October 2000 Fraser Forum: Investment Climates in the Canadian Provinces and Select US States

[Previous] [Contents] [Next]

Jason Clemens

As the Canadian and US economies become more integrated, it is increasingly important to understand what constitutes a successful investment climate. The Fraser Institute Survey of Senior Investment Managers for Summer 2000 was expanded to include both the opinions of US pension and investment fund managers and the evaluation of a select group of US states. US states were chosen for inclusion based on their size and geographic proximity to Canada.

Respondents to the survey managed roughly (Cdn) $864 billion in assets. Survey responses were concentrated in Ontario, New York, and California, with results also received, although to a lesser extent, from other jurisdictions, including British Columbia, Alberta, Quebec, Nova Scotia, Minnesota, Michigan, Ohio, Pennsylvania, Colorado, Texas, Florida, North Carolina, New Jersey, and Massachusetts.

Canadian provincial results: great news for Alberta and Ontario; disastrous news for BC

Respondents were asked to rate the investment climates present in each province or state on a scale of 1 (poor) to 10 (excellent). The investment climate results for the Canadian provinces closely parallel the results received in 1999. Ontario and Alberta tie for top position with a score of 7.7. Ontario inched out Alberta for top spot last year with a score of 7.9 compared to 7.8. As in 1999, there is a considerable dropoff in scores from the top two provinces. 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 (BC) retained the dubious distinction of receiving the lowest score (3.3). Although BC 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.

Awareness: a challenge for nearly all provinces

Of particular interest is the almost complete lack of awareness by US investment and pension fund managers of Canada’s smaller provinces. The responses indicating "Don’t Know" with respect to investment climates ranged from 98.0 percent for the Atlantic provinces, to 96.1 percent for Manitoba, to 94.1 percent for Saskatchewan. Excluding Ontario, which received a 66.7 percent response rate, the larger Canadian provinces also generally struggled for a level of awareness exceeding 50 percent of responses.

Geographic awareness

One of the related trends not obvious in the data 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 within close geographic proximity. For instance, investment and pension fund managers located 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.

Select US States’ results: a better investment climate

The responses for US state investment climates indicate a generally stronger investment environment than in Canada (see table 1). Ten of the 16 US states assessed matched or exceeded the ratings for Canada’s top 2 performing provinces. Further, none of the states assessed received scores below 5.0, while half 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.

Blueprint for a positive investment climate

Beyond asking our respondents to rank the investment climates of various jurisdictions in Canada and the US, we asked them to use a scale of 1 (low) to 10 (high) to rate what factors created and maintained a positive investment climate. Table 2, which summarizes the results, makes it clear that the path to creating and maintaining a positive investment climate is based on a competitive tax regime, including both personal and corporate taxes, the maintenance of adequate infrastructure, and, to a lesser extent, an appropriate regulatory regime.

Conclusion

The bad news in the results of the inaugural US-Canada investment climate survey is that all Canadian provinces, albeit to different degrees, have room for improvement. The good news is that the survey respondents are clear about how a jurisdiction can improve its investment climate.

Jason Clemens (jasonc@fraserinstitute.ca) is the Director of Fiscal Studies at The Fraser Institute. He has a Masters Degree in Business Administration from the University of Windsor.

For more information, or to receive a copy of the full survey, please contact Jason Clemens at (604) 714-4544 or by email at jasonc@fraserinstitute.ca.

[Previous] [Contents] [Next]

info@fraserinstitute.ca
4th Floor, 1770 Burrard Street, Vancouver, BC, Canada, V6J 3G7
Tel: (604) 688-0221 Fax: (604) 688-8539 Book Orders: 1-800-665-3558 ext. 580

You can contact us at the above email address for any comments or information requests. Please report any dead links or technical problems.