By Ron Friesen
On June 19, in his press question-and-answer session after the Finance Ministers meeting in Ottawa Federal Finance Minister Bill Morneau told reporters the meeting covered several key topics. These included the state of the Canadian economy, US trade relations with Canada, taxation of cannabis and the tax fairness agenda intended to insure all Canadians pay their fair share.
In the questions reporters asked a couple of questions about housing and changes being considered to protect the country’s economy from banking sector difficulties. However, almost the entire discussion was dominated with questions about cannabis regulation and taxation. With economic stresses caused by pending NAFTA renegotiations, softwood lumber trade policies changing and questions around Home Capital Group’s troubles why are reporters so overwhelmingly interested in cannabis?
It would be considerate for our Department of Finance to provide more clarity in the public forum where everyone could enjoy equal opportunity to learn and benefit. However, as investors interested in hearing how near-future government policies may affect our investment decisions we’ve always had to dig deeper than our leaders’ public statements.
Foreign Direct Investment
Digging deeper may take you in almost any direction. As we each follow our noses into available research sources we are bound to track into data and news of particular interest to our individual tastes. One interesting topic to follow into a deeper understanding of investment value is foreign direct investment. The stories and data available and relating to foreign direct investment in Canada unveil a great deal about outside perceptions of investment value in our country.
Vancouver’s clean technology sector for example has truly reached global significance and benefits immensely from foreign direct investment. Vancouver currently ranks sixth when compared by FDI Intelligence to the top ranked cities in the Americas for foreign direct investment. Montreal is ranked fifth and Toronto is ranked fourth. FDI Intelligence is a division of Financial Times Ltd. and they have rated Vancouver as the Large American City of the future for 2017/18.
Vancouver’s growing technology economy is benefitting from capital investments from partnerships, private foundations, funds and renewed venture capital. The new clean technology funding is being described as ‘more-patient’ than traditional venture capital investments of just three years ago.
The Hanhai Zhiye Group of China is an invested partner with the Vancouver Economic Commission in the formation of the China Canada Cleantech Innovation Centre since 2015. The initiative is providing local developers of clean technologies with opportunities to reach the Chinese market and funds for the development of promising advances in clean technology and energy.
The results are promising as several foundations and funds are said to be supporting the startups coming up through the CCCIC, creating the opportunity for startups to get a firm foothold and reach markets with their ideas, services and products. Combine this vibrant early-stage activity in the technology industry in Vancouver with the job-producing contributions of Micro-Soft Corporation, Amazon and others and it becomes more clear how the world is increasingly seeing Vancouver as a growing global technology centre.
I compared Vancouver in a recent article to Hong Kong and Shanghai, saying Vancouver’s approach to the future is based on the more costly approach of becoming a clean energy city. The city’s and the region’s growing status in the global clean technology industry may one day deliver the sales revenues required to establish Vancouver as a profitable technology centre.
In the mean time, the well-documented sale of Bit Stew Systems Inc. to General Electric for US$153M certainly shows the potential. And while this sale was an excellent profit-taking day for investors Yaletown Partners Inc., BDC and others it remains to be seen what the long-term economic benefit will be to the City of Vancouver and her citizens.
Economic success requires diverse international trade and market penetration.
New world jobs in technology and the revenues they produce are the positive outcomes Canada needs to ensure the security of its future economy. The on-again-off-again troubles in energy, resources and manufacturing have destabilized Canada’s economy throughout its history. The most significant promise of the technology economy is stable access to global markets. Increasing trade opportunities across the Pacific, Atlantic and south of the USA are necessary to narrow the pitch of our economic chart, but Canada continues to depend primarily on its strong trade with the United States.
Canada’s balance of trade is currently a sticky subject in the US. As an example, Canada has benefitted from exchange trade with just the State of Illinois in 2016 resulting in a balance of $9.4B in Canada’s favour. These kinds of trade imbalances add fuel to the Trump Administration’s argument for trade outcomes more favourable and fair to the United States.
Individual States continue to show enthusiasm for continued and growing trade with Canada. Canada is stated as the third largest trading partner with the State of Texas. Mike Rawlings and Betsy Price, the mayors of Dallas and Fort Worth respectively, continue to make no-nonsense on-going efforts to promote and grow trade with Canada and seem eager to facilitate trade initiatives, believing much can be accomplished working with the provinces directly in spite of any apparent difficulties between the Feds in the US and Canadian capitals.
Reaction to Christy Clark’s throne speech this week is an important step in determining how the province of BC will proceed, and how the region’s trading partners will react. There are going to be changes affecting business in BC in spite of how the provincial government situation flows out, but little matter in terms of clean technology pursuits in the region. It seems clean technology in British Columbia is at an important incubation stage, and is worthy of consideration by clever investors. History demonstrates there have always been many dry opportunities among the rich producers as some win large while others perish at the side of the path. The technology rush continues, and Greater Vancouver / Fraser Valley is an important part of it, for now.