1) Province of Ontario, Canada. Introduction

Ontario's 12.0 million people make it Canada's most populous and dynamic province. Its share of Canada's GDP for 2002 was 42.1 % and it is Canada's leading manufacturing province accounting for 53.5 % of the total national manufacturing shipments in 2002.
The Ontario economy rebounded strongly in 2002, growing by 3.8 %, more than two and a half times the rate of the previous year. The pace of growth slowed towards the end of last year, reflecting a marked slowdown of the U.S. economy, higher oil prices and the uncertainty from the conflict with Iraq. Ontario has a history of strong growth. The stock of FDI in Canada more than doubled in the last 10 years to $ 321 billion, or about 30 % of GDP. In 2001, real GDP grew at a rate of 1.5 %, in 2002 ? it rebounded to 3.8 %. The Ontario economy is expected to expand by 3.0 % in 2003 and pick-up in 2004 by 3.6 %.
Ontario has a diverse and well-balanced economy. The province has relatively high concentrations of manufacturing and financial and business services. The Ontario economy has been shifting towards export-oriented, higher value-added industries.
Employment in Ontario stood at 6,068,000 in 2002, with 105,000 jobs created. Jobs are expected to rise by 112,000 in 2003 and 220,000 in 2004.
Inflation in Ontario was 2.0 per cent in 2002, and is forecast to rise by 3.0 per cent in 2003, and by 2.0 per cent in 2004.
Investing in every sector of the economy:

More than two-thirds of Canada's foreign direct investment comes from the United States. This is due to the stable political environment, the favorable Canadian exchange rate and Canada's strong economic performance.

Foreign Direct Investment by Region 2002

Country____________$Cdn Billions____Share
U.S.A.______________ 224.3_________64.20
Europe (Excl. U.K.)____76.2__________21.28
U.K.________________26.3__________7.53
Pacific Rim__________16.4___________4.69
All Other____________6.2___________1.77

Source: Statistics Canada (Canada's International Investment Position, 1926 - 2002), April 2003 (5/2003)

Ontario's manufacturing and service sectors attract foreign investors looking for competitive costs, available labour and a positive business climate.

Foreign Direct Investment by Industry 2002

Industry________________$Cdn Billions_____%Share
Wood & Paper_____________14.772_________4.23
Service & Retail____________29.116________8.33
Machinery & Equipment______49.108________14.06
Finance___________________67.182________19.23
Energy & Minerals__________79.660_________22.80
Others*__________________109.548________31.36
Total_____________________349.388________100.01

Source: Statistics Canada (Canada's International Investment Position, 1926 - 2002), April 2003 (5/2003)

Other* includes Food, Beverage & Tobacco, Chemicals, Chemical Products and Textiles, Electrical and Electronic Products, Construction and Related Activities, and Communications.


The risks to foreign investors:

For foreign investors, risk is the possibility that the expected return on their investment may not be fully realised. This includes the possibility that their may loose some principal. There are in fact five categories of risk to foreign investors to consider when assessing an investment in Canada:

 Inflation Risk: The danger that rising prices will reduce the purchasing power and real rate of return on their investment over time.
 Interest Rate Risk: The possibility that a rise in interest rates may dictate a drop in the value of their investments. For example, rising rates can make dividend yields on current investments less attractive.
 Economic Risk: The danger that a downturn in the economy, or other significant economic event, will depress the value of their investments by reducing earnings capabilities.
 Market Risk: The possibility that events in the market itself may have an adverse effect on the value of their investments.
 Specific Risk: Relates more directly to the individual investment itself. It covers such elements as new technology making a certain firm's products obsolete, or greater competition reducing earning capabilities.

With a greater understanding of the various forms of risk, the foreign investors will be in a better position to find ways to help reduce risk of their investment in Ontario Canada.

2) INVESTMENT PROMOTION

a) how do official government web sites market themselves to attract FDI?
To attract FDI, the official government web site insists on:
 The Competitive Economy: Ontario has a highly skilled work force, low start-up costs, high tech infrastructure. That is why Ontario?s economy is very competitive.
 The Superior workforce: In Ontario, the workforce is unrivalled in terms of knowledge, education and skill level. The labour turnover rates are quite low.
 The easy Access to Global and North American Markets: Ontarian companies have entry to the world?s largest markets through the North American Free Trade Agreement (NAFTA).
 The Cost-Competitive Business Environment: The cost of doing business in Canada is quite low.
 The First-Class Infrastructure: Ontario offers a business infrastructure unmatched anywhere in the world thanks to its access to broadband and the digital economy, its sound and trustworthy banking system, or reliable municipal services.
 The excellent place to live: Ontario offers a superb quality of life: a safe, just and equitable society, excellent health and social programs, a reasonable cost of living, a world-renowned natural environment, dynamic cities and a rich cultural life.

b) What specific incentives do they offer foreign companies?

Compared with North America, Europe or Japan, Canada including Ontario is the lowest cost place to do business. This was the result of an extensive survey released in January 2002 conducted by the prestigious international consulting firm KPMG.
When it comes to the after tax cost of setting up and running a business for ten years, Ontario has an overall cost advantage over its competitors.
 Production: Ontario's productivity is outstanding, and the result is a very competitive manufacturing unit cost index.
 Competitive corporate taxes: For business, Ontario has a low cost tax environment. Ontario is a low cost country for business. Elimination of capital tax boosts the Canadian tax advantage to 6.6 percentage points by 2008.

Canada's Tax System Supports Investment and more businesses have access to tax-free rollovers:
- Eligibility size: $50 million
- Federal capital gains inclusion rate reduced to 50% from 75%
Among G-7 countries, only Italy has lower tax rates on capital gains
Health Care Information : Ontario's outstanding health care system also helps keep costs low for business.
 R&D Costs : Ontario's research and development activities and infrastructure are world class?and its R&D tax treatment is very generous.
 Electricity and Energy Costs : These can contribute greatly to business costs, but in Ontario their effects are minimized.
 Costs for Construction, Land, Office Leasing : Once more, Ontario is very competitive when it comes to keeping the cost of business inputs low.
 Telephone Affordability : The price of being connected is not high in Ontario.

c) What conditions do they clearly state for foreign investors?
The government has created favourable conditions for foreign investors like:
 Successive tax reductions on individuals and companies,
 the balanced budget,
 the elimination of useless administrative formalities,
 the renewal and construction of new infrastructure,
 the strengthening of measures that incite creation of jobs and investment
 Coface rated Ontario A1 which means that the steady political and economic environment has positive effects on an already goodpayment record of companies. The probability of default is very low.
All of these conditions have translated into the emergence of a dynamic economy.



3) ATTRACTIVENESS FOR INVESTMENT

Canada is a very attractive country for foreign investors. Except some regulated sectors, Canada has always been one of the most opened countries as regards foreign investments.
Canada benefited from a strong penetration of foreign investments thanks to a favourable environment. Thanks to its history and its proximity with USA, Canada attracted many foreign investments, as American and European.

Most of big multinationals and a lot of foreign companies have a setting up in Canada. According the statistics, the total of Foreign Direct Investment in Canada represents 29,4% of the GDP, it means a penetration rate is higher than the penetration rate of the majority of industrialised countries.

1. In order to explain the attractiveness of Canada, different key Advantages can be put forward:

 An excellent economic conjuncture, as Canadian growth has been very strong since many years without any imbalance. Canadian growth benefited from a growth faster than USA in 2002.

 Canada is a rich country: Canada has the advantage of numerous and abundant natural resources ( Hydrocarbon; Mining products; Hydroelectricity).
Furthermore, Canadian market is characterised by an important purchasing power. In terms of income per capita, Canada has one of the most higher with 23.000 $US/Hab.

 A developed financial market with an important network of specialised stock markets (Toronto, Calgary, Montreal), with an important availability of Capital- Risk, and with a sophisticated banking system.

 A good Technological level, as regards the qualification of the labour force, the R&D efforts and its infrastructure?s quality. Canada draws a performance, which can be easily compared to the performance of big developed countries.

 The Access to the North American market thanks to NAFTA, Canada constitutes a privileged access way to investments, as USA and Mexico.

 Competitive conditions: Canada is the country which presents the most interesting global costs for companies as regards for example setting ups and its working.

 The competitive advantage of Canada is due to the low costs of labour, of building lands, of electricity, of telecommunications and of fiscal charges. But the most important competitive advantages concerns Software and R&D.

 The weakness of the Canadian dollar is also an advantage.

2. But Canada also presents some Drawbacks to foreign investments:

 Some sectors are subjected to restrictions as regards foreign investments. And these sectors are strongly regulated (Financial services, Telecommunication, Transports, ... etc).

 Canadian economic environment is very favourable to investments, but the government doesn?t have an active specific policy to support foreign investments.

 The importance of the amercian presence in Canada might be a drawback as the USA are powerful and constitute a big competitor. That is why countries willing to invest in Canada might be braked in order to avoid competition with Americans.

3. Which industry sectors would be wise to invest in this country?

Canada has an excellent competitive position in the High Tech sectors with high added value, as software thanks to low labour costs and to the weakness of the Canadian dollar.





4) Anticipation of Performance Standards

 Ontario government ?s long-term investment goals
a) R&D is the integral for continued success; it is vital to create the new products and processes that will increase productivity and make Canada more competitive internationally.
b) Création of the favorable economic climate to attract more new foreign investments.
c) Stable employment
d) Strengthening of sectors? global competitiveness and creating new opportunities for growth

 The Canadian government faces some internal political pressures to impose tough restrictions or operating conditions on foreign investors.

Sectoral Restrictions and conditions:

Agriculture: Loans by the Farm Credit Corporation may be made only to: individuals who are cnadian citizens or permanent residents; farming corporations controlled by anadian citizens or permanent residents; and co-operative farm associations, all members of which are Canadian citizens or permanent residents.

Energy ? Uranium: A minimum level of resident ownership in individual uranium mining properties of 51% at the stage of first production is required. Exceptions to this limit may be permitted if it can be established that the property is in fact 'Canadian-controlled'. While these limits apply to the control of production, foreign investment is encouraged in exploration and development.

Financial services: Canadian government removed the limits on foreign ownership of federally regulated financial institutions in December 1994. Foreign banks must incorporate subsidiaries in Canada to undertake the business of banking.

Fisheries: Foreign fishing vessels are prohibited from entering Canada's Exclusive Economic Zone except under authority of a licence or under treaty. Foreign vessels are those,which are not 'Canadian' as defined in legislation. The Minister of Fisheries and Oceans has discretionary authority with respect to the issuance of licenses.

Culture: For example: book publishing and distribution. Direct acquisition by non-residents of Canadian-controlled businesses is not normally allowed. Foreign investments in new businesses are considered favorably provided the investment through a joint venture with Canadian control.

 Our company & industry sector and special conditions imposed upon our company from the Canadian government:

Our company is a prosperous multinational corporation. The business activity of our company is Telecommunication in Ontario.
The government might impose some special conditions as follows:

a) Legislation requires that the Canadian broadcasting system be effectively owned and controlled by Canadians. Foreign ownership of any given broadcasting licensee as well as cable operations is limited tolimited to a maximum of 20%.
b) All users of the radio spectrum are required to obtain a radio licence. In the case of individuals, the criteria for eligibility are Canadian citizenship or permanent residence.
c) In the case of a corporation, the critere for eligibility is based upon Canadian residence, and ownership or control.
d) The policies governing the establishment and operation of Canadian telecommunication common carriers restrict foreign ownership to 20% (33 1/3 percent in the case of holding companies). There are no ownership restrictions for companies which provide telecommunications services on a resale basis, i.e. resale of leased common carrier facilities/value-added services.

(source : Investment Canada Act*)

*The Investment Canada Act has been in force since 1985. Recognising the benefits that flow from international direct investment, the legislation reflects Canada's policy of welcoming international investment, and indeed of attracting quality investment to all regions of Canada.
At the same time, for greater assurance of benefits to Canada at the individual transaction level, the Act contains provisions for the review of acquisitions of control of significant Canadian businesses by international investors. The Act also authorise the review of the establishment of new business enterprises in the cultural industries.


How our firm will contribute to national goals:

 Our firm will play a positive role in Ontario by enhancing employment prospects, by contributing to economic and technological development.
 Our activity will participate in improvement of efficiency through increased competition forcing domestic firms to become more productive and. Consequently the quality of telecommunication services will rise and the Quality / Price balance will be developed and improved.
 Our firm will contribute to technological progress in the sector, to strengthen its competitiveness and therefore to global progress of the country.





5) Investment Proposal

Our investment project is to set up the Joint venture with Ontario Federal Municipality partner for the automotive industry in Toronto, Ontario. Our company is of French origine and the leader in this sector in Europe.
We propose the Investment Project into the auto parts in Ontario aimed at
 Development and modernization of the existing technologies in this sector as we plan to conduct Research and Development. Innovation is our essential strategy
 Improvement of quality and diversity of the offer.
 Boosting of productivity growth in Ontario
 Meeting the consumer needs
Competitive advantages: Our firm strong competitive advantage is our experience and involvement in international trade as we have wide network of links all over the world and our strong image is confirmed during the years of activity
 As we have our ?portefeuille? of clients in different markets including Eastern Europe, we will be able to create new opportunities for development of Ontario?s relations with this geant market
 Our company is also famous client of COFACE and we can offer appropriated assurance
 Understanding of consumer needs is one of priorities of the company, so we will provide the satisfaction of our clients
 We apply environmental standards to our operations. So we will stimulate our suppliers to do the same. Our goal is to minimise environmental impacts at all points in the value chain
 We have perfect supply chain management
 We will create jobs and manage them in an appropriate way, as we are experienced in penetration of different markets
 We dispose the full-scale design facility, alternative fuel applications, cold weather development and quality engineering.

(Source: Automotive Parts Manufacturers' Association;
The Ontario Business report: 2002 was a near-record year for Ontario?s auto industry; Oshawa engineering centre leads the way)

 Performance Standards:

1) Required level of local input in manufacturing (Raw material, etc)
Our company offers the improvement of linkages to the various industries, which supply auto manufacturers with inputs, parts, supplies, materials, and services.
2) Guarantee of technology transfer:
Our technology adapts a whole new generation of technology and flexibility in the approaches to production organisation.
We will use every policy level at our disposal, from skills training to infrastructure to R&D programs and much more.
3) Create a specified number of local jobs:
We help Ontario to retain auto sector jobs and create more.
4) Management positions to local staff:
We will combine management by local staff and foreign staff. As we consider it the strategical way to manage our companiy?s local setting up.
5) Manufacture a certain quantity of exportable products:
We are ready to improve export performance of Ontario by exporting a certain quantity of our products to China and Mexico.



 The incentives which we expect / request from the country.

 We would request fiscal and social benefits: tax incentives, competitive corporate tax rates, funding of skills training.
 For example: to train young people in designing, testing, and producing auto parts.
 We would like to have an incentive for Research and Development like from Ontario Research Development Challenge fund in order to expand training opportunities.
 We will request the support of our federal and municipal partners; it will market and maximize our company advantages in Ontario.

 Some items we definitely will not offer:

We will not agree to limit the number of local jobs neither to reduce the working hours. We can?t accept these conditions, because we need high productivity.



Used sites :

http://www.gov.on.ca
http://www.ontario-canada.com
http://www.oecd.org
http://www.cbsc.org (Canada-Ontario Business Service Centre)
http://www.cedr.gov.on.ca (Community & Economic Development Resource)
http://www.trd.fin.gov.on.ca
http://www.apma.ca (Automotive Parts Manufacturers' Association)
http://www.2ontario.com
http://www.nob.on.ca