply and services industry in Canada' because he has been told that clusters have to grow naturally.

The Sudbury cluster has grown naturally. It sure has not had a lot of government help. In fact the governments did not even know it was there until this past year. The skill-testing question for governments is where to put public sector assets, like programs-in mining engineering and institutes for mining tele-matics. Scattering them all over the country does nothing to build the brand.

I have just received an email from the Mineral. Economics and Strategy Unit (MINTEK) in South Africa. Researchers at the mining research institute there want advice about promoting the South African mining supply and services sector. No one at MNDM or Industry Canada has bothered to consult me yet. As a researcher I am flattered by attention from outside the country. As a Canadian I am angry that foreign governments are moving faster than our own governments are.

A new management strategy for NEOHCo is needed, and it is needed soon. Since we can not rely on some mythical outside takeover specialist to recognize the opportunity, northerners will have explain patiently to the current management how to make a profit on the wealth of the-northeast.

Dr. David Robinson, PhD, is an associate professor of economics at Laurentian University. He works with the Institute for Northern Research and Development. He can be reached by e-mail at [e-mail]