By Jennifer LeClaire

Canada is already recognized worldwide for its many location advantages. The economy is strong. The industrial base is diverse. The technology infrastructure is robust. And the educational and multilingual labor resources are enviable.
But Canada is not resting on its success. The nation recently outlined a national economic plan it hopes will make Canada a true economic leader for decades to come. The plan — Advantage Canada — will enhance the nation’s already attractive business climate by reducing unnecessary regulation and red tape, building modern infrastructures, establishing the lowest tax rate on new business investment in the G7 (Canada, France, Germany, Italy, Japan, United Kingdom, United States), and creating the best-educated, most skilled and flexible work force in the world.
Canada has a strong foundation on which to build. It boasts one of the most technologically advanced economies in the world, with high-tech exports leading the way. “Made in Canada” is a competitive label, and the nation’s strong historic ties to Europe make for healthy chemical, machinery, transport equipment, computer electronics, and mining exports. Canada also has unique access to Asia-Pacific markets through its geographic location, its immigration links, and activities to reduce trade barriers. Canada is truly a global economy, and it’s drawing companies from around the world. Since 1996, foreign direct investment in Canada grew more than 128 percent to $415.6 billion at the end of 2005, according to Statistics Canada.

A Diverse Industrial Base
Beyond its natural resources, Canada has carved out industrial niches that are gaining momentum thanks to policies, business initiatives, and university support. Aerospace, agri-food, automotive, biotechnology, chemicals, information and communications technologies (ICT), medical devices, oil and gas, pharmaceuticals, and plastics are among the nation’s key sectors.
Canada’s tech industries are developing much faster than its traditional industries. Government sources say the nation’s ICT sector has grown three times as fast as the entire Canadian economy since 1997. Canada is home to 32,000 ICT firms and has given rise in recent years to global phenomenons such as Nortel Networks, Research In Motion (makers of the Blackberry smart phone), and Sierra Wireless. Each of Canada’s provinces is attracting its fair share of industrial interests.
“Businesses from around the world have selected Canada as their site location solution,” says Shawn Graham, Premier of New Brunswick. “Corporations such as UPS, IBM, and Xerox have established divisions in the province of New Brunswick, and home-grown corporations such as Irving Oil and McCain Foods continue to expand and develop their world-renowned enterprises here.” Graham says these companies benefit from New Brunswick’s skilled and loyal work force, and profit from the region’s high-tech infrastructure, competitive tax structure, and low cost of doing business.
Canada is also one of the top-five countries in biotechnology. Foreign biotech investors are partnering with universities in Canada to research and develop breakthrough life sciences products. Upstream Biosciences, for example, works closely with local university and hospital labs on cancer research. “We chose to locate our latest biotech company in Vancouver, British Columbia, because of the significant cost advantage, access to world-leading biotechnology research, and attractive government technology programs,” says Dexster Smith, co-founder and president of Upstream Biosciences.

The Cost Advantages
Canada has clear business cost advantages over the United States, leading many companies to expand there. “We’ve had strong economic growth last year, and we expect the economy to continue to be strong in 2007,” says Greg Selinger, Manitoba Minister of Finance. “Our economy is strong and despite the high Canadian dollar, impressive gains have been made in the manufacturing sector. Construction work, total exports, and capital investment are also leading the country.”
Western Canadian cities have a business cost advantage over their Midwest U.S. counterparts, according to the KPMG’s 2006 Competitive Alternatives study. Edmonton, Winnipeg, and Calgary have business costs that are 5 to 7 percent lower than the U.S. average. The cost advantage for the Canadian cities holds across all industry sectors, and is strongest in the research and development (R&D) sector, where business costs range from 8 to 20 percent lower than the U.S. average.
“Even with the rising value of the Canadian dollar, cities in Alberta, Saskatchewan, and Manitoba continue to have a significant cost advantage relative to the U.S. average,” says Mark MacDonald, a director in KPMG’s advisory practice. “On a regional basis, all four western Canadian cities (Edmonton, Winnipeg, Calgary, and Vancouver) have lower business costs than any of the 17 Midwest U.S. cities included in the study.”
Vancouver has the lowest business costs among West Coast U.S. and Canadian cities, KPMG reports. Business costs in Vancouver are also among the lowest among major cities in the United States and Canada, ranking fifth after Montreal, Toronto, Atlanta, and Tampa. Among larger West Coast cities, Vancouver’s cost index is 96.9, representing a 3.1 percent after-tax cost advantage relative to the U.S. benchmark of 100. Costs of software operations are 4 percent to 6 percent lower than the U.S. average, and up to 15 percent lower than higher-cost U.S. jurisdictions such as San Jose.
“The strong cost performance for Vancouver and other Canadian cities results from a combination of many factors, including competitive wage and salary levels, lower costs of employee benefits, low energy costs, and a competitive corporate tax environment,” MacDonald says.
KPMG Partner Carl Deslongchamps explains why Montreal has the lowest business costs among major U.S. and Canadian cities, according to the study: “Montreal’s cost advantage over U.S. locations is the combined result of lower labor costs — including benefits — lower electricity costs, and competitive corporate income tax rates.”

Myriad Incentives
National taxes and incentives structures are two additional factors that are contributing to Canada’s competitiveness. Canada guarantees investors the overall lowest tax rate among developed countries and the most preferable R&D tax credit among G7 countries. In fact, Canada boasts the lowest payroll taxes among the G7 and, by 2010, the government expects Canadian-based firms to average a corporate tax advantage of more than 4.5 percent over U.S.-based firms.
There is a myriad of investment incentives in Canada. The Scientific Research and Experimental Development Program lets businesses apply for tax credits on wages, materials, and equipment. The Industrial Research Assistance Program offers small- and medium-sized foreign subsidiaries on-site aid from technology advisors. Technology Partnerships Canada offers funding for high-risk R&D investments that are deemed innovative and have the potential to benefit Canadians. The Natural Sciences and Engineering Research Council (NSERC) of Canada works with companies to encourage R&D in collaboration with universities.
In addition, funding programs are designed to attract and grow Canadian-based companies. For example, the Business Development Bank of Canada funds companies with a basis in technology and a substantial, market-oriented business plan. And Precarn — an independent, not-for-profit company — supports the pre-commercial development of leading-edge technologies. It funds Canadian projects involving the participation of at least two companies and one university, and works with funding programs in other companies to support R&D in the field of intelligent systems. Moreover, each province also offers its own array of incentives beyond the national programs.
Venture capitalists (VC) are also making heavy investments in Canada. VCs invested $1.829 billion in 591 firms across Canada in 2005, according to Macdonald & Associates. Ontario accounted for 41 percent of VC investment in Canada, followed by Quebec at 39 percent. What’s more, the Ontario government has committed close to $1.4 billion over four years to support research and commercialization at its universities, colleges, hospitals, and research institutes.
“We need to ensure that Ontario can compete in the marketplace of ideas,” says Ontario’s Premier and Minister of Research and Innovation Dalton McGuinty. “By building world-class research facilities in Ontario, we can attract and retain the best and brightest people and provide jobs and prosperity for Ontarians well into the future.”

Enjoying Cultural Diversity
Most of the world’s ethnic groups are represented in Canada, a nation that encourages multicultural diversity. More than 100 languages are spoken here. In a recent quality-of-life ranking of 215 world cities by Mercer Human Resources Consulting, five Canadian cities ranked among the top 25 and had the lowest cost of living among the G7. Canada also leads the G7 in terms of being the safest place to live and conduct business with the most fairly administered judicial system.
Canada’s quality of life helps its businesses attract workers. Canada outperforms the United States in terms of its educational and assessment systems, language skills, economic literacy, and quality of engineers, according to the 2006 IMD World Competitiveness Yearbook, as well as in math, science, and literacy. Canada’s York University and the University of Western Ontario are rated among the best MBA schools in the world, based on the Financial Times’ 2006 rankings, and the country ranked third worldwide in terms of number of programs offered. Canada is increasingly finding itself on the world stage. In fact, it will occupy a premier position on this stage in 2010 when it hosts the Winter Olympics in British Columbia.
Colin Hansen, the province’s Minister of Economic Development says, “Businesses in British Columbia have several unparalleled advantages, including our strategic location as Canada’s Pacific Gateway. We are positioned at the intersection of the world’s two economic power blocks in Asia and North America. As the world turns its attention to British Columbia in the years leading up to the 2010 Winter Olympics, B.C. businesses have the chance to take advantage of over $4 billion in Olympics-related opportunities.”
Canada’s diversity and many strengths will make the nation a global standout for years to come.