Why Trade Matters
Trade and the Canadian Economy
KPMG International Business Cost Study–Focus on companies who have found it profitable to invest in Canada
Stories of the Week - February 26, 2004
On February 18, the 2004 KPMG Competitive Alternatives international business cost study was released, the fifth consecutive report of its kind to rank Canada as the most cost-competitive country in which to do business.
The KPMG Competitive Alternatives study presents an analysis of business costs in 11 industrialized countries, including all the G7 countries plus Australia, Iceland, the Netherlands and Luxembourg.
This year's report provides the most thorough comparison of G7 business operations ever undertaken, featuring 121 international cities and 17 industry sectors. The 10-month international study of leading industrial countries compares after-tax costs of starting up and operating a business for a period of 10 years. The analysis takes into account labour, transportation, energy and facility costs, as well as both income-based and non-income-based taxes.
The 17 industries studied in the 2004 edition are aerospace, agri-food, automotive, metal components, specialty chemicals, electronics assembly, medical devices, pharmaceuticals, plastic products, precision manufacturing, wireless communications, biomedical research and development, clinical trials, electronic systems development and testing, advanced software design, Web and multimedia services, and back office/call centres.
Canada is the lowest-cost country in 9 of the 17 industry sectors analyzed, demonstrating significant advantages over other countries in the following industries: aerospace, specialty chemicals, electronics assembly, medical devices, pharmaceuticals, wireless communications, biomedical research and development, clinical trials and back office/call centres. Canada is also singled out for having significant labour cost advantages over the United States.
The 2004 results show Canada holding a 9-percent cost advantage relative to the U.S., which is used as a baseline for the study. When the results are broken down by municipality, Canadian cities rank higher than many of their international counterparts, particularly those south of the border.
Canada's cost advantage over the U.S. is most significant for industries involved in research and development.
Among large international cities with a population of over 2 million, Montreal, Quebec, is, once again, the city with the lowest business costs, with a cost advantage of between 8 and 19 percentage points over comparable U.S. cities.
When compared to 2002, overall results also reveal Canada has increased its cost advantage over the United Kingdom and other European countries, including Italy, the Netherlands, France and Germany.
In welcoming the report, Minister of International Trade Jim Peterson said, "Our doors are open for business, and with one of the most attractive investment climates in the world, Canada should be at the top of the list for companies looking to establish or expand their operations in North America, the world's biggest and richest market."
In addition to world-leading cost competitiveness, Canada offers a growing and dynamic 21st century economy, a highly skilled labour force and a good quality of life. Doing business in Canada is clearly a winning proposition for investors and for Canadians.
This edition of Stories of the Week features four companies that have taken up this proposition and successfully invested in Canada.
KPMG's on-line cost model and full study can be viewed at www.competitivealternatives.com. More detailed Canadian results and collateral materials are available at www.investincanada.gc.ca.
Stories of the Week - February 26, 2004
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Capitalizing on World-Class Infrastructure
Keane Canada Inc., Halifax, Nova Scotia
Since Boston-based Keane Inc. opened in Halifax in 1997, its Advanced Development Centre (ADC) in that city has grown to close to 300 people.
The ADC helps Fortune 1000 companies plan, build and manage application software to optimize business performance, and sells its services through a network of branch offices in the United States and the United Kingdom. In 2002, Keane acquired offshore capability in India, creating a seamless global delivery capability in which the ADC plays an integral part.
Keane's software engineers in the Halifax ADC provide services that cover mainframe, mid-range and Web applications for a diverse range of business clients. Alaisdar Graham, Managing Director of Keane Canada, says that there are many advantages for U.S. companies to operate their application development and maintenance businesses in Nova Scotia. "The Halifax region has the world-class infrastructure required to support our clients' operations," explains Graham. "On top of that, there is the cost competitiveness relative to doing the work internally, the geopolitical security, a strong pool of trained and experienced personnel, the cultural similarities of people and business processes, and the proximity to northeastern U.S. cities."
Keane Canada, which exports all of its services, was recognized for its international achievements with a 2001 Nova Scotia Export Achievement Award.
Automating Routine Administrative Tasks
Opalis Software Inc., Toronto, Ontario
Opalis Software Inc. develops multi-language automation software. Its flagship product, OpalisRobot, automates data centre operations, thereby reducing costs and increasing the performance of networks and systems. OpalisRobot has been implemented by more than 1,000 companies in various sectors worldwide. For example, the software is currently being rolled out in Australia in order to coordinate sales data among the 1,500 supermarkets of that country's largest food chain.
Five percent of the company's customers are in Canada, while 50 percent are in the United States. Yet, in 1999, Opalis decided to move most of its corporate operations from the Netherlands to Toronto. Company president Scott Broder says the move was advantageous: since amalgamating base operations, Opalis has lowered operational costs while drawing from a large local talent pool of skilled multilingual workers. Toronto is considered an international city, offering a good quality of life. In addition, Toronto is convenient for conducting business with European and North American customers, while its proximity to the U.S. has strengthened connections with industry leaders. "Worldwide sales have increased, costs have been drastically reduced and U.S. partnerships are easier to forge," says Broder.
Since its founding in 1998, Opalis has been dedicated to delivering solutions that automate information technology operations. Among the company's other products are OpalisRendezVous, a file replication utility, and Opalis JobEngine, a job-scheduling tool.
Moving the World with Canadian Expertise
Pratt & Whitney Canada, Longueuil, Quebec
Engines that power airplanes and helicopters worldwide are built in Quebec by Pratt & Whitney Canada (P&WC;)—a subsidiary of United Technologies Corporation, a hi-tech company headquartered in Hartford, Connecticut.
From its beginnings in 1928 until World War II, P&WC; operated as a service centre, repairing and overhauling used piston engines. The company supported the war effort with the assembly of U.S.- built WASP piston engines, and in the late 1950s, developed Canada's first small turbine engine, the PT6. Today, P&WC;'s operations and service network span the globe. "Working closely with our customers to open new horizons in aerospace is the guiding principle in everything we do," says company president, Alain M. Bellemare. "A key factor in P&WC;'s success is that Canada has one of the most highly skilled aerospace workforces in the world."
P&WC; is at the forefront of R&D; investment in Canada's aerospace industry, resulting in the certification of more than 40 new aviation engines over the past eight years alone. This emphasis on R&D; has helped to streamline the company's business in very practical terms. Development time for new engines, for example, has been slashed from five years to less than three, while the lead time needed to produce them has shrunk from two years to six months.
German Chemicals Giant Picks Alberta
Raylo Chemicals, Edmonton, Alberta
Raylo Chemicals of Edmonton exemplifies how foreign investors can team up successfully with Canadian initiative and expertise. A division of Degussa Fine Chemicals AG—Germany's third largest chemicals company—Raylo develops complex organic molecules and active ingredients for the North American pharmaceutical industry. Among the products of its cGMP (current Good Manufacturing Practices) plant are oligonucleotides, which the medical community hopes to eventually use for the effective treatment of a wide range of serious illnesses.
In early 2003, Degussa transferred this branch of its activities to Raylo from another subsidiary, Colorado-based Proligo. The move, which created 24 new positions at Raylo, was a logical choice for a number of reasons, according to Raylo President Matthew Colomb. "Degussa needed to expand and our Edmonton facilities and infrastructure could easily support the new oligonucleotides business," says Colomb. "Furthermore, Alberta has an excellent investment and regulatory climate. Another driving factor was access to a sizeable, educated workforce." Raylo, which currently employs 210 people, draws on the nearby University of Alberta for PhDs and lab personnel, and on the Northern and Southern Alberta Institutes of Technology for production staff.
Raylo's products and services are marketed to Europe, the NAFTA region and Japan through Degussa's worldwide sales network.
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