Canada's Best Investment Climates: Alberta and Ontario

B.C. and Quebec worst places to invest, according to fund managers

Release Date: 27 April 1998

VANCOUVER, BC>>>  Alberta and Ontario possess a clear advantage over all other provinces in terms of the investment climate and the conditions needed to foster investment and economic growth, according to Canadian money managers responsible for over $140 billion in total assets under management.

In the latest Fraser Institute Survey of Senior Investment Managers (Spring 1998), Ontario garnered 81 percent positive responses, in terms of its investment climate, while Alberta received 73 percent. New Brunswick finished third with 41 percent, indicating a positive view of investment in that province.

Reinforcing the positive investment climate were the relative rankings of Alberta and Ontario. Alberta ranked first among the provinces while Ontario followed closely in second place. Manitoba finished third, but well behind both Alberta and Ontario. The high rankings earned by both Alberta and Ontario appear to be based on pro-market policies being pursued by both provincial governments, according to Fazil Mihlar, Director of Regulatory Studies at The Fraser Institute.

When asked what particular factors contributed to the positive performance of Alberta and Ontario, money managers indicated that taxation policy and government finances were the principal reasons. In addition, respondents highlighted Ontario's more flexible labour legislation as a positive contribution to that province's success.

The Worst Investment Climates: B.C. and Quebec

On a darker note, investment managers held negative views of both Quebec and British Columbia. Forty-nine percent of investment managers held negative views with respect to the investment climates in both provinces. Moreover, only 5 percent of the respondents had a positive view of Quebec, and British Columbia garnered only 3 percent of positive responses.

Again, the relative rankings reinforced the negative view of these provinces. Quebec finished seventh while British Columbia finished ninth. Only Newfoundland ranked lower than British Columbia.

Between 1994 and 1996, average business investment in machinery and equipment as a percentage of GDP was the lowest in B.C. (7.7 percent) and Quebec (8.3 percent). During the same period, business non-residential investment was lowest in B.C., Quebec, and Manitoba. These statistics reinforce the survey results that B.C. and Quebec are perceived to have the most hostile investment climates.

The respondents indicated that taxation policy and labour legislation were the key reasons for British Columbia's dismal performance. Factors contributing to Quebec's poor performance included government finances, tax policy, labour legislation, and social and economic regulation.

Separation of Quebec: Increasing before the Charest-factor

When asked to indicate the likelihood that the province of Quebec would separate within the next five years, 59 percent of respondents said it was either very likely, likely or somewhat likely. This is a significant increase from the Fall 1997 Survey when only 46 percent of respondents affirmed that Quebec's secession was likely. The survey was completed, however, before the dramatic resignation of Quebec Liberal leader Daniel Johnson and the decision by Jean Charest, former leader of the federal Progressive Conservative Party, to contest the leadership of the Quebec Liberal Party. It is uncertain how these dramatic events will affect the view of investment managers regarding the possibility of Quebec independence.

Continued High Approval Rating for the Minister of Finance

Ninety-two percent of the responding investment managers rated the federal minister of finance as doing either a very good or good job in the finance portfolio.

Continued High Approval Rating for the Bank of Canada

Similarly, 81 percent of respondents stated that the Bank of Canada was doing an excellent, very good or good job in its conduct of monetary policy.

Foreign Exposure seen as the Greatest Risk to Canadian Financial Stability

Foreign, rather than domestic, shocks were cited as the single greatest threat to the stability of the Canadian financial markets over the next six months. Thirty-five percent of the investment managers surveyed indicated US financial instability as the single greatest threat to Canadian financial stability, while 42 percent indicated a slowdown or recession in Asia as the greatest threat. Only 16 percent stated that a domestic slowdown or recession was the greatest threat to Canadian financial markets.

Established in 1974, The Fraser Institute is an independent public policy organization based in Vancouver.

For further information:

Suzanne Walters, Director of Communications,

The Fraser Institute, (604) 714-4582,
Email suzannew@fraserinstitute.ca

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