More than 20 per cent of the money given by a New Brunswick economic development agency over six years ended up with companies that declared bankruptcy or ceased operations, provincial government records say.
Records received through a right-to-information request show that from Jan. 2, 2005, to Sept. 1, 2011, Business New Brunswick gave about $653 million in repayable loans, loan guarantees, equity investments and various forms of grants to companies.
Of that, $76.2 million was given to companies that are out of business, while $74.8 million was given to companies that went bankrupt, the spreadsheets say. In total, that represents about 23 per cent of the investments and loans given by the agency in that time span.
Economic Development Minister Paul Robichaud said the provincial government is concerned by that rate of failure.
"It is just not acceptable," Robichaud said in an interview. "That is the reason why we're taking some active solutions to make sure that situation will not happen again."
Robichaud said his department is going to do a better job of vetting investments in the future in a bid to improve Business New Brunswick's investment success rate.
But Donald Savoie, the author of several books on regional economic development, said it may be time to eliminate economic development agencies such as Business New Brunswick, particularly at a time when the province is grappling with severe fiscal problems.
"We have a deficit we can't sustain," the University of Moncton economist said in an interview.
"We know that federal transfers are going to be leaner in years to come as we shift away from equalization. Some tough decisions need to be made."
New Brunswick faces a projected $471-million deficit this fiscal year and a debt expected to exceed $10 billion.
Savoie said instead of propping up Business New Brunswick, the province should promote its 10 per cent corporate income tax rate, tied for the lowest in the country with British Columbia and Alberta.
"Why don't we scrap all these organizations and tell the business community: 'You will have the lowest corporate income tax in Canada. Now go to it, we're not going give you any more money,'" said Savoie, who wrote a 1987 report that helped launch the Atlantic Canada Opportunities Agency.
"We're going to save a fair bit of money by not throwing money at businesses and by disbanding these organizations."
But Robichaud said it wouldn't be realistic to dismantle Business New Brunswick when other provinces are providing subsidies to business.
"Eliminating Business New Brunswick I don't believe is the solution, because the department will not be on the same level playing field to compete with other jurisdictions," he said.
Business New Brunswick's top 10 investments from the six-year period include large losses to the defunct fabrication and construction firm Atcon, which received $3.2 million in loans and $3.1 million in direct subsidies in 2007, as well as $63.3 million in loan guarantees in 2008 and 2009.
The Fraser Papers mill in Edmundston received $29.3 million in loans from December 2007 before it went through bankruptcy and restructuring in 2009.
Bruce Macfarlane, a spokesman for Business New Brunswick, said some of the companies that went out of business, such as the Fraser Papers mill, were purchased by new buyers after they closed and they continue to operate under new ownership with further government support.
Macfarlane said the government has recovered some funds through bankruptcy proceedings and expects to recover more, though he could not say how much has been recovered.
Macfarlane said the government plans to focus Business New Brunswick's future investments in aerospace and defence, biosciences, industrial fabrication, information technology, value-added food and value-added in the forestry sector.
"It is going to change," he said. "The government is going to have a new and focused economic development strategy that capitalizes on our opportunities in these sectors."