An analysis of the benefits of investing in Canada.
Investing In Canada – Factors that are attractive for direct investment in Canada. Canada is the second largest country in the world, occupying close to 10 million square kilometres of land bounded by the Atlantic, Pacific and Arctic oceans. Canada shares a 6,000 kilometre border and the five largest freshwater lakes in the world with the United States. Known as the Great Lakes, they provide a route to the Atlantic via the St.- Lawrence Seaway, permitting direct access to international markets. More international companies are investing in Canada. The stock of foreign direct investment (FDI) in Canada has increased steadily over the past five years to reach over $130 billion last year. Investor confidence is high. International companies are discovering what firms in the United States have known for decades: it pays to invest in Canada. There is a government commitment to attract foreign direct investment. Canada’s government provides a competitive, welcoming climate for international business. It is committed to fiscal responsibility, deficit reduction and job creation. The following are some essential points all of which prove Canada is a favorable choice: Domestic market; wage competitiveness; work force quality; International business skills; raw materials; energy costs; infrastructure; business services and legal environment. Domestic Market Canada’s per capita purchasing power is second only to that of the United States, among the G-7 countries, and the OECD expects Canada to lead the industrialized countries in near-term economic growth. Inflation is below two per cent and forecast to remain low. Cost of money is lower than it has been for decades. Exports are at record high, having increased by 14 per cent in 1993 over 1992. Under free trade, Canadian-based companies have increased their market share of the Canada-U.S. market. Further, the Canada-U.S. Free Trade Agreement (FTA), together with the North American Free Trade Agreement (NAFTA) which came into force on January 1, 1994, gives Canadian-based companies an unparalleled access to 365 million people, forming an economy larger than that of the European Community. The combined 1993 GDP value of the Canada-Mexico-U.S. market was in excess of $8.5 trillion. Competitive Wages and Benefit Rates: Many international corporations find the Canadian work force to be highly cost-effective. On average, wages in Canada’s business centers are lower than those in nearly all major business centers around the world. Hourly wages of Canadian production workers have risen only 5.4 percent since 1990. Canadian manufacturing wage rates showed the second slowest growth among G-7 countries in 1992, averaging 2.6 percent. In contrast, hourly increases in Britain and Germany have been 12.4 and 14.3 percent, respectively. Educated and Skilled Work Force The cost-effectiveness of the Canadian work force becomes especially apparent in the high level of skills and education of the workers. Canada leads the G-7 countries in advanced education, with about two-thirds of its 20 to 24-year-olds enrolled in post-secondary education. Canada’s 67 universities and colleges produce more than 25,000 graduates annually in engineering, the applied sciences, the physical sciences and mathematics, while its technical institutes provide 11,000 graduates annually in areas relating to electronics and telecommunications. Canadian operations enjoy low turnover and absenteeism rates, and the days lost to work stoppages have been cut by more than one-half in the past two years. Major international firms have also won many productivity improvements in their Canadian operations through work place initiatives in labor-management relations. International Business Skills Canada is a land of immigrants. Employers will find pools of experienced workers who also offer fluency in foreign languages, knowledge of international cultures and business practices, and networks of business contacts in the key Asian, European and American markets. Canada is an effective bridge between North America and Europe. Canadian business practices and laws are a blend of American and European cultures. Canada’s metric system of measurement means that Canadian manufacturers can readily meet requirements for European standards and measures. In addition, new government initiatives, such as the Skill Investment Program, are further enhancing Canada’s ability to train and retrain workers for tomorrow’s growth industries. Abundant Raw Materials Canada’s rich mineral reserves and natural resources, coupled with its cost-effective ability to extract and harvest, enable Canada to be a leader in exports of both raw and processed commodities. Canada is the world’s top producer of newsprint and zinc, as well as the second largest producer of nickel, pulp and potash. Canadian-based processors and manufacturers can enjoy reduced transportation costs by being close to these globally competitive sources of supply. Vast, low-cost Energy Supplies In addition to raw materials, Canada’s rich mineral deposits involve mineral fuels and river systems that have been tapped for massive energy reserves. These include huge deposits of oil and gas, coal and uranium, as well as virtually unlimited hydroelectric generating capacity. Canada is one of two G-7 countries that are self-sufficient in oil supplies. Canada has the lowest electricity cost of all the G-7 countries, and is the only G-7 member with enough natural gas to be a net exporter. The resulting benefits of Canada’s energy abundance to industry are widespread. For example, low-cost hydroelectric power enabled Canada to become a leading exporter of aluminum and aluminum products. Sophisticated and Efficient Infrastructure As a consequence of the geographical vastness of Canada, the communications and transportation infrastructure has become highly effective and advanced. Heavy investment in fiber optics and high speed transmission technology, together with a newly competitive long-distance market, will help maintain Canada’s competitive costs. The need to provide effective communications links from coast-to-coast led to Canada’s emergence as a major telecommunications equipment exporter, and an international leader in satellite communications. Collectively, Canada’s transportation systems (roads, railroads, air transport and port access) is the cornerstone of its industrial strength. World-Class Business Services Canada’s business service sector has expanded considerably over the past 20 years, and now provides highly specialized service for all international investor needs. Canadian banks rank among the largest in North America, with international offices in the U.S., Latin-America, Europe and Asia. Trust companies and other financial institutions provide additional financial services. International investors who prefer to deal with financial services firms based in their home country will find that many leading international banks, investment dealers and insurance companies have offices in Canada. For example, there are Canadian offices for global asset leaders of American, British, French, German, Japanese, Hong-Kong and Swiss banks. Stock exchanges in Toronto, and Vancouver provide many international firms with Canadian equity participation. – Factors that discourage direct investment in Canada. Canada is an excellent country for direct investment, although there are few factors that might discourage direct and foreign investment; The political instability that was created by the Quebec referendum, had discouraged current foreign investment from expanding, and put a halt in new investments. As long as the Quebec situation is not solved, uncertainty by foreign investors will continue. (2). – Factors that allow or make Canadian Industry to be competitive or not competitive; -Dynamic economies constantly re-invent themselves and grow through innovation. To grow and prosper, business needs an efficient marketplace an environment that encourages innovation and expansion, free of unnecessary barriers. -Increasing productivity, and creating jobs for Canadians. help the private sector create more and better-paying jobs. Spending smarter, targeting resources where the payoff is greatest, and reallocating funds to new priorities. -Increasing global trade and advances in technology are changing the world economy. Countries that ignore what is happening and take a “business-as-usual” attitude will fall behind. On the other hand, countries that take bold actions by adapting to new technologies and the realities of today’s economy will meet the challenges of tomorrow head on, seize new opportunities, and build a better country. -Build a positive entrepreneurial climate and help small businesses grow -Expand markets for jobs and growth through trade -Create an efficient and modern infrastructure -Increase global trade and business dealings, and continually upgrade Canadians’ skills and knowledge levels to ensure jobs and growth. All Canadians, individuals as well as groups in both business and government, need to work together to improve their chances for success -Helping small business grow. Small business creates jobs, almost 90 percent of the new jobs in the Canadian economy. The priority is to make sure that nothing stands in its way, by removing obstacles to growth. -Cutting paper burden: Entrepreneurs should spend more time growing their businesses and less time filling out government forms -Encouraging investment in small business: -Encourage greater cooperation between levels of government, and work with the provinces in streamlining the regulatory regime. -High standards to boost sales: Developing and adhering to common standards for products and services is important in a highly competitive, global economy. -Concentrate attention on those countries seeking to become members of the new World Trade Organization, and countries such as Chile who may join the North American Free Trade Agreement (NAFTA). -Increase the number of exporters and reduce the current account deficit and, as a result, create more jobs for Canadians. -Building global linkages. A more strategic approach to promoting Canada as an investment site within NAFTA. 3. (A). The two likeliest strategies to adopt: 1. Open a plant in Mexico to assemble the auto parts. Canadian suppliers must compete on the basis of lowest-cost, highest-quality, high value-added; components. The low value of the peso will encourage parts and vehicle sourcing from Mexico while discouraging exports to the Mexican vehicle market. Global competition will intensify for both parts companies and assemblers, particularly as emerging countries struggle to develop their economies, many using the automotive sector to spur economic growth. It is expected that trade barriers will be reduced further, thus opening new market opportunities for Canadian firms. The risk of adopting this strategy is the firm will have to deal with a completely different sets of rules and regulation of the Mexican government, that might not suit the firms goals and policies. 2. Outsource the assembling of auto parts to Mexican plants. In the longer term, the Mexican market is expected to increase assembly capacity over 50 percent, to about 2 million units per year, and parts sales are expected to grow to $20 billion. The phasing out of the protectionist Mexican Auto Decree will create significant trade, sourcing and investment opportunities for both assemblers and parts manufacturers. The risks of adopting this strategy are the possibilities of jeopardizing quality of the firms auto parts, and the difficulty of implementing quality and control check on their products. 3. (B). The services that Canadian Government can provide to assess Canadian businesses: Department of Foreign Affairs and International Trade (DFAIT) DFAIT promotes and protects the interests of Canada and the common values of Canadians throughout the world. Within its International Trade mandate, DFAIT strives to maintain and enhance Canada’s economic health and competitiveness by actively pursuing and promoting Canada’s economic and commercial interests with its global partners. Through International Trade Centres (ITCs) in Canada and its missions abroad, DFAIT implements a wide range of initiatives designed to attract productive foreign investment to Canada and promotes Canadian firms as strong investment, commercial and technology partners. DFAIT programs and initiatives ensure that Canadians have full access to investment opportunities in Canada and abroad. DFAIT meets its objectives through working closely with federal departments such as Industry Canada, as well as with the provinces and major business and industry associations. Services provided, in Canada, by DFAIT include basic export and trade-related advice, investment and technology development counselling; including publications, market studies and information on government assistance programs. To support its activities abroad, DFAIT has five geographic branches, each focused on a specific area of the world: Africa and the Middle East, Asia-Pacific, Europe, Latin America and the Caribbean, and the United States. DFAIT also has a network of trade commissioners and commercial officers, in Canada and abroad, to assist Canadian firms and promote trade, investment, technology and strategic alliances. Canada’s International Business Strategy Canada’s International Business Strategy is a blueprint which lays out how government and industry can best work together to generate new international opportunities for Canadian business. CIBS is central to the federal government’s commitment to a Team Canada; partnership with Canadian industry and the provinces. Industry Canada (IC) Industry Canada is responsible for Canadian industry and science, tourism, telecommunications, business and consumer framework policy. IC also administers the Investment Canada Act which includes investment review and notification procedures. IC is organised on an industry sector basis, and works directly with Canadian companies and business associations to promote industrial, scientific and technological development, including promoting and facilitating foreign direct investment in those sectors in Canada. It manages a portfolio of programs and provides services in the areas of business intelligence and information, technology and industrial development, and trade and market development. It also maintains a network of regional offices across Canada and works closely with the provinces. 3. ( c). The specialists to use in import/export: Export Development Corporation (EDC) EDC is a customer-driven, financial services corporation dedicated to helping Canadian business succeed in the global marketplace. EDC facilitates export trade and foreign investment through the provision of risk management services, including insurance (export credit, foreign investment), financing and guarantees to Canadian companies and their customers. Canadian business center Where you meet and how you present yourself could make the difference between closing a deal or closing a door. That’s what the Canadian Business Center is all about. The Canadian Business Center can play a key role in your positioning, marketing, and sales strategies. You can host special events including sales presentations, seminars, receptions, meetings an exhibits in the deluxe meeting facilities. The firm can have a single contact point for their Mexican clients and partners, where they can. reach you any time you are in Mexico. Up to 30 fully equipped individual booth spaces available Ideal for a variety of events including mini-trade shows, product demonstrations, special exhibits and receptions. The center offers Professional Services. The Canadian Business Center can give you immediate access to the resources of the Canadian Embassy and the extended network of clerical resources to assist you with all your business correspondence; Translation and Interpretation Services to facilitate quick and effective communication with your Mexican partners and clients Centrally located in downtown Mexico City, the Canadian Business Center service offered through the Department of Foreign Affairs and International Trade’s Access North America program. It is part of an overall strategy to help Canadian companies take advantage of emerging business opportunities in Mexico. Experts In International Law and Trade For the firm to survive and be competitive in the global market, it must be aware of the international laws and regulations of the foreign countries they are dealing with. To facilitate this task, its extremely important to consult experts in international laws and global trade.