Panel 1 Canada s Investment Advantage Competitive Alternatives 2014 - KPMG s Guide to International Business Location Costs 8 th Chinese Enterprises Outbound Investment Conference April 2014 Jamie Samograd
Presentation Outline 1. About Competitive Alternatives 2. International cost results 3. Cost trends 4. City results 5. Other competitiveness factors 6. Further information 2
About Competitive Alternatives
About the Study Extensive guide to Business Locations - 2014 is 10 th published edition Ranks locations based on business costs - 10 countries, 100+ cities - 19 industries, 26 business cost factors - Separately compares non-cost business factors 6 months of research 50,000+ data elements Can be used as reference for: - Relocation, Expansion, Merger, Acquisition or Offshoring 4
Analysis Framework 5
International Locations 100+ cities in 9 mature and 1 emerging country * Not all study cities are shown due to space constraints 6
Industries and Sectors Overall Results Services Sector Manufacturing Digital Services Software development Video game production R&D Services Biomedical R&D Clinical trials management Electronic systems develop and test Corporate Services International financial services Shared services center Advanced batteries Aircraft parts Auto parts Electronics assembly Food processing Medical devices Metal machining Pharmaceuticals Plastic products Precision components Specialty chemicals Telecom equipment 7
Top Highlights For Canada Ranked #1 among 9 mature markets studied Business costs 7.2% lower than the US Business costs increased by 0.7% since 2012 Canada is among 4 countries (France, UK and Netherlands) that offer the lowest effective corporate income tax rates across business sectors 8
International Cost Results
Cost Components Analyzed 10
International Cost Results % cost advantage/disadvantage relative to US Source: Competitive Alternatives, KPMG LLP (Canada), 2014 11
Sector Results Digital Services % cost advantage/disadvantage relative to US Source: Competitive Alternatives, KPMG LLP (Canada), 2014 12
Sector Results R&D % cost advantage/disadvantage relative to US Source: Competitive Alternatives, KPMG LLP (Canada), 2014 13
Sector Results Corporate Services % cost advantage/disadvantage relative to US Source: Competitive Alternatives, KPMG LLP (Canada), 2014 14
Sector Results Manufacturing % cost advantage/disadvantage relative to US Source: Competitive Alternatives, KPMG LLP (Canada), 2014 15
Cost Trends
Cost Trends Since 2012 Canada Back in first place among mature markets Cost index down from 95.0 to 92.8 Significant cost factor trends - 3% currency depreciation against the US$ - Decrease in office facility lease costs - Decrease in sea freight rates - Decrease in natural gas rates - Increase in industrial facility lease costs - Increase in air freight rates - Increase in electricity rates 17
Taxes Tax costs: - Include income, property, sales, capital, other taxes - Represent up to 14% of location-sensitive costs - Effective income tax rates are calculated net of generally applicable tax credits and incentives: Lowest 2 nd 3 rd Digital services Canada UK France R&D France Netherlands Canada Corporate services UK Canada Netherlands Manufacturing UK Canada Netherlands 18
City Results
Regional Results Major International Cities - Mexico City 81.9 - Toronto 93.6 - Milan 98.3 - Paris 99.4 - London 99.9 - Los Angeles 100.5 - Frankfurt 101.0 - Sydney 101.0 - Tokyo 102.1 - New York City 103.6 Total operating costs, including taxes United States = 100% 20
Costs Across North America 21
Regional Results US/Canada Pacific population > 2 million - Vancouver, BC 94.6 - Portland, OR 98.1 - Las Vegas, NV 98.2 - Riverside-San Bernardino, CA 98.7 - Sacramento, CA 99.5 - San Diego, CA 99.9 - Los Angeles, CA 100.5 - Seattle, WA 101.4 - San Francisco, CA 104.2 Total operating costs, including taxes United States = 100% 22
Regional Results US/Canada Northeast Population > 2 million - Montreal, QC 92.0 - Toronto, ON 93.6 - Cincinnati, OH 94.9 - Cleveland, OH 96.3 - Pittsburgh, PA 96.4 - Baltimore, MD 97.1 - Detroit, MI 98.2 - Philadelphia, PA 99.4 - North Virginia (Metro DC), VA 100.1 - New York City, NY 103.6 Total operating costs, including taxes United States = 100% 23
Regional Results US/Canada Northeast Population < 2 million - Quebec City, QC 90.7 - Niagara Region, ON 91.9 - Sudbury, ON 93.5 - Youngstown, OH 94.0 - Lexington, KY 94.5 - Charleston, WV 94.6 - Saginaw, MI 96.0 - Indianapolis, IN 96.2 - Buffalo, NY 96.9 - Wilmington, DE 98.1 - Trenton, NJ 99.5 Total operating costs, including taxes United States = 100% 24
Regional Results New England/Atlantic Canada - Moncton, NB 90.1 - Charlottetown, PE 90.4 - Fredericton, NB 90.8 - Halifax, NS 91.6 - St. John's, NL 93.7 - Bangor, ME 95.2 - Providence, RI 97.7 - Manchester, NH 98.0 - Burlington, VT 98.4 - Hartford, CT 98.9 - Boston, MA 101.1 Total operating costs, including taxes United States = 100% 25
Other Competitiveness Factors
Other Competitiveness Factors Broad array of factors influence location decisions 27
Other Competitiveness Factors Competitive Alternatives main report also includes a comparison of other competitiveness factors - Non-cost factors that influence location decisions - Separate from the primary analysis of business costs Aspects of the business environment compared - Economic conditions - Labor availability and skills - Innovation - Infrastructure - Regulatory environment - Quality of life and cost of living
For Further Information
For Further Information Full results available from www.competitivealternatives.com - Download reports and summaries - Profiles of all cities included in the study - Access detailed study results - Compare selected countries and cities - Results for all 19 industry operations - Assess sensitivity to exchange rates - Contact study leaders 30
Jamie Samograd jwsamograd@kpmg.ca www.competitivealternatives.com The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. 2014 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. The KPMG name, logo and cutting through complexity are registered trademarks or trademarks of KPMG International. 31