If you want to profit, speed is of the essence. The Atlantic Gateway is a great idea, but Canada spent too much time debating and an opportunity may have passed to the Port of New York

When it comes to figuring out the crazy quilt of modern economics, it helps to have been around. This is the case for David T. Fung, who came to Canada from Hong Kong in 1966 when he was 21, did a doctorate in chemical engineering at McGill, and then studied business at Queen’s. Today Fung is the chair and CEO of the ACDEG Group of companies, which has partnerships in eight sectors on three continents. In his spare time, Vancouver-based Fung is the chair of Canadian Manufacturers and Exporters, co-chair of the Members of the Canada Foundation for Innovation, and vice-chair of the Canada China Business Council. His titles tend to include the words strategy, innovation, science, engineering, transportation, and partnership. Something about this eclectic mix has made him very broad-minded, or maybe it was the other way around. 

Fung likes to quote Einstein: “Insanity is doing things the same way over and over again and expecting different results.” This is the perennial human dilemma. We always want something new, but we don’t want to change how we get there. Fung’s real theme is how to create new value using strategy and innovation. Toss in leadership and the ability to sell, both of which he has in spades, and you have the essence of the modern economy.

In the early 1980s, when Fung was at chemical giant C-I-L,  he participated in a team that responded to government legislation to reduce sulphur emissions from the smokestacks of smelters. The group captured the chemical and turned it from a pollutant to a product that could be sold to industry at a profit. Using unit trains and terminals around the Great Lakes, they extended its economic distance (the limit at which it could be sold at a profit) from 300 to 2,000 kilometres. The areas around the smelters that had once been moonscapes were reclaimed.

“We showed that environmental control does not have to be a cost,” says Fung. “We captured a pollutant, turned it into a useful product, and used logistics to expand market reach. We got it into the global supply chain economically. It was a combination of technology, marketing, and logistics.” There is no innovation without the proper motivation, he adds. In this case, it came from new government regulations. “Sometimes it comes from desperation. Otherwise, you’d just sit on the couch and watch the hockey game.”

These days Fung is thinking about the Canadian forest industry, which uses some of the world’s best fibre to make newsprint, a low-value product. “The industry needs to restructure to become a global leader in producing high-value products,” he says. For example, Fung says the BlackBerry turns cheap raw materials into a product worth hundreds of dollars, and an iPod is assembled for a few dollars in Asia and then sold for $300 in North America. 

“Scandinavians treasure their wood fibre much more than we do,” says Fung. “They are leaders in innovation, while we are falling behind the curve and shutting down plants. Life is too easy here. We need executives who can create new value and not just focus on quarterly results. We need to copy the policies of the northern European countries. Tiny Finland is managing forestry companies in Brazil and China, while Canada chose to stay home.”

Still, Fung would not trade Canada’s position with anyone, ticking off a unique endowment of resources, educated workforce, and location between the U.S., Europe, and Asia. But competition is increasing; technology is both creator and destroyer of businesses, and emerging economies are rising rapidly. “We can’t go back to the good old days of cutting down trees and fishing a few weeks a year,” he says. “We need to rethink. Staying home is not an option. If our executives have global vision and we train our workforce to be global participants, we will gain control over our future.”

Fung points out that Hong Kong has no resources but manages 50,000 factories in China. Canadian geologists found and developed several oil fields in Kazakhstan and Libya, then sold them to China for several billion dollars. “This was based on knowledge alone,” he says. “We just need enough of our executives to jump on a plane.”

What about the doom and gloom associated with the recession? It’s just part of the business cycle, says Fung. If government has a clever strategy, fewer people will feel the pain. His key insight: “In a downturn, some systems will break down. Although they seem on the surface to work, the pieces are not connected.” We are driven to save old systems at all costs, including companies and even sectors. The free market is efficient but harsh. It is up to government to find a balance.

Fung’s heart is with those who adapt to changing times. During this recession, 15% of CME members have increased sales. “Those who excel can take a bigger market share,” he says. What about transportation, the Atlantic Gateway in particular? “It is a wonderful concept, but we lost two to three years just talking about it, and it wasn’t smart to exclude Quebec from the discussions. This allowed the Port of New York the time to deepen its channels.”  

On the West Coast, the private sector was allowed to take the lead in developing Prince Rupert into a world-class container port for the Pacific Gateway. “On the East Coast, the private sector played second fiddle to regional politics and was unable to take the lead in picking the hub based on what the market wants,” says Fung. “Lack of global vision was the major flaw. Some people can’t see that the container traffic through the Atlantic Gateway could have been 10 to 20 times bigger than it is today.”