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backAMERItalk August, 2005
Ontario: Keys to Success
Those in charge of encouraging development in Ontario sound like proud corporate executives when they declare that the province's biggest asset is its people.
"Our key ingredient to success is our work force," says Robin Garrett, assistant deputy minister in the Trade and Investment Division of the Ontario Ministry of Economic Development and Trade. "We've got skilled labor and an education system that puts us against some of the top locations in North America," adds John Davidson, the ministry's manager of information and communication technologies, life sciences, and business services.
The province's leader, meanwhile, has made improving Ontario's human capital a cornerstone of his administration ever since taking office in 2003. "It's a plan to strengthen the education and skills of our people because we know the best work force will attract the best jobs," Premier Dalton McGuinty said last October in a statement marking his first year in office. "It's a plan to ensure we have prosperity for people — strong economic growth grounded in the knowledge and skills of Ontarians."
McGuinty's people plans revolve around a number of central goals. In education, objectives include creating 7,000 new apprenticeships and enhanced student aid to 50,000 university and college students. The push for prosperity includes investing $1.8 billion over four years to support research, development, and commercialization of new ideas through the province's universities, colleges, hospitals, and research institutes. And the government aims to improve the health of its residents by expanding access to a variety of care along with boosting wellness efforts.
When it comes to human capital, Ontario has plenty to brag about. Home to some 12.5 million people, it's Canada's most populous province. And, Garrett adds, "56 percent of the work force has a post-secondary degree, higher than the average in other industrialized nations." Workers are well-trained and productive, yet more affordable to employ than their counterparts in many American locations, according to a number of independent studies.
The province's businesses also benefit from location, Garrett notes. "Geographically, we're really nicely situated. We have easy access to 420 million consumers." Within a day's drive is 40 percent of the continent's population — a drive made easier by the province's extensive transportation infrastructure, rated by the Economist Intelligence Unit as number one relative to other G-8 countries.
Cost considerations tend to favor Ontario as well. Colliers International, for example, tracks real estate prices and finds that warehouse/distribution space in Toronto is less expensive than in most of the top American cities surveyed, while high-tech R&D space is also cheaper in Toronto. Labor costs are often lower in Ontario as well, and comparative studies have found lower corporate tax rates for Ontario manufacturers compared with their counterparts in manufacturing-intensive U.S. states.
Given such facts, it's not a surprise to learn that the province enjoys a healthy economy, with plenty of positive headlines. "We are the engine of the economy in Canada. We have a strong and remarkably diverse economy," Garrett says. "We're expecting real GDP to be at a 3.3 percent growth rate through 2007. It's expected to carry on."
Good News From Ontario
A number of recent headlines have brought tidings of Ontario's prosperity:
• In March, General Motors of Canada Ltd. announced its $2.5 billion Beacon Project, an investment that will create 500 new jobs in Ingersoll, Oshawa, and St. Catharines. To help make that happen, the province committed upwards of $235 million as part of its half-a-trillion-dollar Automotive Investment Strategy designed to support leading-edge auto manufacturing projects. The project includes establishment of the Automotive Centre of Excellence at the University of Ontario Institute of Technology in Oshawa, which focuses on automotive engineering, design, and innovation and aims to better link auto suppliers, universities, researchers, and students.
• Ford Canada last October promised to pump more than a billion dollars into its Oakville plant. The company is establishing a next-generation, flexible-manufacturing system along with more R&D. About $100 million from the provincial government's Automotive Investment Strategy will supplement the investment.
• DaimlerChrysler Canada last December announced a $365 million investment at its Windsor minivan assembly plant. Among other things, the automaker is replacing manual paint operations with a robotic painting line.
• In a deal announced late last year, Ferrero Group picked a site in Brantford for its new North American production facility. The chocolate maker is investing approximately $150 million to construct a 600,000-square-foot facility that will initially employ more than 600 people.
• Four new Apotex pharmaceutical facilities will create about 1,500 new jobs in Ontario, the company announced in November. It's the largest pharmaceutical investment in Canadian history, promising new facilities in North York, Etobicoke, and Richmond Hill.
• Procter & Gamble has spent the past year preparing a new Canadian distribution center in the Ontario community of Brantford. The 775,000-square-foot center required an investment of some $70 million, with employment of 150 expected.
• Nova Chemicals, maker of plastics and chemicals, recently announced plans to modernize and upgrade its Corunna ethylene plant. The $260 million investment is to increase capacity while reducing costs and improving reliability.
• Autoliv Canada last year expanded its inflatable-curtain-airbag manufacturing facility in Tilbury. The addition incorporates a scouring process and additional weaving capacity, and was made necessary by the growing demand for inflatable curtain airbags.
Driving Into Ontario
As recent headlines indicate, Ontario is widely recognized as a prime place to manufacture motor vehicles and parts. In fact, while Detroit is the historic center of the auto industry, adjacent Ontario has actually taken the lead when it comes to units produced, according to Garrett. "We finally surpassed Michigan," she says, noting that 2004 light-vehicle-manufacturing statistics show annual production of 2.6 million units in Ontario and 2.5 million in Michigan.
"There are 14 vehicle assembly plants in Ontario among six large vehicle manufacturers: General Motors, Ford, DaimlerChrysler, Toyota, Honda, and Suzuki," she says. "We also have more than 400 auto-parts manufacturers. Employment in automotive is about 114,000 people."
The presence of Toyota, Honda, and the Big Three makes Ontario all the more attractive for suppliers, Davidson notes. "Those OEM plants become a draw for those that have to be close to a Toyota or a Honda," he says.
Quite a bit more assembly takes place just across the border in the United States, Garrett adds. "We can deliver just-in-time to automotive plants throughout North America."
"The real pitch is we've got a location within the heart of the North American manufacturing belt," Davidson says. "From an OEM perspective, they can do it on a more cost-effective basis here than in some of our Great Lakes competitors, and we give the Southeast United States a pretty good run for its money."
Alive and Well
"Ontario has the fourth-largest biomedical cluster in North America," Garrett points out. The cluster includes 60 research centers and more than 100 biotech companies, including such prominent names as GlaxoSmithKline, Amgen, Biogen, Genzyme, AstraZeneca, Eli Lilly, and Pfizer.
The research component is what makes the industry in Ontario so healthy. "Economic growth in the life-sciences area is usually driven by innovation and scientific research," she says, and statistics indicate a steady growth in pharmaceutical R&D expenditures — every year for more than a decade. The provincial government, in fact, hopes to boost that even further by spending some $1.8 billion to coax more R&D from public-sector labs into the marketplace. "We're helping to commercialize publicly funded R&D," she says.
"We've put a tremendous amount of energy and money into getting more commercialization out of Ontario universities," Davidson observes. "We hope some American companies and other companies will be able to participate in that."
But tax credits also make Ontario a prime place for private research. "Our R&D tax credit is very generous," Garrett says. "The after-tax cost of $100 of research can be reduced to as low as $42 in Ontario."
As is the case with the automotive sector, Ontario's life-sciences sector coordinates well with its counterpart across the border. For example, biotech and pharmaceutical operations are on the rise in the Buffalo–Niagara area of New York, home to more than 150 companies, major research centers, and educational institutions.
Another primary sector that has fueled much of Ontario's recent economic growth is information and communications technology (ICT). "The bulk of the industry is in the Greater Toronto Area, but Ottawa is also known to be a leader in ICT, and the Waterloo region as well," Garrett notes.
Nearly a quarter million Ontarians work in the ICT sector, at more than 5,000 companies. Nortel Networks and Mitel Networks are among the homegrown players, and multinationals with major Ontario operations include IBM, Cisco Systems, Dell, Ericsson, Microsoft, Siemens, Motorola, and McAfee.
The province has deployed some of its high-tech expertise into the call-center business, enabling it to land quite a few high-end customer-contact operations. While India has become a hot destination for these kinds of centers representing American companies, Ontario holds its own for a number of reasons. "We've got the cultural compatibility and the same time zones, and the ability to get up to Toronto easily," Davidson notes.
In fact, even some of the major Indian contact-center providers have set up shop in Ontario, realizing that many clients want the option of near-shore operations. "India always beckons, but Ontario has a lot of good things to offer," he says.
Among the attractions is a well-qualified work force. Sixteen of the province's colleges of applied arts and technology offer specialized training in call-center operations, and a fifth of Ontario's work force speaks at least one language besides English.
What's more, Davidson says, some companies simply feel more comfortable bringing sensitive knowledge to a facility closer to home. "Their IP is protected under a legal system that is pretty much along the same lines as the U.S. Our laws are parallel."
Other Vibrant Sectors
Beyond automotive, life sciences, ICT, and contact centers, the province's economy benefits from a diverse variety of healthy sectors. Among them:
• Aerospace — More than 350 Ontario aerospace firms support the global industry with aerospace/aviation design, manufacturing, and product support. Much of this sector's goods and services are destined for export markets.
• Chemicals — Name a top chemical company, and odds are that it has operations in Ontario, where 23 of the 25 biggest names are doing business. Chemical manufacturing is the province's fourth-largest industry, and a large portion of the activity takes place in Sarnia, home of five refineries and 19 chemical plants.
• Environment — Ontarians love nature, which is not surprising given the splendor of the province's natural environment. Business people in Ontario have found plenty of ways to make environmentalism profitable, through specialized technologies and systems implementation.
• Natural Resources — Among the province's natural blessings are forests, which provide the wood and paper industries with products to export around the globe. Ontario also is a world leader in mining and mineral exploration, thanks to its abundant mineral wealth.
• Food — There are plenty of mouths to feed in Ontario, but the province's food sector also ships many products elsewhere. In fact, the agrifood sector is responsible for some $5 billion in annual exports, and Ontario is a leader in food-technology research and development.
• Machinery — Plenty of exports come from this industry as well. In fact, nearly 90 percent of the process-machinery shipments go elsewhere, to end users in more than 170 countries.
• Plastics — Ontario is the continent's third-largest plastics producer. Given its strengths in chemicals, natural resources, and machine tools, it's not a surprise to find that plastics is a fully integrated industry in Ontario, with everything from resin and material suppliers to mold-makers to processors.
Ready and Eager to Work
Ontario's work force stacks up favorably in a number of important measures. One is worker loyalty, demonstrated by the province's average employee job tenure of eight years (and nine years among manufacturing employers). By contrast, American workers on the average spend 3.7 years at a job before moving on.
In addition, statistics indicate a willingness among Ontario employees to embrace international standards for productivity and quality. Tally ISO 9000 certifications per 100,000 residents and you'll see the province at the top of the list, ahead of Michigan, Indiana, Ohio, and other manufacturing-intensive U.S. states.
As for costs, Ontario's workers typically can be hired for less, when compared to those in many U.S. cities. For example, it costs less to employ a computer programmer in Toronto or Ottawa than in Atlanta, Chicago, Dallas, or San Jose. The same holds true for electrical engineers and systems analysts.
Unionization rates, meanwhile, are lower in Ontario than in most other Canadian provinces, and labor troubles tend to be relatively few and far between. Provincial statistics measuring days lost to work stoppages show a healthy trend toward higher productivity.
The province is home to 39 percent of Canada's population, Garrett says, yet 53 percent of the nation's manufacturing jobs can be found there. "We're quite a bit more manufacturing-intense," she observes. In addition, 54 percent of Canada's international investment lands in Ontario. "That speaks to the diversity of the province and Toronto."
Making sure that the province's work force is ready to meet the needs of business and industry is serious business. Says Garrett, "We're doing a lot of investment in education to make sure we have the skilled labor they need." The province's network of publicly funded post-secondary education includes 24 colleges of applied arts and technology and 20 universities, with tuition rates considered low by international standards.
Ontario also has an active apprenticeship system partnering educators with businesses. A tax credit of as much as 25 percent helps businesses cover apprenticeship expenses. The provincial government recently announced plans to invest another $14.5 million in apprenticeship-training programs to update classrooms and equipment, develop new training materials, and expand such flexible alternatives as distance education.
Investments continue to boost the province's work-force–development system, a fact noted by Premier McGuinty when he announced the new Automotive Centre of Excellence at the University of Ontario Institute of Technology. "We know that Ontario is a lap ahead in the race to attract the best people and to have the best-educated, most highly skilled and productive work force in North America," he told a news conference. "By investing in our people, we can ensure that Ontario remains the place to be for years to come."
The Place to Be
Canada in general and Ontario in particular have historically attracted large numbers of immigrants, a fact that has made the province one of the most multicultural places on earth. Ethnic groups of all kinds are represented in Ontario, and more than 50 languages are spoken. Needless to say, the culture is enriched accordingly.
Adding to the quality of life is a mix of natural, unspoiled beauty and big-city amenities. Provincial parks and lakes dot the map and offer wide recreational opportunities, while cities such as Toronto beckon with major-league sports and world-class theater and shopping.
The cost of living compares favorably to many U.S. locations, and housing ranges from the affordable to the luxurious. Health care affordability is a given, thanks to the universal healthcare system, and Ontario's public-safety statistics are the envy of most American communities.
Still, as Premier McGuinty noted in a recent speech to the Canadian American Business Council in Washington, D.C., the work of improving Ontario is ongoing. "By investing in the skills and education of our people, increasing the innovative capacity of our manufacturers, and maintaining the infrastructure that makes our region go, we're building a future where knowledge and information drive growth. We can compete with the best and preserve our quality of life with well-paying jobs and a future that is bright and worth striving for."
Source: Area Development - GAI
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