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Atlantic Canada: a Region on the Rise

Jun/Jul 06
The dominant image of Canada's four Atlantic provinces - New Brunswick, Nova Scotia, Prince Edward Island, and Newfoundland & Labrador - as a region of rugged beauty and bucolic charm is giving way to a new one. With a population of barely 2.2 million people, Atlantic Canada is earning a reputation as a winning place for business and industry. Along with its undeniably high quality of life - low housing costs, crime rates, pollution levels - it retains abundant and well-managed natural resources, a startlingly mixed and diversified economy, an educated, trained and loyal work force, a fully modal transportation infrastructure, and an extraordinarily cost-competitive environment for growth.

In fact, in the 2006 Competitive Alternatives International Business Cost Study, compiled by Swiss-owned KPMG Management Consultants, the Atlantic cities of Moncton (New Brunswick), Charlottetown (Prince Edward Island), Halifax (Nova Scotia), and St. John's (Newfoundland & Labrador) scored first, second, third, and fourth, respectively, as the least expensive locations in northeastern North America for industry.

According to John Thompson, CEO of Enterprise Greater Moncton, "The study lends credibility to the case we are making that [we are] a good place. You have to realize that in North America alone, we are competing with around 285 jurisdictions for business. Being in this study is very useful because your name [becomes] recognized."

"The report lays the groundwork for [the city] to continue to succeed," says Clifford Lee, mayor of Charlottetown. "When investors consider where they want to do business, reports like this are considered a major component of the decision-making process. We have become a big city in the business world with all the local down-home qualities that make us unique to the rest of the world."

New Brunswick
New Brunswick's economy is dominated by manufacturing industries such as food and beverages, wood-based manufacturing, transportation equipment, and nonmetallic ores and primary metals processing. New Brunswick is blessed with an abundance of natural resources. Forests, mostly spruce and fir, occupy 85 percent of the land mass; consequently, wood and wood products - pulp and paper, sawmills, and furniture - are key to the provincial economy. New Brunswick has several large mines that extract silver, bismuth, cadmium, coal, copper, natural gas, gold, oil, lead, potash, peat, tungsten, silica, salt, and zinc. Many of these nonmetallic ores and primary metals are processed in the province.

Tourism is a vital part of the province's economy. More than 1.5 million people per year visit New Brunswick's tourist attractions, including its two national parks and numerous provincial parks. Fishing and agriculture are also very important. More than 50 varieties of fish and shellfish are caught here; in fact, the town of Shediac has been called the "lobster capital of the world." In agriculture, New Brunswick's potatoes are renowned in more than 25 countries; strawberries, apples, blueberries, and vegetables are produced for local consumption and export, and the province is self-sufficient in the production of milk and poultry.

In recent years, New Brunswick has worked hard to further promote economic development by focusing on information and communications technologies, and attracting and developing cutting-edge technology clusters. Emerging sectors include life sciences, agri-foods, precision and component manufacturing, aquaculture, environmental engineering and waste management services, software development, and e-learning platforms.

New Brunswick turned in a performance last year similar to the previous year as its economy expanded 2.5 percent. Increases in provincial manufacturing shipments, exports and restaurant receipts surpassed national rates. Capital investment reached an all-time high. Farm cash receipts, retail trade, mineral production and port tonnage also reported favorable advancements. Tourism revenue held steady. Consumer inflation slowed significantly from the previous year and fell below the Canadian rate for the first time since 2001. The number of employed in the province surged forward to reach a record high in 2005; both full-time and part-time employment profited from gains. With employment growth exceeding labor force growth, the unemployment rate was pushed down into single digits, falling to an average of 9.8 percent. The provincial participation rate achieved an all-time high of 63.9 percent.

Mandated wage benefits in New Brunswick are below the Canadian average at 16.4 percent of payroll. In fact, the province's wage rates are among the lowest on the continent. Current research indicates that average annual earnings for computer programmers, electronics technicians, machine tool operators, machinists, mechanical engineers, production supervisors, and systems analysts in New Brunswick are anywhere from five to 15 percent lower than anywhere else in North America.

The Government of New Brunswick has also taken significant and substantial steps to ensure a competitive business environment in the province through specific tax measures. These include reducing the small business tax to the lowest in Canada; increasing the small business income tax threshold (active business income) from $400,000 to $450,000; reducing the general corporate tax rate to 12.5 percent; and reducing personal income taxes.

Nova Scotia
The Nova Scotia economy has, over the years, diversified away from traditional resource-based industries - fishing, farming, mining, forestry - into technical, high-end services for both the public and private sectors. Currently, the services sector accounts for 76.5 percent of the provincial economy, proportionately larger than in Canada as a whole.

Partly as a result of this, Nova Scotia's GDP has expanded since the beginning of the decade by nearly 14 percent. The services sector continues to outperform its goods-producing counterpart by nearly every measure, helping to solidify the province's reputation as the principal location in Atlantic Canada for R&D, public administration, and defense.

Indeed, Nova Scotia boasts a strong research community with 2,300 researchers conducting leading-edge work in the medical, marine, agri-foods, and technology fields at established facilities throughout the province. Related to this, the IT sector in Nova Scotia is strong, diversified, and growing. The province witnessed 11.8 percent employment rise in software and services during 2005.

Meanwhile, high-tech manufacturing has taken off in the province, thanks to companies like Michelin, which has produced more than 150 million tires from its three plants, and Tesma PFC, which manufactures components for virtually every transmission system of General Motors' rear-wheel drive cars and light trucks. Nova Scotia is also home to the highest concentration of military personnel in Canada, with 20,000 people working directly in the aerospace and defense industries. Nova Scotia's Aerospace Business Park is home to such companies as Lockheed Martin, IMP Group, and Pratt & Whitney.

In tandem with all of this, the province is positioning itself as one of North America's main energy supply regions. Nova Scotia's Sable Offshore Energy Project produces natural gas from a number of wells off the coast and the province's supply feeds industrial and commercial/residential applications. Nova Scotia's offshore has approximately $3 billion invested in infrastructure. The 1,300-kilometer Maritimes and Northeast Pipeline connects the province directly to the U.S. Northeast market and the North American gas pipeline system.

Other investment-sensitive factors include the provincially operated Nova Scotia Business Inc.'s (NSBI) payroll rebate, which is a performance-based incentive offered to eligible companies expanding in or locating to Nova Scotia. The federal government of Canada and the provincial government also encourage scientific research and experimental development (SR&ED) through their respective SR&ED tax credit programs. These programs are designed to reward claimants who attempt to overcome a technical uncertainty; attempt to advance technology while overcoming the uncertainty; and ensure the process undertaken is a scientific one that is carried out or supervised by qualified personnel.

At the same time, Nova Scotia offers the most favorable corporate tax regime in Atlantic Canada, as well as the region's lowest provincial income tax and top marginal rate. And it levies no provincial payroll taxes. Finally, Nova Scotia communities offer skilled, educated, and available work forces; competitive cost structures; and a clean, attractive, and pleasant environment.

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