KPMG Study Results Fact Sheet

KPMG Competitive Alternatives study – 2006 edition

Canadian Overview

• For the sixth consecutive time, KPMG's Competitive Alternatives global cost study ranks Canada as the most cost-competitive G7 nation in which to do business.
  
  
• Six Canadian cities rank among the top 10 most cost-competitive cities in the 2006 study.
  
  
• Canada continues to hold an overall business cost advantage of 5.5 percentage points over the United States , despite a strong appreciation in the Canadian dollar relative to the U.S. dollar.
  
  
• Canada offers significant cost advantages over the U.S. in all 17 sectors analysed in the 2006 report. Canada's sectoral cost advantage over the U.S. ranges from 2.5 percentage points in telecommunications to 16.0 percentage points in clinical trials, and is most significant for industries which perform research and development.
  
  
• The 2006 study also ranks Canada as the lowest-cost G7 country in 12 of the 17 sectors studied, including aerospace, chemicals, electronics, medical devices, pharmaceuticals, precision manufacturing, telecommunications, biotechnology, clinical trials, software design, Web and multimedia and corporate service centres.
  
  
• Furthermore, Canadian cities are the G7 cost leaders in 16 of the 17 sectors studied in the 2006 edition .
  
  
• Among the large G7 cities with population over two million, three Canadian cities including Montréal, Toronto and Vancouver rank among the top five lowest-cost cities in the study. Montréal emerges as the most cost-competitive, with a cost advantage of between 2 and 18 percentage points over comparable G7 cities.
  
  
• Canada also has the lowest overall labour costs in the G7. In comparison to the U.S. , Canada has a cost advantage of 3.5 percentage points for technical/professional labour and 6.9 points for senior management.
  
  
• Canada has the best effective corporate income tax rates for research and development operations and the fourth lowest effective corporate income tax rates for manufacturing operations. In addition, Canada offers the lowest cost for electricity and for total industrial facility investment.

G7 COUNTRIES	COST INDEX	CANADA 'S G7 ADVANTAGE (in percentage points)
Canada	94.5	n/a
France	95.6	1.1
Italy	97.8	3.3
United Kingdom	98.1	3.6
United States *	100.0	5.5
Japan	106.9	12.4
Germany	107.4	12.9

*The study expresses total business costs in each country as an index. For comparison purposes, the United States was assigned a cost index of 100.0 and represents the study baseline.

Technical Facts

• The KPMG Competitive Alternatives study presents an analysis of business costs covering 128 cities in nine industrialized countries, including all the G7 countries plus the Netherlands and Singapore.
  
  
• Among the countries studied, Singapore has the highest overall cost advantage of 22.3 percentage points relative to the U.S. With GDP per capita on par with some western European nations, Singapore is the first newly industrialized country to be included in Competitive Alternatives .
  
  
• This is the sixth published edition; previous studies were done in 1996, 1997, 1999, 2002 and 2004.
  
  
• The eight-month international study of leading industrial countries compares after-tax costs of starting up and operating a business over a period of 10 years.
  
  
• The study measures the combined impact of 27 location-sensitive cost components as applied to the industry sectors analyzed. These cost factors generally represent between 30 and 90 percent of the total operating costs for manufacturing and service operations.
  
  
• The study uses the Canadian exchange rate of $1.1735 (US$0.852). According to the KPMG analysis, even if the Canadian dollar were to appreciate by 10 percent relative to the U.S. dollar Canada would retain a small competitive advantage over the U.S.
  
  
• The 17 industries studied in the 2006 edition are: aerospace, agri-food, automotive, chemicals, electronics, medical devices, metal components, pharmaceuticals, plastics, precision manufacturing, telecommunications, biotechnology, clinical trials, product testing, software design, Web and multimedia and corporate service centres.
  
  
• More than 2,000 individual business scenarios were examined and more than 30,000 cost items were analyzed in the study.