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Think Dynamic. Competitive. Think. Bottom Line. Think. Think. Canada!. Canada. Overall government budget in surplus. Excellent economic fundamentals. Low inflation and low interest rates. Easy access to markets. Geography and NAFTA provide easy access to the world's most prosperous

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Canada

Think Dynamic

Competitive

Think

Bottom Line

Think

Think

Canada!

Canada


Canada

Overall government budget in surplus.

Excellent economic fundamentals

Low inflation and low interest rates.

Easy access to markets

Geography and NAFTA provide easy

access to the world's most prosperous

market.

A cost-competitive business

environment

An excellent place to live

Large stock of skilled workers; low

start-up costs; competitive tax system

(particularly for R&D); strong technological

environment; positive business climate.

Superb overall quality of life.

2

Canada: a Dynamic, Competitive Economy

— Open for Global Business

Canada's economic fundamentals and

relative cost advantages provide a

first-rate business environment.

Report Card

Canada provides:

Canada


Canada

Excellent economic fundamentals

Excellent economic fundamentals

Canada

3

3

Canada Provides:

Excellent economic fundamentals

Easy access to markets

A cost-competitive business environment

An excellent place to live and work


Canada

The Institute for Management Development ranked Canada as the best fiscally managed country in the G-7 in 2000

Surplus

% of GDP

+

0.0

Deficit

-3.0

-6.0

2000-01

2001-02

1992-93

1993-94

1995-96

1997-98

1994-95

1996-97

1998-99

1999-2000

Source: Finance Canada

4

Canada’s strong fiscal situation

  • Canada's fiscal situation has turned around dramatically:

    • In 1994, Canada’s deficit (as a percentage of GDP) was 6.7%, the third highest in the G-7.

    • However, by 1997, Canada became the first G-7 country to post a surplus in the 1990s, and is the only G-7 nation expected by the OECD to post two straight financial surpluses from 2002 to 2003.

    • Federal government spending (as a % of GDP) reached a 50-year low in the 2000-01 fiscal year, the key source of the Canadian fiscal turnaround.

Federal Budgetary Balance

Public Accounts Basis

C

Federal Program Spending

Public Accounts Basis

% of GDP

Projected

10

Total Government Surplus*

16

8

6

4

2

14

% of GDP

0

-2

-4

12

-6

-8

1994

1995

1996

1997

1998

1999

2000

2001

2002**

2003**

10

* Includes federal, provincial/state and local ** Projections

Source: OECD Economic Outlook, June 2002

2003-04

2002-03

1995-96

1993-94

1997-98

1998-89

2000-01

2001-02

1994-95

1999-00

1996-97

Canada


Canada

Canada

5

A Strong Fiscal Surplus

Total G-7 Government Fiscal Balance (% of GDP)

2001-2003

4

2

  • Canada had the highest general government surplus as a percentage of GDP in the G-7 in 2001. The OECD expects Canada to be the only G-7 country with fiscal surpluses in 2002 and 2003.

0

-2

2003

-4

2002

2001

-6

-8

-10

Italy

U.K.

U.S.

Japan

France

Canada

Germany

Source: OECD Economic Outlook, June 2002


Canada

Canada

6

Low Inflation and Low Interest Rates

Inflation

4

  • Canada’s targeted inflation rate is locked between 1% to 3%.

    • Over the past five years, Canadian inflation averaged 1.9%

3

2

Year-Over-Year % Change

1

0

1994

1997

1995

1999

2000

2001

1996

1998

Sources: Statistics Canada and the Federal Reserve Bank of St. Louis

%

Long-Term Interest Rates

10

  • Canada's excellent fiscal situation and low inflation are reflected in low domestic interest rates.

8

5

3

1994

1995

1996

1997

1998

1999

2000

2001

2002

Last data points plotted: Canada – August 2, 2002; U.S. – August 12, 2002

Source: Bank of Canada, Government long-term bond.

U.S. Treasury, Constant Maturity long-term bond.


Canada

Canada

7

A Growing Domestic Economy

Real GDP Growth Projections 2002-2003 (%)

4

3.6

3.4

3.0

2.9

2.8

2.7

2.5

2.3

2.0

2

  • Canada’s GDP grew at an annual rate of 6.0% in the first quarter, similar to U.S. growth but much stronger than growth in other G-7 countries.

    • The OECD and IMF both forecast Canada to lead the G-7 in economic growth in 2002 and 2003.

1.4

1.4

0.9

0.8

0

2003

2002

Canada

France

Italy

-1.0

Germany

U.S.

U.K.

Japan

Source: International Monetary Fund, May 2002

4.0

4

3.5

3.2

3.0

2.8

2.8

2.5

2.5

1.9

2

1.5

1.4

0.7

0.3

0

2003

2002

-0.7

Italy

Canada

France

U.S.

Germany

U.K.

Japan

Source: OECD Economic Outlook, June 2002


Canada

Easy access to markets

Canada

8

Canada Provides:

Excellent economic fundamentals

Excellent economic fundamentals

Easy access to markets

A cost-competitive business environment

An excellent place to live


Canada

Canada

9

Streamlined Border Flows

  • Since the enactment of the North American Free Trade Agreement (NAFTA) in 1994, Canada provides long-term assured access to the North American market — nearly 400 million people with a combined GDP of over $9.4 trillion ($U.S.).

  • In addition to eliminating tariffs, NAFTA provides procedures for:

    • border facilitation;

    • movement of personnel;

    • investment and intellectual property protection; and

    • product certification.

  • The North American market is serviced through a well integrated transportation system which is among world’s best.

    • - Automated permit ports, transponder identification systems and joint processing centres are being tested and deployed.

Annual Transborder Crossings -

Total Number of Trucks and Canada-US Air Passengers

Entering Canada

20

Air

15

10

5

Truck

0

80

82

84

86

88

90

92

94

96

98

2000

Source: Transport Canada and Statistics Canada, 2001


Canada

Canada

10

Smarter Borders

  • Efficient border crossing was restored within a week of the tragic events of Sept 11th

    • today, border wait times average less than 10 minutes

  • In December, Canada and the USA signed a declaration to build a Smart Border for the 21st Century to accommodate the growth in trade and commerce

    • initiatives focus on improving existing border processes through the use of new technologies and infrastructure

  • The December Budget also allocated $1.6 billion over the next five years for border initiatives


Canada

300 mi

St. John's

Edmonton

Charlottetown

600 mi

Québec

Fredericton

Regina

Calgary

Montréal

Victoria

Vancouver

Halifax

Ottawa

Winnipeg

Seattle

Toronto

Boston

Windsor

Milwaukee

New York

Chicago

Detroit

Philadelphia

Cleveland

Baltimore

Pittsburgh

St. Louis

Washington

San Francisco

Denver

Atlanta

Los Angeles

Houston

Miami

Mexico City

Canada

11

…and Short Distances to Markets

  • Almost half of the U.S. population lives within a 10 hour drive of Toronto, and over 60 percent within a two hour flight.

  • Business travel between Canada and the U.S. has increased considerably since the inception of the “Open Skies*” Agreement (February, 1995)

  • Direct air service between major cities in Canada and the U.S. has nearly doubled in 6 years.

  • *Under “Open Skies” Canadian Air Carriers gained unlimited rights to establish routes from any point in Canada to any point in the United States. Similarly, U.S. carriers also gained unlimited access to the Canadian market (with a phase in period for up to three years)


Canada

Canada

12

Canada Is by Far the Largest U.S. Trading Partner

  • Canada and the U.S. have the world’s largest trade partnership, with two-way trade amounting to $700 billion in 2000. In fact, this averages to more than $1.3 million dollars a minute in trade.

  • Between 1995 and 2000, trade between Canada and the U.S. grew at a compound average annual rate of 10.4%.

  • The U.S. trades more with Canada than with any other country - the U.S. trades more with Canada than with all of the countries of the E.U. combined!

Canada - U.S. Trade

$ Billions

800

$700 Billion

700

600

500

400

300

200

100

0

1995

1996

1997

1998

1999

2000

Source: Statistics Canada

Distribution of U.S. Trade* — 2000

Mexico

12.4%

Japan

Canada

10.6%

20.3%

China

5.8%

Germany

4.4%

All Others

46.5%

* Merchandise trade

Source: World Trade Atlas


Canada

Canada

13

Canada Welcomes Foreign Investment

Distribution of Foreign Direct Investment

  • Foreign direct investment in Canada has more than doubled since 1990.

  • Increasingly more investment goes to knowledge-based industries in high-tech manufacturing and services sectors.

  • The U.S. is the dominant source of foreign capital.

    • - In 2001, the U.S. share of foreign direct investment (FDI) in Canada was 67%.

by Industry

2001

1990

Machinery & Transportation

$131 Billion

$321 Billion

Source: Statistics Canada

2001

Distribution of Foreign Direct Investment

by Region/Country

Source: Statistics Canada


Canada

$340 Billion

Canada

14

The United States is Canada’s Largest Source of FDI

Canada - U.S. Direct Investment Stock

  • Canada and the U.S. have one of the world’s largest direct investment partnerships, with the stock of investment between the two countries totaling $340 billion in 2000.

  • Between 1990 and 2000, U.S. foreign direct investment in Canada grew at an average annual rate of 6.9%.

  • Over this period, Canadian direct investment abroad grew at an average annual rate of 8.2%.

$ Billions

350

300

250

200

150

100

50

0

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

Source: Statistics Canada

Distribution of Canadian Total Direct Investment Stock

7.5%

U.K.

France

5.5%

United States

Netherlands

3.5%

57.4%

3.3%

Barbados

2.4%

Japan

20.4%

All Others

Source: Statistics Canada


Canada

A cost-competitive business environment

Canada

15

Canada Provides:

Excellent economic fundamentals

Excellent economic fundamentals

Easy access to markets

A cost-competitive business environment

An excellent place to live and work


Canada

Canada

16

Superior Quality Workforce

  • The overall skill level of Canada's workforce ranks high among competing countries.

  • According to the World Competitiveness Yearbook, Canada has the highest percentage of individuals achieving at least college or university education.

* Percentage of the population that has attained at least tertiary education among 49 countries considered in the World Competitiveness Yearbook, 2002.


Canada

Canada

17

An Excellent Post Secondary System

RANKING OF ELECTRICAL ENGINEERING

UNIVERSITY PROGRAMS

Institution Score U.S. Cdn.

Rank Rank

  • 1998 U.S. Gourman report scored 10 Canadian electrical engineering programs in the top 22, and 18 in the top 40

  • Canada’s 67 universities and colleges produce more than 25,000 graduates per year in math, engineering and pure and applied sciences

M.I.T.4.92 1

Stanford4.91 2

Berkeley4.88 3

Illinois4.86 4

Toronto4.86 1

UCLA4.82 5

McGill4.82 2

Cornell4.81 6

U.B.C.4.81 3

McMaster4.80 4

Purdue4.79 7

Southern California4.77 8

Princeton4.76 9

Michigan4.7510

Carnegie Mellon4.7411

Polytechnic-Brooklyn4.7312

Queen’s4.72 5

Alberta4.72 6

Calgary4.71 7

Polytechnique, Mtl.4.70 8

Saskatchewan4.70 9

Manitoba4.70 10


Canada

* Standing among 75 countries. Index based on the availability of Management education in first-class business schools.

Source: Global Competitiveness Report, 2001-2002

Canada

18

Skilled Management

Management Education* World Rank

1st

2nd

  • Canada ranks third among the G-7 and fourth overall in a 75-country study of locally available Management education in first-class business schools.

    • - Eight Canadian business schools are ranked among the top 100 Management Schools in the world according to a January 2001 survey by the Financial Times (UK).

4th

6th

21st

31st

49th

Index

U.K

U.S.

Italy

Japan

France

Canada

Germany


Canada

Full-time, full-year wages* ($U.S. PPP**)

Life Science Professionals

Physical Science Professionals

Computer Programmers***

Electrical and Electronic Engineers

Chief Executives

$42,097

$46,348

$36,467

$48,945

$59,608

$49,469

$52,423

$54,960

$62,309

$101,240

Canada

19

Low Labour Costs

U.S.=100

  • According to the U.S. Bureau of Labor Statistics, labour costs in Canadian manufacturing (wage and non-wage) are the lowest in the G-7.

  • Occupational wages are also lower in Canada for knowledge workers.

* Figures are for 1999. Source: U.S. Bureau of Labor Statistics

Occupational Wages — Knowledge Workers, 1999

* Canadian data have been converted to full-year assuming a 52-week work year.

** Purchasing power parity for 1999

*** date for computer programmers based on average for 1997, 1998, 1999

Source: IC calculations based on Statistics Canada Labour Force Survey and U.S. Bureau of Labour Statistics Occupational Employment and Wage Estimates


Canada

3rd

Index

8th

20th

45th

50th

59th

72nd

U.S.

Italy

U.K.

Japan

France

Canada

Germany

Canada

20

Plenty of Natural Resources

Natural Resource Endowments —

World Rank*

  • Canada is extremely well endowed with natural resources.

  • Canada ranks 3rd in the world in natural resource endowments, well ahead of other G-7 countries.

* Measured in terms of thousands U.S.$ per capita. Standing among 92 countries.

Source: World Bank, 1997

  • Canada is the only G-7 country with a per capita trade surplus in non-energy raw materials.

* Includes: crude fertilizers and crude minerals; metalliferous ores and metal scrap; iron and steel; and non-ferrous metals.

Source: World Competitiveness Yearbook, 2002.


Canada

Canada

21

A Tax Advantage for Firms to Expand in Canada

  • Canadian locations compare well internationally in terms of statutory corporate income tax rates.

    • The federal government and some provinces have announced sharp cuts in corporate taxes, to take effect over a five-year period.

    • The Economic Statement and Budget Update accelerated the pace of this tax relief.

  • By 2005, firms in Canada will have a 5.0% corporate income tax rate advantage over U.S. firms (including capital tax).

Corporate Income Tax Rates

including capital tax equivalents

46.6%

44.9%

41.5%

40.0%

38.6%

35.6%

34.6%

2002

2005

2003

2004

2001

2000

Source: Finance Canada, December 2001


Canada

Canada

22

Low Employee Benefits

Employee Benefits* as a % of wages

  • Among the G-7, Canada has the lowest overall labour costs, including benefits.

    • Lower medical insurance premiums are an important reason for this.

G-7 Comparison,

80

60

40

20

0

Italy

Japan

U.K

U.S.A

Canada

Germany

France

Other Benefits

Statutory

  • Average for 12 operations

  • Source: KPMG Management Consulting, 2002


Canada

0.6

Hospital, surgical, medical and

major medical insurance

8.0

premiums*

Short term disability, sickness

0.7

or accident insurance and long

0.7

term disability or wage

continuation

0.7

Dental insurance premiums

0.5

0.1

Other (vision care, physical

and mental fitness, etc.)

0.4

Canada

23

Quality Health Care at Low Cost

Employer-Sponsored Health Benefits

Canada and the U.S.

  • Canada's health care system is among the best and the cheapest in the industrialized countries:

    • Employer-paid health benefits as a percentage of workers' gross pay in Canada are about 22 percent of that in the U.S.

    • (2.1% compared with 9.6%).

2.1

Total

9.6

% of Gross Annual Payroll

* U.S. value includes payments for retired employees

Source: Employee Benefits, 1995, prepared by the Research Centre, Economic Policy Division , The U.S. Chamber of Commerce and KMPG, Employee Benefits Cost Survey, 1996. Adapted from KPMG report on Corporate Taxation and Employee Benefit Cost Guide for Large Service Firms, prepared for the ICT Branch, Industry Canada, March 2000


Canada

Canada

24

Low R&D Costs

Relative Competitiveness of

R&D Tax System

  • Canada offers the most favorable tax treatment for R&D among the G-7:

    • Canada’s combined federal and provincial tax credits reduce the after-tax cost of $100 of R&D expenditures to as low as $44.

    • In Canada, eligible costs include: capital equipment, overhead, process R&D, salaries, and materials.

  • These tax-based incentives permit firms to significantly reduce R&D costs through direct investment or sub-contracting in Canada.

0.70

Canada

0.88

U.S.

0.89

Australia

0.91

France

0.92

Korea

0.97

Mexico

1.00

U.-K.

1.01

Japan

1.02

Sweden

1.03

Italy

1.05

Germany

The B-index represents a ratio of the after-tax cost of a $1 expenditure on R&D divided by 1 less the corporate tax rate. A lower B-index indicates a more competitive R&D tax system Source: Conference Board of Canada, November 1999.


Canada

Canada

25

Low Energy Costs and Rates

Average Electricity Costs

  • Canada has abundant oil, gas, coal and hydro-electric resources.

  • Electricity costs for industrial users are significantly lower in Canada.

G-7 Comparison

Canada

France

U.K.

Germany

U.S.

Italy

Japan

0

50

100

150

200

250

300

350

400

$US (12 operations)

Average Electricity Rates

G-7 Comparison

Canada

France

U.K.

Germany

U.S.

Italy

Japan

0

2

4

6

8

10

12

14

US cents per kWh (12 operations)

Source: KPMG Management Consulting, 2002


Canada

Canada

26

Low Costs for Construction, Land, Office Lease

Construction Costs

G-7 Comparison,

Index: U.S. = 100

Italy

Canada

  • Canadian office lease costs are highly attractive. Lease costs include office space plus operating, utility, tax and insurance costs.

France

U.S.

U.K.

Germany

Japan

0

50

100

150

200

250

300

350

G-7 Comparison,

Land Costs

Index: U.S. = 100

France

U.S.

Canada

Italy

U.K.

Germany

+1828

Japan

0

100

200

300

400

500

G-7 Comparison,

Office Lease Costs

Index: U.S. = 100

Italy

France

U.K.

Germany

Canada

U.S.

Japan

0

50

100

150

200

Source: KPMG Management Consulting, 2002


Canada

Canada

27

First-Class Technological Infrastructure

Technological Infrastructure*

World Rank

1st

  • Canada's technological infrastructure is second only to the U.S. among the G-7 — we rank above or very close to the U.S. in terms of:

    • internet users and internet hosts

    • computers per capita

  • Building a universal, competitive, leading edge "Information Highway" is a government priority.

5th

12th

17th

22nd

25th

Index

32nd

Germany

U.K.

Canada

Japan

U.S.

Italy

France

* Standing among 49 countries. Index based on 20 characteristics including investment in telecommunications, computers in use, computer power, internet connections, number of telephone lines, cost of telephone calls and use of robotics.

Source: World Competitiveness Yearbook, 2002


Canada

Canada

28

First in Internet and Wireless Affordability

Internet Access Charges* – 2000

U.S. $

93.10

59.83

56.16

49.22

Based on PPPs Peak Rate 40 hrs.

Online/Month

41.72

35.83

35.40

  • Canada ranks first among the G-7 in terms of wireless communications costs and second in terms of internet access charges.

U.K.

U.S.

Canada

Italy

Germany

France

Japan

* PSTN fixed charges include monthly rental fee and additional monthly charges related to discount plans, if applicable. Includes 40 one-hour calls. In France, ISP and PSTN usage charges are bundled and included under the ISP.

Source: OECD, http://www.oecd.org/dsti/sti/it/com/

Wireless Communication Costs

Price per minute, 1999 in U.S. $ PPP

0.36

0.36

0.32

0.31

0.29

0.18

0.09

Toronto

Rome

Tokyo

London

Paris

Berlin

Boston

Source: Yankee Group, Wireless/Mobile Communications Global Report, Volume 3, No. 16, May 1999


Canada

Canada

29

First in Telephone Affordability

Annual Business Telephone Charges U.S. $ PPP

745

Canada

U.K.

1067

1076

France

1177

Germany

U.S.

1215

1443

Italy

  • Business telephone charges are lower in Canada than in any other G-7 country.

1566

Japan

Source: OECD Communications Outlook 2001

Annual Residential Telephone Charges U.S. $ PPP

286

U.K.

349

Canada

355

France

360

Germany

433

Japan

440

Italy

466

U.S.

Source: OECD Communications Outlook 2001


Canada

Canada

30

Sound Financial Institutions

Average Bank Financial-Strength Rating

E

E+

D

D+

C

C+

B

Canada

U.S.

  • According to Moody’s Financial Strength ratings, Canadian Banks rank 1st among the G-7 in terms of their intrinsic credit worthiness.

U.K.

Germany

Italy

France

Japan

B= strong intrinsic financial strength C= good D= adequate E= very weak

Source: The Economist, March 2000


Canada

Canada

31

Positive Business Climate

  • Canada understands the importance of its business community and has created an environment to encourage its success.

Source: The Economist (EIU), August 24th, 2001


Canada

Canada

32

Solid Microeconomic Policies

Economic Health*

  • According to The Economist, Canada ranks 2nd among 21 countries in a Lehman Brothers study pertaining to the effectiveness of microeconomic or structural policies.

  • These rankings are based on three micro-policy categories:

    • policies that increase an economy’s long-term potential growth rate. For example, spending on education and R&D.

    • policies that affect labour market performance or reduce the lowest rate of unemployment at which inflation is stable (NAIRU).

    • policies that increase product market competition.

Index of structural policies, 0=worst, 10=best

Source: The Economist, March 17th, 2001

*Based on a study of 21 countries.


Canada

Canada

33

Less Paperwork for New Businesses

Total Number of Business Start-up Procedures*

  • Canada makes it easier to set up a new business, with less paperwork than any other country.

  • Canada is the most efficient place to pull together worldwide research or production teams.

Source: The World Bank and Harvard University,

taken from The Globe and Mail, November 14, 2000

*Procedures divided into five major categories:

Safety & Health, Environment, Taxes, Labour,

and Screening.


Canada

Canada

34

Forward-Looking Framework Policies

  • The economic policies of the government of Canada are focused on making Canada a world leader in the global knowledge-based economy of the 21st century. Commitments include:

    • Making Canada the most connected Government to its citizens by 2004.

    • Making high-speed broadband access available to Canadians in all communities by 2005.

    • Becoming one of the top five countries for research and development by 2010.

    • Shaping a "National System of Innovation“; and

    • Providing marketplace frameworks/services benchmarked against the best in the world.

Government Policies/Programs Aimed at

Building the Knowledge Infrastructure

  • 21st Century Chairs for Research Excellence

  • Networks of Centres of Excellence

  • Canadian Foundation for Innovation

  • Canadian Institute for Health Research

  • Telecommunications Policy

  • Technology Partnerships Canada

  • Granting councils (NSERC, MRC, SSHRC)

  • Communications Research Centre

  • Industrial Research Assistance Programme (NRC)

  • Co-operative sectoral research programs (PAPRICAN)

  • Canadian Network for the Advancement of Research, Industry and Education (CANARIE)

  • SR&ED (Scientific Research & Experimental Development) tax credit for private sector research and development

  • Leading edge information systems: Strategis; CISTI (NRC); Cdn. Technology Network; Sector Competitive Frameworks


Canada

An excellent place to live

Canada

35

Canada Provides:

Excellent economic fundamentals

Excellent economic fundamentals

Easy access to markets

A cost-competitive business environment


Canada

Canada

36

…and a Safe and Just Society

  • Canada tops the G-7 as a safe place to live and conduct business.

  • Canada also ranks well in providing equal opportunities for individuals.

* Confidence that person and property is protected. Rank among 49 countries considered in the 2002 World Competitiveness Yearbook. Source: IMD

* Race, gender, family background does not pose a handicap for competitiveness. Rank among 49 countries considered in the 2002 World Competitiveness Yearbook Source: IMD


Canada

Canada

37

Canada Offers Much

  • Canada's economic fundamentals are excellent — government policies are geared toward competitiveness.

  • Canada provides assured access to the world's richest economy, in addition to having a large and growing domestic market of its own.

  • Canada provides a cost-competitive and future-oriented environment for business:

    • quality, productive workers;

    • a competitive tax system;

    • prime locations for R&D activities;

    • abundant energy at low prices; and

    • an excellent infrastructure.

  • Canada is an outstanding place to live, invest and do business.


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