Ontario & Alberta boast Canada's best investment climate,
New York & Massachusetts tops in the U.S.
Contact:
Jason Clemens, Director of Fiscal Studies
The Fraser Institute
Telephone: (604) 714-4544
Email: jasonc@fraserinstitute.caRelease Date: 19 September 2000
VANCOUVER, BC — U.S. and Canadian investment managers have ranked Ontario and Alberta as the top two Canadian provinces, and New York and Massachusetts as the top U.S. states for the attractiveness of their investment climates. The Summer 2000 Survey of Senior Investment Managers, was released today by The Fraser Institute, a Canadian-based economic research organization.
"As the Canadian and U.S. economies become more integrated, it is increasingly important to understand what constitutes a successful investment climate," says Jason Clemens, director of fiscal studies at the Institute and co-ordinator of the quarterly survey.
U.S. pension and investment fund managers with assets under administration of nearly (U.S.) $430 billion participated in the inaugural U.S.-Canada survey. Canadian respondents added another (Cdn) $249 billion in assets under administration, for a combined total of over (Cdn) $864 billion in assets under administration.
An Awareness Problem: A Challenge for Nearly All Canadian Provinces
According to the survey, U.S. investment and pension fund managers are almost completely unaware of Canada's smaller provinces. The responses indicating "Don't Know" with respect to investment climates ranged from 98.0% for the Atlantic provinces, to 96.1% for Manitoba, to 94.1% for Saskatchewan. Excluding Ontario, which received a 66.7% response rate, the larger Canadian provinces also generally struggled for a level of awareness exceeding 50% of responses.
Geographic Awareness
One of the interesting trends is the concentration of awareness based on geographic location. Respondents were much more likely to have an understanding, or at least a knowledge, of states and provinces in close geographic proximity."For instance, fund managers in New England, particularly in New York State, were much more likely to have knowledge of New England and mid-western states as well as central Canadian provinces than firms located in other regions," says Clemens.
Investment Climate in the Canadian Provinces
Respondents were asked to rate the investment climates present in each province or state on a scale of 1 (poor) to 10 (excellent). Ontario and Alberta tie for the top position with a score of 7.7. Last year, Ontario inched out Alberta for top spot with a score of 7.9 compared to 7.8.As in the 1999 Summer survey results, there continues to be a major gulf in performance between the top two provinces and the rest. Saskatchewan, Manitoba, and New Brunswick tie for third position with a score of 5.4, a full 2.3 points below the top score.
British Columbia retained the dubious distinction of receiving the lowest score (3.3). Although B.C. improved its performance slightly from last year, increasing from 3.1 to 3.3, it did not improve enough to overtake Newfoundland (4.6) for ninth position.
"Interestingly, the overall rank of provinces does not change even when U.S. responses are excluded," notes Clemens.
Select U.S. States Results: A Better Investment Climate
The responses for a select group of U.S. state investment climates indicate a stronger and more vigorous investment environment than is generally present in Canada. Ten of the sixteen 16 U.S. states assessed matched or exceeded the ratings for Canada's top 2 performing provinces. None of the states received scores below 5.0, while half of the Canadian provinces received scores at or below 5.0.Massachusetts and New York tie for the top position with scores of 8.3, followed closely by California with a score of 8.1.
The Border States: An Example for the Canadian Provinces
Of particular importance to Canadian provinces is the strong and consistent performance of U.S. states bordering Canada. For instance, U.S. states in the mid-West such as Illinois (7.3), Indiana (7.1), Michigan (7.9), and Ohio (7.6) posted strong investment climate ratings, particularly when compared to the bordering Canadian provinces (Manitoba (5.4), Ontario (7.7) and Quebec (4.8)). In fact, only Canada's top-rated provinces were competitive with the investment climate scores posted by a majority of the U.S. border states.Another illustration of this difference in investment climates occurs in the Pacific Northwest. Washington State garnered a score of 7.4 for its investment climate while the neighbouring Canadian province, British Columbia, received a dismal 3.3. "This stark difference in the two neighbouring jurisdictions' investment climates can have a significant effect in determining the destination for investment in the Pacific Northwest," says Clemens.
Policy Blueprint for a Positive Investment Climate
Respondents were also asked to rate the factors that create and maintain a positive investment climate using a scale of 1 (low) to 10 (high).The results are clear that the path to creating and maintaining a positive investment climate is based on a competitive tax regime (both personal and corporate), adequate infrastructure, and, to a lesser extent, a proper regulatory regime. Equally clear is that government provision of social services and government subsidies to business are not important factors in establishing a positive investment climate.
A Policy Mix for the Future
Respondents were also asked to indicate whether they believed jurisdictions maintained the correct mix of policies to foster and develop globally-competitive firms over the next decade.Alberta (90.3%) and Ontario (93.5%) are the only two provinces to receive positive responses in excess of 50%. Both Quebec and New Brunswick, at 45.2%, recorded the next highest positive Canadian score. Interestingly, Quebec is the one province to receive both highly positive (45.2%) and negative (38.7%) responses. In fact, Quebec also had the third highest negative response rate.
As with its investment climate scores, British Columbia recorded the worst performance; 71.0% of respondents stated that the province does not have policies that foster and encourage globally-competitive firms. Newfoundland recorded the next largest negative score of 45.2%.
New York (74.5%), North Carolina (72.5%), and California (68.6%) led the group of select U.S. states in positive scores. None of the U.S. states received large negative responses. In fact, Minnesota at 7.8% had the highest negative response rate.
Approval Rating for Canada's Minister of Finance Stays Low
The approval rating for the Minister of Finance, Paul Martin, continued at 52 percent for the second straight survey-a far cry from the perfect approval ratings achieved only a short 2 years ago.
Bank of Canada Approval Drops
The Bank of Canada's approval ratings also plummeted from their previous level of unanimous support (100%) to 81 percent approval in the current survey. It is unclear what precipitated the drop in approval ratings, but they come at a time when there is increasing concern over inflation, growth rates, and the value of various Canadian equity markets.
About the Survey
The Survey of Senior Investment Managers was created in 1996 in order to gauge the opinions of financial managers on matters of public policy.The 2000 Summer Survey has been expanded to include the opinions of U.S. pension and investment fund managers, as well as the evaluation of a select group of U.S. states, chosen based on size and geographic proximity to Canada.
Surveys were mailed to senior investment officers at roughly 1,000 investment management firms across Canada and the U.S.. Eighty-two responses were received between June 1 and July 21, 2000. Statistical confidence levels are not assigned to the results.
|
Required Policies for a Positive Investment Climate (rated out of 10 for importance) |
|||
| Policy | All Responses |
Canadian-Only Responses |
US-Only Responses |
| Competitive personal income taxes | 8.7 | 8.4 | 8.8 |
| Competitive corporate income taxes | 8.7 | 8.6 | 8.8 |
| Competitive capital gains tax | 8.4 | 8.4 | 8.5 |
| Competitive corporate capital tax | 8.0 | 7.7 | 8.2 |
| Subsidies to business | 3.5 | 3.7 | 3.3 |
| Competitive regulatory regime | 7.1 | 7.7 | 6.7 |
| Appropriate environmental regulations | 6.6 | 6.8 | 6.4 |
| Flexible labour market | 7.1 | 7.5 | 6.8 |
| Government-provided social services | 4.1 | 4.5 | 3.8 |
| Adequate infrastructure | 8.5 | 8.4 | 8.6 |
Established in 1974, The Fraser Institute is an independent public policy organization based in Vancouver, with offices in Calgary and Toronto.
For further information contact:
Suzanne Walters, Director of Communications,
The Fraser Institute, (604) 714-4582,
Email suzannew@fraserinstitute.ca
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