The impending doom of the mothballed $733-million magnesium plant called Magnola, at Asbestos, does at least remind Quebecers yet again of the costly foolishness of government playing favourites in the private sector.

Noranda Inc. announced the Magnola plan in 1997. Eager to prop up a dwindling town, the Quebec government’s Société générale de financement (SGF) reached for its chequebook, snapping up a stake which finally rose to $253 million. Other government agencies, pathetically, pumped $20 million more into schemes to process magnesium locally.

Pfffffftt ! China began to produce magnesium cheaply - it’s used in automotive, aeronautic, and industrial components, mainly - and the world market imploded. Magnola, opened in 2000, closed in 2003. Now a company that bought the installation last year wants to demolish it.

SGF officials are abandoning their - our - stake in the project. They have no choice. Noranda lost money on the doomed venture. Fine - that’s a matter for the company’s executive, its board and its shareholders. But that a Quebec government agency lost a bundle is a matter for us all. Why did taxpayers have to invest in a smelter ?

The SGF exists to help develop Quebec industries by buying into selected companies until they get going.

It’s not working very well. The SGF’s net earnings for 2006 were just $75 million, a pittance on total assets of $2.53 billion. Over the five years to 2006, the net earnings total was a negative number - including the Magnola debacle - of $590 million.

Ah, say defenders, but we’re creating jobs !

Really ? Here’s a statement from the SGF’s annual report for the year 2001 :

"Whether Interquisa Canada, Kruger Wayagamack, Circuit Foil America, or Magnola, all of these projects required a considerable investment by the SGF. However, it will only be in a few years that these companies will reach their stride and begin to show profits."

Oh yes ? Circuit Foil, a profitable European company, opened a factory in Granby in 2001, but this facility has since been mothballed. The firm now processes imported foils. The SGF owns 10 per cent.

Wayagamack is a Trois Rivières paper mill. Just this week the company announced the shutdown of one of three paper machines there ; the whole industry is in a tailspin. The SGF owns 49 per cent of the plant.

Interquisa, part of a profitable European group, runs a Montreal chemical plant with 140 employees. The SGF owns 49 per cent.

Magnola you know about.

That’s a lot of investment for not many jobs.

There are plenty of other examples : the bankrupted Metaforia entertainment centre in downtown Montreal ; the bankrupted Lavalum aluminum recycling plant in Laval, the doomed Gaspesia paper mill.

The list goes on.

In 2003, running for office, Jean Charest and his Liberals assailed the culture of business handouts represented by the bloated SGF and other government agencies. They were right. Companies with good prospects have little trouble finding private-sector investors ; companies with poor prospects have no business getting government money.

A huge honeypot of government funds may tempt companies to make uneconomic - that is, bad - decisions. It will make life hard for firms trying to compete against the favoured few. And the fund’s decision-makers will surely be tempted, at least sometimes, to use "their" money to the political benefit of the government of the day. There’s just no excuse for this agency.

Once in office, Charest did choke off new funding to the SGF. But now it’s time to shut down this albatross, this symbol of government meddling.

If Quebec really wants to stimulate economic development it should liquidate the SGF’s assets in an orderly manner and use the money to reduce the government’s accumulated debt. This would reduce the impact of annual interest payments for every year to come, would level the playing field for all the companies in each industry, and would force the SGF’s pampered pets to deal with the realities of life in the private sector.

Shut down this ill-conceived agency now.