Canada is getting a lot of positive attention these days in business circles and popular media. And while a telegenic and media savvy Prime Minister is helpful in raising the country’s profile, he alone is insufficient reason for The Economist magazine to feature Canada on its cover in October 2016 and declare Canada an “example to the world.” And socio-political decisions, like Canada ambitiously and magnanimously accepting and resettling over 40,000 Syrian refugees in less than 24 months, have certainly bolstered worldwide opinion of Canadians, who were already considered a friendly bunch. It is in the realm of business and foreign direct investment, and Canada has also been receiving high praise, posting strong results in global rankings, and announcing exciting new investment in a wide variety of industries. Though not without challenges, Canada is working diligently at supporting, promoting, and attracting high-value, innovation-oriented economic sectors and achieving some remarkable success.
The Great White North is “White Hot”
There are so many ways to measure national progress and success, and it seems like new scores and rankings are released by some corporate or not-for-profit organization every few weeks. Some focus on GDP, unemployment, investment levels, stock market returns, and other purely economic and financial metrics. Others veer more toward the social realm, examining educational attainment, social progress, health outcomes, happiness, and even “goodness.” Environmental and sustainability rankings are becoming more common, rigorous and important.
Every ranking is a tool with a different methodology and focus; each a lens through which to see an economy, a country, a person. What’s remarkable is that Canada continues to rank in the top 15, 10, 5, or at the pinnacle of an increasing number of global rankings.
Here are some examples of how Canada ranks against its G7, G20, OECD, and global country competitors:
For foreign and domestic investors, it is compelling to consider that Canada is ranked at or near the top in virtually all the rankings that matter.
Canadian Business and Investment Trends
Canada has been on a slow-but-steady process to become more economically competitive in the last 25 years. This has come through fiscal discipline (federally, mostly), lowering and simplifying business taxes, relaxing (but not abandoning) regulatory regimes, pursuing new international trade agreements, investing in major pieces of transportation infrastructure, enabling the development and attraction of a highly-educated and skilled workforce, and selectively nurturing key industry clusters.
The cumulative results of these changes are often surprising, like the business rankings (above), or statistics on foreign direct investment (FDI). According to UNCTAD data, the 30-year trend in global FDI is for developing and emerging economies to capture a larger share of total worldwide investment and for advanced economies to receive a diminishing proportion. This is true for Canada as well as other so-called advanced economies. It is also true, however, that Canada continues to receive a proportion of global foreign investment that exceeds its share of the global economy. For the 10-year period ending in 2016, Canada had the world’s second highest level of inbound FDI as a share of GDP, and the highest level of FDI per capita. In other words, it “out performs” on FDI attraction.
Another proxy indicator of FDI success is the AT Kearney Foreign Direct Investment Confidence Index, which in the last three years has placed Canada in fourth, third, and most recently fifth place when compared to 24 other global economies. And despite some uncertainty regarding upcoming renegotiation (some would say, “renewal”) of NAFTA, when AT Kearney survey respondents registered their opinions on economic outlook over the next three years for each country, Canada had the highest ratio of respondents indicating they are “more optimistic” as compared to a pessimistic point of view.
Diverse Industries, Varied Geographies
Place branding in economic development is a tricky business. Once people have a mental image – or a mental map – in their heads about a place, it can be very difficult to dislodge that view, or enrich it with something more complete. This is doubly true for Canada, which has a habit of over-performing and under-promoting. As a result, it is not commonplace to think of Canada as a world leader in quantum computing, artificial intelligence, autonomous vehicle innovation fossil fuels and renewable energy, life sciences innovation, and more.
In fact, there are more than 20 key sectoral clusters in which Canada has a distinct strength or competitive advantage globally, and through which local and international investors can seek domestic success and global expansion.
Centers of excellence and industry clusters can be found all around the country, if you look for them. Based on the most recent data from fDi Markets, the three largest metropolitan areas in Canada – Toronto, Montreal, and Vancouver – are the destinations of one-third to half of all investment, projects, and new jobs originated through FDI. The obvious location targets for new investment are the metros with the greatest size, economic breadth, transportation connectivity, and name recognition, globally. However, they are far from the only Canadian location choices for new investment.
The Consider Canada City Alliance is a collaborative marketing and business promotion effort among Canada’s 12-largest city regions to provide expertise and investment support across the country. Together, these metros represent roughly two-thirds of the national economy, and these major cities all compete well for global investments and corporate mandates. And still there’s more opportunity elsewhere.
Over the last five years, more than 900 other cities, towns, and communities across Canada have received foreign investment, each one presenting a unique value proposition to that company. For example, Welland, Ontario (population 50,000) attracted GE Power Generation from the United States to build a $250 million manufacturing plant for gas turbine engines. Portage La Prairie, Manitoba (population 13,000) attracted Roquette from France to build a $400 million pea protein processing facility, the largest of its kind in the world. These are transformative investments for a small city or town, and many great opportunities like this exist for companies wishing to take advantage of economic, social, and infrastructure assets at lower costs while still easily getting their products to global markets.
Understanding the geography of business in Canada requires an open mind and some research. People don’t expect to hear, for example, that the Province of Ontario was the third-largest destination in North America for “fintech” projects over the last four years, trailing only New York and California. For an industry like Aerospace Vehicles & Defense, one might expect Montreal to demonstrate deep expertise – since it is the third-largest aviation cluster on the planet, after all. But it’s important to not overlook the smaller aerospace clusters of Halifax, Kitchener, Vancouver, Ottawa, and Winnipeg, each of which employ between 1,000 and 2,500 people in this advanced sector.
Canada is “Open for Business”
Canada is not without challenges. Trade policy creates both opportunity and doubt with the introduction of CETA with the E.U. and the renegotiation of NAFTA with the U.S. and Mexico. Rising housing and business costs in a few large markets create challenges but also opportunities for smaller cities and communities. There is an ongoing existential challenge to create laws and regulations that are uniquely Canadian (and sometimes European in their influences) but also competitive with the U.S. and Mexico. And, although world-leading rates of immigration create challenges for integration and economic empowerment, Canada still manages to lead the world in social cohesion.
So, what does it mean to say one is “open for business”? It is expressed in many ways. Canadian cities are ambitiously welcoming new investment; federal investment restrictions are being eased; investor protections are being enhanced; and immigration is being promoted as one spark in the economic engine. There is also more focus, funding, professionalism, and aspiration within the economic development function at all levels of government across the country. This is a welcome improvement, and some economic development groups in the country are now truly world class in their approach to business attraction and inbound project management.
As for economic incentives, this is one area where federalism is alive and well, with each province taking its own approach to this business attraction tool. Some provinces do not utilize incentives at all, whereas others are very entrepreneurial and creative, and others maintain a “war chest” of cash for catalytic projects in key sectors. The incentive processes are typically not easy, but they can be financially worthwhile.
New for 2017 will be a Federal Invest team in the Canada Hub to promote and facilitate FDI. This federal team will work in partnership with Global Affairs Canada (responsible for diplomatic and consular relations, among other things), the Canadian Trade Commissioner Service, the Department of Innovation, Science and Economic Development Canada, as well as with provincial and municipal investment attraction offices.
Canada has been “hitting above its weight” for years in terms of FDI attraction and business expansion. With the investment attraction functions at all levels of government, only now beginning to work in concert, combined with the overall positive vibe that Canada has globally, it’s going to be interesting to see what happens next.
Canadian Prime Minister Justin Trudeau
Microsoft Canada Excellence Centre opened in 2016, a $90M investment in talent development & new product innovation, adding 450 jobs to 300 existing personne