Atlantic Provinces: The Fire Inside, Site Selection Magazine, July 2003

ore than 430 foreign firms – mostly U.S.-based companies representing service, manufacturing and retail industries and the offshore energy sectors – have set up shop in Atlantic Canada.

        Whether their operations are in Newfoundland and Labrador, New Brunswick, Nova Scotia or Prince Edward Island, most industry players are drawn to Canada’s East Coast by two common ingredients: a compelling business case and innovative incentives.

        Consider Boston-based Keane Inc. The global IT services player has more than 45 offices around the world, and keeps a wide-angle lens open on its investment location options. Asked to pinpoint the attractions of its Atlantic Canada site, James Brewer, Keane’s vice president of global services delivery, points first to the pool of talent produced by local universities and colleges in Halifax, and the area’s emphasis on technology and business.

        Many of the elements motivating Keane to set up, and maintain, one if its Advanced Development Centers in the Nova Scotia capital are, in fact, business-case elements available across Atlantic Canada: a low labor-force turnover rate, a top-notch telecommunications infrastructure, well-skilled and available workers. Factor in a favorable exchange rate, the region’s close proximity to major North American clients, and the comfort of a common language and cultural similarities – and the catalyst for growing investment in targeted regional sectors becomes clear.

Newfoundland and Labrador is expected to lead the country in growth in 2003. Elizabeth Beale, president of the Atlantic Provinces Economic Council (APEC) – the region’s independent research and public policy organization – says there’s an energy roll afoot here. Rapid start-up of oil production is the key factor behind this once-poor province gaining solid economic ground: wells drilled at Terra Nova and Hibernia are to generate up to US$437 million in capital expenditures. Husky Energy and PetroCanada are proceeding with the $1.7-billion White Rose project which, over 10-15 years, could add $365 million to provincial coffers in royalties.

        In other resource developments, an agreement inked with mining giant Inco could mean total capital investment in Voisey Bay of more than $2.1 billion. It could also, says provincial mines and energy minister Lloyd Matthew, put Newfoundland and Labrador at the leading edge of R&D for processing nickel sulphide concentrates. All this hot resource news is firing investment and fueling further exploration activity. It’s also setting off political debate around a hot topic: whether Newfoundland and Labrador – the last to join in the country’s confederation pact – should separate from Canada.

        Meanwhile a range of initiatives has been put in place to keep the business climate strong. Newfoundland and Labrador now have among the lowest corporate income taxes and the lowest manufacturing tax in is Canada. The tax-free threshold for health and post-secondary (payroll) tax has been increased to around $365,000 from $73,000 – a move that removes 95 per cent of all businesses from the payroll tax rolls, and puts an estimated $6.3 million back into the hands of the business community each year.

        The province’s government is committed to easing the payroll tax burden on business further. The recently-enhanced EDGE program makes designated companies eligible to receive a new 50-percent rebate on federal corporate income tax, in addition to a 100-percent rebate on provincial corporate income tax and a 100-percent payroll tax rebate. And a venture capital tax credit program has been introduced for local businesses offering credits of 20-to-35 percent.

Several new energy-related projects are on the burner in New Brunswick; even without them, this province finds itself regularly rated among the most competitive business locations in the world.

        The urban centers of Fredericton and Moncton pull in much of the province’s business, but rural locations offer their own appeal. Ringing testimonials from company executives reveal the appeal: Gerald Engstr?m, managing director for Kanalflak, a leading ventilation products company, cites a host of factors. Chief among them is availability of a highly skilled labor force and a provincial government that has a business-oriented approach. Guy Breau, senior manager for Spiegel Group TeleServices Canada, says turnover is “very low” while “achievement is very high” and stresses the country’s tradition of independent thinking and team playing, both of which, Breau notes, are “rare and valuable” business commodities. Then there is the cost factor: analysis of operating costs for light manufacturing and call centers by The Boyd Group show the province with the lowest total annual operating and labor costs of all locations studied in these two industry categories.

        U.S.-based call center Virtual Agent Services finds competition for employees and turnover low and facilities affordable, in rural locations. Like Kanalflak, the company chose Bouctouche, near Moncton, as the site for a modern facility.

Nova Scotia and New Brunswick are neighbors. So two of their largest business centers – Halifax and Moncton – have decided to start cooperating, instead of competing, to attract businesses investment. A new economic development partnership, labeled the Halifax-Moncton growth corridor, is promoting the assets of a region which spans parts of these two provinces – parts that share common blows inflicted by slow economic growth and population declines.

        The first task of the newly-linked regions: identifying the economic assets located in the 156-mile (250-km.) corridor between the two centers, which have a combined population of more than 500,000. Along that corridor are 15 industrial parks, two major airports, a natural gas pipeline and Halifax’s large container port.

        Sporting corporate presences by such companies as Stream International and Spiegel Group Tele Services Canada Inc., Nova Scotia has scored solid successes in the call center industry, in large part due to its payroll rebate incentives. Some credit also goes to the province’s new Target Novat Scotia Web site, at www.targetnovascotia.com. U.S.-based TeleTech Holdings Inc., which is setting up three new customer contact centers – one in Halifax, and two sites in as yet unnamed rural locations – is eligible for $8.6 million in payroll rebates.

        Convergys Corp. is expanding its operations into the Truro area – its third contact center in this province; it signed a six-year payroll rebate with the province’s business development organization, Nova Scotia Business Inc. (NSBI). Doppleganger Canso Inc. (DCI), which is planning a center in rural Canso, will receive a $306,000 rebate over five years.

        DCI’s investment, says NSBI president Steve Lund, reflects a commitment to “an alternate business model for contact center deployment,” one which capitalizes on smaller labor pools located in rural communities – and one which could become a model for other investment-hungry communities in the province.

Nine years ago, the tiny province of Prince Edward Island had no aerospace industry presence. Today, Premier Pat Binns says it accounts for roughly 20 per cent of the province’s total exports – and contributes more than $109 million to the P.E.I. economy.

        It’s an industrial boon to an economy that’s truly feeling its oats: Prince Edward Island is also experiencing a recovery in agricultural production and exports, an increase in manufacturing shipments and a boom in its construction market.

        Two new companies – MDS PRAD Technologies Corp., a subsidiary of MDS Aero Support, and Vector Aerospace – have announced plans for new and upgraded facilities this year at the province’s aerospace business park. MDS PRAD is building an R&D facility geared to engineering and production at its facilities in Slemon Park; the park houses such international industry players as Atlantic Turbines International and Honeywell Engines and Systems.

        This is the only aerospace business park in Canada with a training center; the center can tailor training programs to tenants’ needs – and that’s been a factor in attracting companies here. So has this province’s government. MDS Prad’s president and chief operating officer, Phillip Rodger, confirms public officials’ efforts played a vital part in the decision to invest here. Now, government has unveiled new tax incentives for businesses setting up in specific industrial parks: a sales tax rebate, a corporate income tax offset, and a full property tax rebate.

        Atlantic Canada’s business case is compelling, and each East Coast province is experiencing a range of sector-specific investments that mark new-millennium economies taking shape.