Ontario: Welcoming the new millennium

Look around Toronto for examples of upbeat news.

OAO will locate in north Toronto near the Steeles Technology Campus, home to several major U.S. companies' software development and consulting operations. Excite@Home is located there, as are Motorola, Sprint, and Siebel Systems. In Markham, Motorola Canada will move into new headquarters this summer, bringing along with it three new R&D centers.

Internet activity is booming in Toronto. Zook Consulting checked the registry of top-level Internet domain names and found more than 200,000 based in Toronto. The city's number of domain names per capita ranks among the top North American cities, indicating a strong production level of Internet content.

The good news is not limited to the Toronto area. In Nepean, near Ottawa, high-tech powerhouse JDS Uniphase has launched a $41 billion acquisition of SDL Inc. of California, orchestrating the largest high-tech merger in history. JDS Uniphase is a growing leader in the hot field of fiber optics.

In Hamilton, American Express has created 150 jobs with a new call center offering corporate travel services for employees of PricewaterhouseCoopers. More contracts and jobs are on the way. TD Waterhouse is opening a 250-person call center in Ottawa, representing new jobs for investment representatives.

An RFD facility in Kanata will further the technology of California-based SS8 Networks. Zenastra Photonics also is building in Kanata, spending $40 million on a new headquarters and manufacturing facility that will create 500 jobs in the manufacture of optical components for high-speed networking equipment.

More and more people across North America are learning about the Technology Triangle in southwest Ontario. The high-tech region is roughly bounded by the cities of Kitchener-Waterloo, Guelph, and Cambridge and is fueled by half a dozen universities and a growing critical mass of tech operations. Among the Technology Triangle's headturning success stories is Research in Motion, which designs, manufactures, and markets innovative wireless solutions for mobile communications. The company spent $32 million last year acquiring six buildings adjacent to its headquarters.

Food-processing companies have fed the Ontario economy with healthy growth as well. Among the recent successes is Coca-Cola Bottling Co., which is creating 550 jobs with a $150 million facility in Brampton. The bottling plant will be the company's largest production and warehouse facility in North America. For its part, Hershey Canada is spending $42 million on two new production lines and a waste-- treatment facility in Smith Falls. Corn wet-miller Casco Inc. is investing more than $30 million in a facility in London.

These stories are just a small sampling of the positive economic headlines in Ontario. They're a breath of fresh air for people weary of bad news.

Growing in Ontario

Check the economic numbers; the good news in Ontario is more than just anecdotal. Yes, employment was off a bit and joblessness up slightly in the early months of 2001, but coming off a strong 2000 the figures remain quite respectable. And the Conference Board has forecast 2.2 percent employment growth by the end of the year.

Other indicators are as positive as ever. Business investment, which hit $27.4 billion last year, is expected to grow by 5.2 percent in 2001, well above the rate of increase recorded in 2000. Manufacturers are forecasting significant increases in capital spending. Housing starts in 2001 continue to rise over 2000 levels that represented an 11-year high. New-home sales and resales continue to be buoyant. Personal disposal income is on the rise and is expected to keep growing during the next several years. And inflation remains relatively low and steady.

With a gross domestic product of more than $270 billion, Ontario is the eleventh-largest economy in North America. It constitutes more than 40 percent of the Canadian economy and is growing faster than most of the G-7 countries. Healthy GDP growth is in the forecast for at least the next five years, according to the Bank of Montreal, with expected growth rates of nearly 3 percent this year and even higher the following few years.

The province's goods and services are increasing not only in volume but also in quality. More than 4,500 operations have achieved ISO 9000 status, well ahead of neighboring American states when figured on a per capita basis.

Ontario is Canada's center of manufacturing, handling 56 percent of the country's total manufacturing output. Transportation equipment is the biggest sector, accounting for a quarter of all production. Ontario ranks second only to Michigan in motor-vehicle production, thanks to the eight car and truck manufacturers that operate plants in the province.

Also leading the way in Ontario are such sectors as information technology, telecommunications, and financial services. The province has been an innovator in digital microwave transmissions, satellite communications, and data-distribution networks. Its commercial banking sector was the most profitable in the G-7 for most of the 1990s.

Who Does Business Here?

Nortel Networks is an Ontario-based company. Also housed in Ontario are such companies as Mitel, ATI Technologies, Magna International, Pantheon, INCO, and Four Seasons Hotels, to name just a few.

Foreign-based multinationals have built the Ontario economy as well, many of them having brought operations to the province decades ago. The automotive industry in particular got off to an early start. Ford Motor Co., for example, opened its first Ontario operation in 1904, only a decade or so after the invention of the automobile. General Motors showed up in Ontario in 1918, and Chrysler in 1924. Honda and Toyota have major operations in Ontario as well.

International companies in most other sectors also have found Ontario quite hospitable. The list is impressive: Boeing, Honeywell, DuPont, 3M, Dow, Glaxo Wellcome, Bayer, Nestle, Heinz, Nabisco, General Electric, Siemens, Procter & Gamble, Unilever. Even American Express has crossed the border to operate in Canada.

Nearly three quarters of Canada's foreign direct investment comes from the United States, 6 percent.from the United Kingdom, 13 percent from Germany and other European Union countries, and 6 percent from Japan and others in the Far East. Multinationals are attracted to Ontario for a number of reasons: It's an ideal place to take advantage of the North American Free Trade Agreement. Within a day's drive of Toronto is nearly $3 trillion in personal income, about 37 percent of the personal income of Canada and the United States combined. Moreover, the province's international exports make up two fifths of its GDP and total more than $10,000 per person, twice as high as in neighboring Michigan and as much as four times the rate in many Western nations.

Ontario is also a prime location from which to serve the lucrative market of Canada and, of course, Ontario itself. The Canadian market tops $600 billion, and Ontario buys some $80 billion of its own goods and services.

Keeping Costs under Control

The Economist Intelligence Unit describes Ontario's cost structure as low, "particularly by developed-country standards." Labor costs are quite favorable when compared with U.S. jurisdictions as well as Germany and Japan. Manufacturing unit labor costs in Ontario have declined slightly since 1992, even as they've increased by more than 13 percent in the United States.

While wages are somewhat lower, the cost picture is even more impressive when total compensation is considered. Mandated benefits run about the same in Ontario as in other Western locations. But healthcare is publicly funded and therefore not an employer burden, other than an employer health tax that tends to run much less than the amount American companies typically pay for premiums.

Construction costs for industrial buildings are lower in Ontario than in neighboring U.S. states. Industrial-space rental rates are quite competitive. Water costs are among the lowest in the world, and energy prices compare quite favorably with those in U.S. border states.

What about taxation? One might think taxes would be quite burdensome, given all of the public services that Ontarians enjoy. Surprisingly, corporate and business taxes are competitive with those in the United States as well as the G-7 average.

The regulatory environment is also on a par with that of other advanced economies. When it comes to compliance, the focus is on making things as easy as possible for businesses. Regulatory authorities even offer consultation and advice to ease compliance troubles.

Getting to and Around the Province

Shipping in supplies and shipping out goods is efficient in Ontario, thanks to a transportation infrastructure that a World Economic Forum report ranked tops in the G-7. The report studied how well businesses in the various jurisdictions are served by road, rail, air, and water.

Ontario is the gateway into Canada. Forty percent of all goods and more than two thirds of all truck traffic travel from the United States into Canada through four major border points: Niagara Falls, Fort Erie, Sarnia, and Windsor. In fact, the Windsor-Detroit crossing is the world's largest single corridor of international trade, funneling more than $80 billion worth of goods a year and processing some 6,500 trucks a day.

The trade volume is huge but efficient; the average border time for trucks carrying goods that were processed before arrival is just 60 seconds. A number of improvements are cutting customs-processing time, from electronic data interchange to the Pre-Arrival Review System.

Air transportation is most prominent at Pearson International Airport in Toronto, Canada's largest air-cargo center and the seventh-busiest international airport in North America. Its terminals have U.S. federal inspection "preclearance" facilities. Some 45 major airlines serve Pearson, providing service to 140 destinations in 45 countries, including direct connections to 48 U.S. cities daily. Ottawa International Airport, for its part, supports a high-tech cluster with direct services to nine U.S. cities and nearly three dozen commuter flights to Toronto every day.

Major railways include Canadian Pacific and Canadian National, which moves 55 million tons of freight a year. Water connections can be found across the province through the Great Lakes/St. Lawrence River system that joins Ontario with three other Canadian provinces, 17 U.S. states, and the Atlantic Ocean.

Ontario's strong infrastructure extends from the physical to the virtual. The province's telecommunications network is highly developed, with digital switching, signaling, and fiberoptic technology. All local and long-distance lines are digital, and long-distance trunk lines are 95 percent fiberoptic.

Telecom services available in Ontario include ISDN, ATM, and fiber-ring technologies. High-capacity Internet access is on the menu, along with dynamic routing; intelligent network infrastructure through Common Channel Signaling; and seamless voice, video, and data links with major U.S. carriers and Teleglobe. Bell Canada, AT&T, and Sprint are among the long-distance carriers.

The province's telecom costs are competitive with those in other North American infotech centers. Dedicated telecommunications lines in Ontario are 15 to 20 percent cheaper than in major U.S. infotech hot spots, while "800" line costs are identical. And the largest free-- calling area in North American is the Greater Toronto Area, which also boasts more cellular phones per capita than any other city on the continent.

Learning and Working

In an increasingly competitive global economy, companies that succeed tend to be those with the best employees. With that in mind, Ontario delivers a well-educated and highly motivated work force.

Indeed, the 2000 World Competitiveness Yearbook ranks the overall educational system in Canada ahead of that in Japan and the United States in terms of meeting the needs of a competitive economy. Enrollment in higher education is the second-highest in the world. In all, approximately 7 percent of the gross domestic product is spent on education, more than is spent in the United States, Japan, Germany, the United Kingdom, France, or Italy.

Ontario's work force numbers just over six million, 60 percent of whom have attended college. Some 20 percent of Ontario's workers have a university degree, while another 30 percent earned diplomas from the province's world-- leading and workplace-focused system of community colleges. The province's work force is particularly strong in high-tech and scientific disciplines. More than a million and a half Ontario workers have university, college, or postsecondary degrees in computer science, math, science, engineering, agriculture, or biology.

A network of 17 universities is the centerpiece of the province's educational system. Ontario's universities graduate more than 11,000 students a year, with hundreds of doctoral degrees awarded annually. The computer, electrical, and mechanical engineering programs at McMaster and Toronto are among the continent's most prominent, and the University of Waterloo is well known for math and computer science.

Waterloo also has attracted attention with its cooperative-- education program that has students alternate terms between the university and the workplace. The concept started there in 1957 and has spread throughout Canada, creating a strong and mutually beneficial link between academia and business.

Also bringing the real world together with the academic environment are the province's 25 community colleges of applied arts and technology. The institutions serve some 300 Ontario communities with workplace-geared diploma and certificate programs covering more than 600 disciplines. They offer contract-training programs as well, designed to meet the needs of specific companies and industries. And they provide continuing education for Ontarians already employed.

The apprenticeship system is yet another way Ontarians can gain on-the-job training. Tens of thousands are involved in the system, which has been expanding in recent years to make room for more employers and more young workers.

Ontario hasn't finished refining its educational system. The province is increasing its already hefty investment in education with such programs as Access to Opportunities, whose aim is to double the number of postsecondary spaces for computer-science and engineering students. The Strategic Skills Investment initiative hopes to build upon industry-education collaborations to develop more forwardlooking skills in the work force.

Ontarians benefit not just from strong education but from their own backgrounds as well. More than a quarter of the population was born outside Ontario, a fact that has brought unusually diverse language skills to the province. While English and French are the most prominent languages, Ontarians speak more than a hundred languages in all. Toronto, where 42 percent of the population moved to Ontario from somewhere else, is widely regarded as one of the world's most ethnically, culturally, and linguistically diverse cities.

Canadian workers as a whole are known for loyalty and commitment. One 13country study ranked employees in Canada first in commitment, as evidenced by job tenure averaging eight years for all workers and nine years for managers.

In addition, labor-management relations tend to be healthy in Ontario. The most recent annual statistics showed 95 percent of contract negotiations successfully concluded without work stoppages, with wage settlements averaging just 2 percent. Average manufacturing wages are lower in Ontario than in neighboring U.S. states, and the comparison is even better when one factors in the savings resulting from Ontario's publicly funded healthcare system. This helps keep Ontario's unit labor cost at a healthy level. In fact, these costs have dropped 0.4 percent since 1992, while they've grown by 13.4 percent in the United States.

A Hotbed of RED

Ontario has shown it knows how to put its brainpower to work. Strength in research and development begins with the provinces critical mass of public- and private-sector intellectual talent. Building upon that is a generous RED tax credit program and other government initiatives.

Canada is a global leader in RED tax benefits, and Ontario ups the ante of the federal programs to create a superior RED tax environment. Every dollar spent on eligible RFD can earn a tax credit in Ontario, a much more generous standard than can be found in most of the United States.

Further supporting RFD are such programs as the Ontario Innovation Trust, with matching funds for new research infrastructure. The program is enjoying a rapidly growing endowment. The Ontario RFD Challenge Fund, for its part, is also growing; it offers matching funding for research as well as for partnerships between businesses and research institutions.

The results of these efforts are impressive. Ontario research expenditures totaling some $5 billion a year make up half of the RED in Canada. The province has long been a leader in telecommunications innovations, starting with the first telephone call and the first long-- distance connection. Today the province is at the forefront of development of such technologies as digital microwave transmission, data-distribution networks, and satellite communications services.

Biotech also has a strong research foundation. Insulin was discovered there, and Ontario scientists developed early artificial hearts and kidneys along with the application of Cobalt 60 to cancer therapy. Health-related research is conducted today by such companies as Pfizer, Eli Lilly, Hemosol, Genpharm, Abbott Laboratories, and Glaxo Wellcome, among many others.

Manufacturing also benefits from strong RFD in Ontario. Major automakers that include the Big Three and Toyota perform RFD in the province, along with Canadian operations of such household names as Xerox and General Electric. Food manufacturers from Heinz to Nestle perform research and develop products in Ontario.

Life in the Province

How is quality of life measured? There are plenty of yardsticks, typically reflecting the personal needs and preferences of whoever is doing the measuring. Ontario fares well by a lot of important gauges.

For those who value culture and multiculturalism, there's plenty to like. Ontario's mix of ethnic groups and languages brings with it a strong diversity in the cultural life and spirit of the province. Culture, of course, can also can be evaluated by such amenities as theater, opera, ballet, and symphonic music, and Ontario ranks well here, too. For example, Toronto is the third-largest theater center in the Englishspeaking world, behind only New York and London.

Others rate quality of life with a recreational yardstick. Again, Ontario measures up. Nearly 300 provincial parks offer places to commune with the province's natural beauty. Ontario has prime fishing on its 227,000 lakes, and good hunting in its vast forests. Golfers enjoy more than 600 courses in Ontario, while fans of softball and soccer can find organized league play across the province.

Pro sports include the national pastime of hockey (Ontario has two NHL teams). Ontarians cheer major-league baseball and basketball teams as well, along with pro football. And many historians believe that baseball, often thought of as the quintessential American sport, was first played in Ontario.

Measure quality of life by cost of living and Ontario looks great. Even in the big city of Toronto, costs are lower than in most of the world's major financial centers. Moreover, Ontario's inflation forecast is the lowest in the G-7.

Get out the healthcare yard-- stick and Ontario looks robust. Most noteworthy is the fact that Ontarians don't have to worry about medical bills in the way that many Americans do, because medical and hospitat services are provided at no charge to eligible residents.

Education? The quality measures up, as mentioned earlier. So does the cost. Both the public schools and the Roman Catholic system are publicly funded.

It's no surprise, then, to learn that those who try to put numbers on quality of life rank Ontario at the top. Last year was the sixth in a row that Canada placed first in the United Nations' Human Development Index, which takes into account a number of gauges, including life expectancy, literacy, and standard of living. And Corporate Resources Group, based in Geneva, places both Toronto and Ottawa on its top-10 list of the world's cities with the best quality of life.