The Ontario region should be on the UK’s overseas investor shortlist. It has a highly skilled workforce, its banking system is the envy of the world, it will shortly have one of the lowest rates of corporate tax and it has a first-class infrastructure system.
Clare Barnett, UK Ontario government senior economic officer, says Ontario’s benefits regularly surprise newcomers. But first, how has the region weathered the global recession? Is it still in fighting health, despite the tough financial pressure of the last two years?
“We’ve done very well,” says Ms Barnett, “which is down to our government addressing some of our original economic worries back in 2003. Ontario has seen a huge amount of economic diversification since that time and we were able to get our deficit right down.”
Welcome to the 21st century
And by some margin too. Ontario has a strong automotive presence – including several plants for Honda, Chrysler, Ford and Toyota – world-class financial services and banking sector operations, plus an increasing presence in IT and biosciences. It’s a truly 21st century blend of high tech, science and services. Ontario’s annual GDP – currently $445bn – dwarfs that of Switzerland and international trade now tops $1bn a day. It also boasts the highest GDP rate of any Canadian province.
No wonder investors – particularly UK investors − are warming to the region fast. “FDI investment doubled between 2003 and 2007. Primarily it has been US investment but now a third of our FDI investment, going on the basis of 200 projects, comes from the UK,” says Barnett.
Anyone investing seriously in Ontario will want reassurance that the local infrastructure is being upgraded. Ontario’s transport system now boasts a new airport link and a re-vamped overground rail system through large areas of Ottawa – part of an on-going $4bn project − and an Oyster card system is being planned. The government is also taking huge steps to upgrade its social housing stock, integrating this investment with cutting edge green renewable energy initiatives.
Safe and secure
A big draw for many investors is Ontario’s sound reputation for banking. As Ms Barnett notes, Ontario came though the global credit crisis in excellent shape. But that wasn’t down to good luck.
“Our regulatory system has always been very strong,” she says. “There’s been a lot of publicity around the strength of our corporate financial health and strong governance and that has attracted investors. It’s also allowed us to showcase our banking system. President Obama has been interviewed saying how strong our banking system is, and the White House has come here to take a look at how it is structured.”
The World Economic Forum backs this testimony. It named Canada as possessing the soundest banking system in the world for the third year in a row (leaving Sweden, Luxembourg and Australia trailing in its wake; the US slipped to 40th place). That’s down, it declared, to solid funding and careful and sensible lending.
A massive green push
But it’s Ontario’s green energy credentials that is really creating an impact. “Our Green Energy Act saw Ontario get its first feed-in tariff – the first in North America,” says Ms Barnett. It means renewable energy developers in the region can access generous subsidies for clean energy production.
The green energy focus is certainly a huge step away from coal reliance and an opportunity for many to diversify their energy mix. Many Ontarians have now applied for renewable energy projects, from solar to wind and other sources.
“We also have excellent energy security,” she continues. “We have a big nuclear re-build programme and renewable energy is going to be doubled. By 2014 the government is committed to close all coal-fired plants in the province. There’s a lot of public acceptance for the move, as well as for nuclear energy in general.”
The Toronto Stock Exchange is home to leading green energy players. In fact, it recently launched a new index solely to green-friendly companies – the new Standard & Poor TSX Clean Technology Index.
Investors are also committing to the province in a big way. Samsung is a stellar example. It has invested $7bn in Ontario, creating 16,000 jobs in the region in the process, which should make Ontario the place for green energy manufacturing in North America. Already Ontario is increasingly becoming a leading producer of renewable energy hardware − wind turbines, solar inverters and solar modules.
The Samsung investment will drive more wind and solar energy projects, exporting green electricity to the fast-growing renewable energy market in the US, according to Ms Barnett. It is also transforming Ontario’s manufacturing heartland, laying deep foundations for new economic growth.
Before going to press, it was announced that Germany’s Siemens AG has also joined Samsung in a large green power deal. Siemens will supply up to 600 megawatts of energy for Ontario under an agreement with Samsung. Siemens will supply new wind turbines for many of Samsung’s new developments, creating up to 1,400 new jobs in the region.
Meanwhile another 800 new jobs were recently created by Ubisoft, a French studio digital media player. “Ubisoft is a very exciting opportunity for Toronto,” says Ms Barnett, “drawing on the city’s growing gaming and film industry expertise, not to mention its strong multicultural diversity, energy and dynamism.”
The lowest rate of corporate tax in North America
What of tax incentives? It’s a good question, and another reason for putting Ontario on your FDI shortlist. “A very big government initiative is the new government harmonised sales tax [HST, equivalent to the UK-based VAT system],” says Ms Barnett. “The introduction of the HST which combines Ontario’s Retail Sales Tax with the Canadian wide General Sales tax creates a single, federally administered value added tax at a rate of just 13 percent.”
Currently corporations operating in Ontario are taxed at a rate of 33.5 percent. But the combined federal-provincial rate on income earned in Ontario will now fall to 25 percent for corporations with taxation years beginning on or after 1 July, 2013. It’s a phased-in reduction that means Ontario will be able to boast a general corporate income tax rate of 10 percent by 2013. That’s got to be a huge draw for many companies.
“That’s not all,” says Ms Barnett. “We’ve also got what’s called the Eastern Ontario Development Fund to encourage more job creation. There’s an apprenticeship tax credit from federal government and $5,000 from the Ontario government for companies heavily focused on the Knowledge Economy. That’s a $7,000 rebate in total.”
Ontario’s competitive business costs, strong record in financial services, green energy credentials and highly skilled workforce position the province as a leading destination for FDI.
Did you know?
– In an Economist survey of 90 countries, only Finland and Sweden ranked higher than Canada in the areas of honesty and reliability in business.
– Toyota’s Ontario plant is the only site outside Japan to produce the luxury Lexus.
– Messier-Dowty manufactures landing gear systems in Ontario for some of the biggest names in aerospace including Boeing, Bombardier, Dassault and Raytheon.
– GlaxoSmithKline produces medications worth billions each year in Ontario, 80 per cent of which are exported to more than 70 countries.
– In a survey by The Scientist magazine, 35,000 researchers around the world ranked the University of Toronto as the best place to work outside the US.
– More than eight million people around the world use BlackBerry wireless devices invented, manufactured and marketed by Research in Motion (RIM) of Ontario.
Select Ontario is a business and marketing tool that enables investors and site selectors to make timely, informed decisions about where to locate their business projects in Ontario. Launched in February 2010 at the Economic Developers Council of Ontario (EDCO) annual conference, Select Ontario is Canada’s first provincial web-enabled site selection tool. Basically it’s an online geographic information system (GIS) that provides valuable business information, including detailed statistics and current data about available properties, community demographics, and workforce statistics, educational skill levels, and business clusters. “Innovative, business-friendly online marketing tools like GIS, play an important role in attracting new investment opportunities to Ontario,” says Aileen Murray, president of EDCO. “It will also help economic development professionals better promote Ontario as a premier location for sustained economic activity.”