Daily Archives: October 14, 2006

The Best Place to Do International Business in Canada (is Halifax, Nova Scotia)

It’s Saturday (my day off from sourcing), and since I don’t have any Flaming Laptops or Weasels to report on, I’m going to tell you about the best place to do international business in Canada, and why. If you want the short answer, it is Halifax, Nova Scotia, but since I know some of you may not take it on faith that I’m right, you can keep reading.

The September 25 – October 8, 2006 issue of Canadian Business ran an article entitled The Best Places to Do Business in Canada where they ranked prime locations for business in terms of annual operating costs (/M$), cost of living index (with Toronto as a baseline), building permit growth, unemployment rate change, and crime rate per 100,000. Based on the weighted rating they used, Quebec City came first, St. John’s Nfld came fifth, Edmonton came seventh, Halifax came ninth, Ottawa came twelfth, Winnipeg came thirteenth, Vancouver came thirty-first, Calgary came thirty-fourth, Toronto came thirty-seventh, and Montreal came thirty-eighth.

A snapshot of the statistics of these cities is as follows:

Rank City Yearly Operating Cost ($M) Cost of Living Index Building Permit Growth Unemployment Rate Change Crime Rate(/100,000)
1 Quebec City, Que. 30.44 73.10 89.31 -32.76 5,069
5 St. John’s, Nfld 28.55 63.80 1.66 -11.76 6,898
7 Edmonton, AB 31.55 73.70 27.82 -19.15 12,207
9 Halifax, NS 29.34 74.90 17.31 -16.39 12,723
12 Ottawa, Ont. 32.18 83.30 -0.15 -35.71 6,385
13 Winnipeg, MB 29.48 74 6.52 -12.5 11,975
31 Vancouver, B.C. 35.04 98.30 6.23 -31.67 12,804
34 Calgary, AB 33.33 82.8 -1.86 -3.13 7,347
37 Toronto, Ont. 34.20 100.00 -7.59 -16.00 7,630
38 Montreal, Que. 32.46 86.8 -4.13 -1.19 10,213

However, there are more factors that you need to consider than just annual operating costs, cost of living, building permit growth, unemployment rate change, and crime rate – especially if you are an international business looking to set up or expand an operation in Canada. First of all, you need easy access to the rest of the world – and there are not that many large international airports in Canada with regular flights around the world. When you get right down to it, if you are doing a lot of international traveling, you probably want to be in Vancouver, Calgary, Edmonton, Winnipeg, Toronto, Montreal, or Halifax. Not only are these seven of the eight largest airports in Canada (by volume), but the only airports currently participating in the CANPASS program. However, we’ll include Quebec City since it did rank number one, St. John’s since it has the most eastern airport in Canada, and Ottawa since it is the nation’s capital.

Canada only has about 32M people, and with almost half its population clustered in and around the seven CANPASS cities (over 14.6M people in the greater metropolitan areas), it’s not surprising that it only has a handful of large airports with a large number of regular international destinations. Thus, with the exception of Ottawa, the nation’s capital, it makes sense that we should more or less restrict ourselves to these cities in our determination of the location that is truly optimal for an international company to open a (new) office in Canada.

Restricting our analysis to these cities, we see the following rankings:

City Yearly Operating Cost ($M) Cost of Living Index Building Permit Growth Unemployment Rate Change Crime Rate (/100,000) Airport (flts/day) Unweighted Sum
Quebec City, Que. 4 2 1 2 1 10 20
St. John’s, Nfld 1 1 6 8 3 9 28
Edmonton, AB 5 3 2 4 8 5 27
Halifax, NS 2 5 3 5 9 7 31
Ottawa, Ont. 6 7 7 1 2 6 29
Winnipeg, MB 3 4 4 7 7 8 33
Vancouver, BC 10 9 5 3 10 2 39
Calgary, AB 8 6 8 9 4 4 39
Toronto, Ont. 9 10 10 6 5 1 41
Montreal, Que. 7 8 9 10 6 3 43

At this point, it becomes abundantly clear that Vancouver, Toronto, Calgary, and Montreal are not your best choices (which is not unexpected since they scored so low on Canadian Business’ ranking). Furthermore, when you consider St. John’s lack of building permit growth and airport facilities (you need to house your organization), it’s probably not your best choice either.

This leaves Quebec City, Edmonton, Halifax, Ottawa, and Winnipeg. Considering that one of your primary decision drivers will (and should) always be cost of operations, that cost of living needs to be reasonable in order to maintain reasonable cost levels (since talented human resources are always a significant expense and will only stick around if they are afforded a comfortable lifestyle), and that commercial space is not increasing, this should strike Ottawa from your list as well.

So, Quebec City vs. Edmonton vs. Winnipeg vs. Halifax, which is truly the best location to set up a new location as part of your international business? Considering a primary driver is international accessibility, and that Quebec city is not one of Canada’s international airports (and that it only has only one fourth of the traffic of Halifax or Winnipeg), we should be tempted to drop Quebec City at this point. Furthermore, when you consider that communication is key, that English is the international language of business and that Quebec City, in the heart of Canada’s only province with French as the sole official provincial language, is not nearly as bilingual as Montreal, and despite it’s beauty and low cost of living, its time to chop it from our list.

So, we are down to Edmonton, Winnipeg, and Halifax. Let’s review our rankings:

City Yearly Operating Cost ($M) Cost of Living Index Building Permit Growth Unemployment Rate Change Crime Rate (/100,000) Airport (flts/day) Unweighted Sum
Edmonton, AB 5 3 2 4 8 5 27 (12)
Halifax, NS 2 5 3 5 9 7 31 (12)
Winnipeg, MB 3 4 4 7 7 8 33 (15)

With these rankings, it looks like Edmonton might be the best city, but when you limit it to your three most critical factors – international access, operating cost, and building permit growth (since you need space), Edmonton and Halifax tie and Winnipeg is still at the bottom. Thus, it should be clear that the race is really between Edmonton and Halifax. (We ignore crime rate and unemployment rate changes since they are all relatively close and since they are not really strong determining factors. Cost of Living does have an impact, as it indirectly impacts operating costs, but the costs of living are very similar.)

Halifax is 7% cheaper, Halifax International Airport (which is nearing the final stages of extensive renovations and improvements) processes 75% of the annual volume of Edmonton International Airport (with over 15 airlines serving it), and, unlike Edmonton (which is overshadowed in almost every way by Calgary), Halifax is the center of not only the province, but Canada’s Maritime Provinces. Furthermore, it’s the ideal location for a North American office that has to regularly work with locations across North America and Europe. Halifax is on Atlantic Standard Time, which means that it is four hours ahead of California (Pacific Standard Time) and four hours behind London (Greenwich Mean Time). So, you can work with Europe in the morning and California in the afternoon in a standard business day! Then there’s the issue of bandwidth – the majority of the big bit pipes to Europe run through the area (which also has the Telecom Application Research Alliance), so strong, fast connectivity is not a problem! (Furthermore, Nova Scotia’s two full-service telephone companies offer end-to-end redundant fiber networks.)

And, for those of you who need ocean transport, the Port of Halifax (the first inbound and last outbound port on the North American continent) is a full day closer to southeast Asia than any other North American port. Furthermore, Consolidated Fastfrate is currently building a new state-of-the-art transload, distribution, and warehouse facility at the Port.

Halifax may not be building as explosively as Edmonton, but it’s still an aggressive pace. Moreover, rapid fire expansions can often lead to rapid fire contractions, so Halifax might be the safer bet. Furthermore, when you get right down to it, once a city has made the cut, there are more than just hard numbers to think about.

The real strength of a company lies in its people – who need to be educated and cultured. Per Capita, Nova Scotia (and Halifax in particular) has one of the highest concentrations of universities and colleges in the country (which have exported their services to over 100 countries globally, enroll students from over 140 countries annually, and which graduate approximately 15,000 students yearly), and the highest concentration of graduates with a post-secondary education in Canada. Halifax is the largest city in the maritime provinces and a strong argument can be made that it is the cultural center. With annual events such as the Annual Atlantic Film Festival, Atlantic Jazz Festival, Atlantic Fringe Festival, Halifax International Busker Festival, and Shakespeare by the Sea that rival similar events in Canada’s largest cities, culture surrounds you.

Therefore, even though it only landed ninth on Canadian Business’ list of the best cities to do business in Canada, I would argue that Halifax is the number one location to do international business in Canada. After all, if you consider the following numbers from the article Get in Line from the same issue of Canadian Business, Halifax tops the list for the most cost effective city not only in Canada, but the U.S as well, to do business!

City Salaries ($mil) Benefits ($mil) Labour Costs ($mil) Rent ($thou) Power ($thou) Total ($mil)
Halifax 8.09 1.62 9.71 721 38 12.04
Edmonton 8.49 1.70 10.18 709 31 12.48
Montreal 8.74 1.75 10.48 743 36 12.83
Calgary 8.90 1.78 10.68 810 31 13.11
Ottawa 9.01 1.80 10.81 911 36 13.33
Toronto 9.41 1.88 11.29 893 40 13.84
Vancouver 9.52 1.90 11.42 1164 24 14.22
Salt Lake City 8.60 3.27 11.87 940 29 14.41
St. Louis 8.79 3.34 12.13 1152 30 14.89
Baltimore 9.05 3.44 12.49 1088 39 15.20
Phoenix 9.17 3.49 12.66 1164 50 15.46
Denver 9.63 3.66 13.29 1013 50 15.93
Boston 9.81 3.73 13.53 1266 60 16.49
San Francisco 9.96 3.79 13.75 1873 88 17.32

So, if you are looking to set up a new office in Canada, and you do not already have one in Halifax, set it up here. I’ve been convinced for the last few years that Halifax would eventually become not only one of the best places to do business in Canada, but the best place if you were, or wanted to be, an international company. And now it looks like I was right. So beat the rush – do it now. After all, it’s always the businesses that invest at the beginning of the curve that reap the greatest rewards – and, right now, the curve is just starting. Some really big companies are already starting to move into the region – you don’t want to be left behind, do you?

Furthermore, if you want to move into the region, there are people and organizations here to help you do it – at very, very low cost. Nova Scotia Business, Inc. (which has assisted in the creation of roughly 17,000 jobs in the last five years) is rooted in Halifax and one of their primary missions is to help companies successfully set up shop here in Nova Scotia. They can also assist you in identifying loans, tax credits, and grants that you can use to significantly reduce the initial costs of setting up a new operation in the area. Furthermore, their payroll rebate program, which any company with the intention of creating at least fifty new full time jobs in the region can apply for, can help you reduce your initial costs for up to six years! They also have an Export Development team which can assist you in penetrating additional markets. For more information, check out the NSBI site or contact Paul Doucet, Director of Communications and Strategic Initiatives, he’d love to hear from you! You can tell him The Doctor sent you.

If you think it was unfair of me to skip companies 2, 3, 4, 6, 8 and 10 on the Canadian Business list in my analysis, here’s why I think otherwise.

For the longest time Charlottetown, #2, qualified as a city only because it was the capital of Prince Edward Island, a province of approximately 130,000 people surrounded by water, and it’s airport is about as small as you can get. If you really want to operate off of a tiny island, I’d go with Hawaii.

With respect to #3, #4, and #10, Saguenay, Que., Laval, Que., and Sherbrooke, Que. they are also rather small and, to be blunt, I doubt that most Canadians even know where they are! (If two of these cities were not near the shortest driving route between New Brunswick and Ontario on your way to Ottawa or Toronto, I probably would not know where they were!)

New Brunswick, a province of only 0.75M people, has three cities vying for supremacy – Moncton, the traditional business hub, Saint John (#6), an emerging competitor thanks to IT and Irving, and Fredericton, the capital with the primary University campus. In addition, they have two vying airports – the Moncton airport and the Fredericton/St John airport. As a result, I would argue that neither city is the best place to do business in the Maritimes and that Saint John does not belong on our list.

Markham, Ont., #8, like the other cities in Ontario on the list, are going to be shadowed by Toronto and Ottawa, especially since most of these cities are small (in comparison), with limited airports and employable populations.