Red Deer’s Land and Economic Development Department has a fresh set of stats with which to entice foreign investment.
KPMG’s 2010 Competitive Alternatives study, the results of which were released on Tuesday, shows that Red Deer compares favourably to the United States and countries in Europe and Asia Pacific when it comes to business costs. And that relative advantage has increased since KPMG’s last study in 2008.
“It gives us a great tool with which to market the region,” said Cyril Cooper, land and economic development officer with the city.
Red Deer is currently working with Red Deer County, the Red Deer Chamber of Commerce and Red Deer College to attract foreign direct investment from the United States and Europe.
In the study, the KPMG network of international firms compared business costs in cities across 10 countries. Using the average figure for New York City, Los Angeles, Chicago, and Dallas-Fort Worth as a baseline of 100, it ranked the other cities and countries.
Red Deer’s costs came in at 95.1 per cent of that baseline, with the average for Canada 95 per cent. The 32 Canadian cities included in the study had average business costs ranging from 91.2 per cent in the case of Sherbrooke, Que., to 95.8 per cent for Toronto.
Three other Alberta cities were considered, with Grande Prairie having a percentage of 96, with Edmonton 95.7 and Lethbridge 94.1.
In 2008, the average business cost for Red Deer was calculated at 97.2 per cent of the U.S. baseline.
“That’s the best thing is that we’ve improved 2.1 per cent,” said Cooper. “That’s really positive.”
The KPMG study measured 26 “significant cost components,” including labour, taxes, real estate and utilities. It also factored in non-cost considerations like labour availability, economic conditions, infrastructure and quality of life.
Specific sectors were studied. For Red Deer, the figure was lowest in the case of research and development, at 79.1 per cent of the American baseline. Corporate and IT services averaged 87.6 per cent and manufacturing came in at 97.5 per cent.
“Research and development is where you really see some significant improvements,” said Cooper, noting that the average cost in this category two years ago was 91.2 per cent of the baseline.
He pointed out that Red Deer’s relative costs decreased in all three categories.
“On a baseline perspective, compared to 2008, things are positive.”
Among the countries included in the KPMG study, Mexico had the lowest average business cost at 81.8 per cent of the U.S. baseline. Following Canada at 95 per cent was the Netherlands (96.5 per cent), Australia (97.8), the United Kingdom (98.2), France (98.3), Italy and the United States (100), Germany (102.6) and Japan (107.6).
The KPMG study said Canada’s improved position relative to the United States was due in part to an easing of the Canada-U.S. exchange rate over the past two years, with the loonie pegged at USD$0.943 at the time that the numbers were compiled, down from parity in 2008. It also cited federal and provincial tax cuts and reforms, noting that business taxes in Canada are now lower than in any of the other G7 countries.
While the report might offer some ammunition to Liberal Leader Michael Ignatieff’s proposal to scrap the remainder of the scheduled corporate tax cuts, KPMG stressed the importance of staying ahead of the competition.
The Conservative government and business leaders have criticized Ignatieff’s proposal, arguing that taking about $5 billion from Canada’s corporate sector in taxes they would not have paid will mean firms will slow down investments and fewer jobs will be created.
“(Canada) must continue to present a clear value proposition to businesses in other areas in order to maintain its attractiveness for international firms,” said Simon Harding, an associate partner with KPMG’s advisory services.
With files from The Canadian Press.
hrichards@www.reddeeradvocate.com