By Gregg Wassmansdorf, Senior Managing Director, Global Corporate Consulting group of Newmark Knight Frank
This article is one story about Canada’s current competitiveness, its recent investment successes, and its attractiveness for new investment and business growth. While certain key personalities and metros remain central and important to this narrative, it is a broad assortment of economic development institutions, regions, cities, and new public-private initiatives that are emerging as central to the next chapter in Canada’s economic success.
Global Competitiveness and FDI Attraction
In this magazine last year, I outlined a lengthy list of business and economic rankings that placed Canada in first position relative to other countries in the G7, G20, OECD, or globally for such measures as cost competitiveness, ease of doing business, soundness of the banking system, global reputation, talent, growth, and corporate taxes. Some of these rankings may have slipped in the last year (they can be volatile measures of economic and business health). But overall, there is a lot of positive news to report for business investment in Canada. This has involved many companies, in diverse industries, making investments across the country.
Beginning in the west coast city of Vancouver, it continues to explode with startups and large investments in software, technology, digital media, and green economy innovation. Well known Silicon Valley company, Slack, continues to grow with a recent $427M venture financing while maintaining nearly half of its global workforce in Vancouver. And global behemoth, Amazon, announced in April 2018 that it would expand its Vancouver Tech Hub by creating an additional 3,000 jobs in fields including eCommerce technology, cloud computing, and machine learning.
Making no small plans in the Prairie Provinces, even with a pull-back in oil and gas investments, the food processing sector has seen announcements and groundbreakings like a $360 million potato processing plant in Lethbridge, Alberta and a $500 million pea protein processing facility in Portage la Prairie, Manitoba by the French company, Roquette.
In Ontario, the largest provincial economic engine in the country, many notable projects have been made in the last year that were globally competitive in nature. Sanofi Pasteur announced a $500 million Bulk Biologics vaccine manufacturing facility to be constructed at its Canadian headquarters in Toronto. This represents one of the largest capital projects ever undertaken by the life science company.
Toyota, meanwhile, made good on its previous commitments to continue investing in its Ontario operations despite global competition for programs (and trade uncertainty) and announced a $1.4 billion upgrade to its Cambridge and Woodstock facilities that will establish Ontario as Toyota’s North American manufacturing hub for the RAV4, including hybrid versions. This came on the heels of Ford’s announcement of a $1.2 billion upgrade for its engine plant in Windsor and the creation of a new connectivity research and engineering center that will based in Ottawa, with satellite campuses in Waterloo and Oakville.
In Hamilton, Ontario, historical strengths in steel continue to receive new rounds of investment but other sectors as well are propelling this city’s transformation. Medical technology company, Stryker, has invested $100 million in a national head office. IBM and Hamilton Health Sciences have launched a world-class Healthcare Innovation Centre. And the Centre for Integrated Transportation and Mobility (CITM) continues to support start-ups and small-to-medium sized enterprises (SMEs) focused on the development of connected and autonomous, multi-modal and integrated mobility technology solutions or business models.
Compelling investments and innovations continue to churn out of the Waterloo region, northwest of Toronto, as well. This mid-sized region is home to the University of Waterloo (one of the world’s top mathematics and computer science educational institutions), several unique public/private innovation hubs and accelerators, plus the world’s largest Internet of Things (“IoT”) manufacturing spaces. Artificial intelligence, security tech, quantum sciences, information and communication technologies, and manufacturing technologies are intertwined in this creative hub.
In the internationally-renowned city of Montréal, more great things continue to happen. As the third-largest aerospace cluster in the world, and a major life science hub, other sectors continue to thrive and grow. Dallas- and Hollywood-based Reel FX will establish a new animation studio and create 400 jobs in Montreal. British-based Behavox, a pioneering artificial intelligence data analytics firm, announced its plans to create 200 jobs within a new research and development center in Montréal, deepening the city’s world-class capabilities in this field.
The smaller urban area of Québec City has had some very notable announcements this year as well, which reinforces the importance of looking beyond the obvious major metros. LeddarTech, which develops high performance, solid-state LiDAR sensing technology for automotive, drones, and collision avoidance attracted $130 million in investment from four major Tier-1 automotive partners. And another local firm, Coveo, which is an expert in internet search, analytics, and machine learning to deliver information and recommendations across digital platforms attracted a $100 million investment from a San Francisco-based investment firm.
Lastly, when you think of cyber security, does your mind immediately consider Halifax, Nova Scotia? Maybe it should. In 2018, two cyber software specialist companies decided that they would open new Canadian offices in Halifax. For Secure State Cyber from Stockholm, Sweden, it was their first international office. For BeyondTrust of Phoenix, Arizona, their maritime Canadian office became their tenth location globally and is planned to house 150 employees within five years. For companies like these, access to software development and defense sector knowledge at reasonable cost (with payroll tax incentives), and time zone access across North America and Europe as well, are compelling factors.
Beyond the hundreds of other corporate announcements that have transpired this year, there is also a level of ambition and boldness to certain economic development and business attraction initiatives that deserve recognition and interest from abroad.
Economic Development and Investment Promotion
Lots of change has been unfolding within Canada’s economic development environment, much of it focused on organizational renewal and program innovation for new investment attraction.
In March 2018, Canada’s Ministry of International Trade launched “Invest in Canada,” a new federal organization dedicated to attracting global investment and simplifying the process for global businesses to choose and locate their business operations in Canada. As I have written elsewhere and stated publicly, Canada continues to “hit above its weight” in the attraction of foreign direct investment but that advantage is constantly being challenged and eroded by a growing list of viable global country competitors. Recent new, free and progressive trade agreements with Europe and Asia are important parts of Canada’s story to attract global investment, but the role of marketing, promoting, attracting, and closing deals is essential and the Invest in Canada organization is an essential and positive step.
At the provincial level, several provinces are restructuring their economic development ministries to have more business-friendly programs and, critically, to have a simpler one-window or concierge approach to handling inquiries and projects. Economic incentives are also becoming more widely available.
Municipally, the economic development profession in Canada continues to improve in its professionalism, its depth of talent, its sophistication to work with international clients and complex projects, and its creative outreach (well done Calgary). And very importantly, several metro areas have, with encouragement from the consulting community, created new and improved regional economic development organizations with names like Toronto Global and Edmonton Global.
Without question, the biggest economic development policy news of the year comes from the Feds.
Innovation through Supercluster Initiatives
In February 2018, the Government of Canada announced one of its broadest and most ambitious policy objectives, which includes investing up to $950 million under the Innovation Superclusters Initiative. The investment, which will be matched equally by the private sector, is expected to create more than 50,000 jobs and expand Canada’s economy by $50 billion over the next 10 years.
Through the government’s Ministry of Innovation, Science and Economic Development, Canadian businesses were invited in 2017 to collaborate with other companies and post-secondary and research institutions to propose “bold and ambitious strategies that would transform regional economies and develop job-creating superclusters of innovation.” After reviewing many submissions, the federal government selected and dedicated funding toward five so-called superclusters across the country:
- The Ocean Supercluster (based in Atlantic Canada) will use innovation to improve competitiveness in Canada’s ocean-based industries, including fisheries and bio products, oil and gas, clean energy, defense, and ocean technologies;
- The SCALE. AI Supercluster (based in Québec) will expand Canada’s role as a leading global exporter with innovations across intelligent supply chains impacting retail, manufacturing, and transportation sectors and building upon Canada’s current strengths in artificial intelligence and robotics;
- The Advanced Manufacturing Supercluster (based in Ontario and headquartered in Hamilton) will deepen connections between Canada’s existing technology strengths and a wide variety of manufacturing-focused industries to improve competitiveness and productivity in automotive, food processing, steel and other materials, new devices, and other key sectors;
- The Protein Industries Supercluster (based in the Prairies) will broaden Canada’s role as one of the world’s largest food producers and, more specifically, accelerate its growth as a leading source for plant proteins by working with farmers, feed and food processors to grow business at home while also helping to feed the world; and
- The Digital Technology Supercluster (based in British Columbia) will use broadband telecom, big data, and digital technology innovations to unlock new potential in important sectors like healthcare, natural resources, and manufacturing.
Several key points are worth noting about the superclusters initiative.
First and foremost is that this is not just a government program. A foundational premise of the program is broad collaboration and networking within the public, private, educational, and not-for-profit sectors. Consequently, the five chosen superclusters represent more than 450 businesses, 60 post-secondary institutions, and 180 other participants in sectors covering nearly 80 percent of Canada’s economy. This could be huge.
Second, some anecdotal evidence already suggests that while these supercluster organizations get their operational structures in place and funding arrangements solidified, the initiatives are already reaping benefits. Companies that had never engaged with one another are talking. Educational institutions have new lines of communication and collaboration with private industry. International companies that have heard of the superclusters initiatives are inquiring and meeting with Canadian governments and corporations to discuss their potential involvement.
Third, in keeping with the Government of Canada’s current commitment to “Gender-Based Budgeting” and principles of inclusive growth, the supercluster initiatives are not only meant to propel innovation, economic expansion, and job creation but also improve skills development within the labor force, advance women’s roles in business (e.g. more women in tech) and deliver economic development to Indigenous communities. The Digital Technology Supercluster, for instance, explicitly outlines its objectives to create new pathways for Indigenous students, support skills development through organizations like the First Nations Technology Council, and offer entry level certification, advanced training, and work experience in six in-demand technology fields while supporting the growth of First Nations enterprise.
In 2018, Canada has taken some knocks. U.S. tax changes reduced Canada’s long-standing corporate tax rate advantage of its southern neighbor. Foreign investment has declined nationally (in the context of FDI declines globally). NAFTA trade renegotiations are ongoing and the end-result is not yet clear. These headwinds are challenges that Canadian governments and business appear to be facing with confidence and by seeking solutions through technology and policy innovation.
Despite challenges, many of Canada’s fundamentals are strong. Project wins through FDI are remarkable, and often transformative. Immigration to the country is growing and talent-focused. Many of Canada’s international rankings remain consistently among the “top 10.” The latest Economist Intelligence Unit global livability index now shows Calgary as the #1 city in North America and #4 worldwide, followed closely by Vancouver and Toronto. It is this livability, inclusive economic growth, and the potential of innovation-oriented superclusters that will be important storylines in Canada’s economy when recession comes to the global economy and in the expansionary phase to follow.
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