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British Columbia has the third largest population (4,052,400) of Canada’s ten provinces and is the only province on the Pacific Rim. Geographically part of the Pacific Northwest region of North America, British Columbia is strategically located to provide unparalleled access to American markets while also maintaining close commercial and cultural ties with Europe and the Asia Pacific. Most of British Columbia’s population lives in the province’s southwest corner. The city of Vancouver (metropolitan area population 2,016,600) and the provincial capital, Victoria (Capital Region population 334,400), are the major centers. The skill and versatility of British Columbia’s human resources are the province’s greatest strengths. British Columbia is traditionally one of the most popular destinations for Canadians who relocate and for foreign immigrants to Canada who add their talents and skills to the province's already rich workforce. British Columbians enjoy a high standard of living built on the strength of a competitive, export-driven economy. Resource industries such as forestry and mining remain the leading sources of export revenue, but new and rapidly growing knowledge-based sectors are bringing added diversity to the British Columbia economy. This change in the province’s economy presents an increasingly wide range of trade and investment opportunities in British Columbia.
Economic Overview
The province's total gross domestic product is approximately US$100 billion (at the purchasing power parity exchange rate), which is about equal to that of the state of Oregon. British Columbia is Canada's third-largest provincial economy and has the second highest credit rating and the second lowest ratio of tax-supported debt to gross domestic product of Canada’s ten provinces.
Information technology and electronics, advanced materials engineering, environmental technologies, aerospace, sub-sea engineering, biotechnology and health care products are the core industries of British Columbia’s growing knowledge-based economy. Together, they employ a highly trained workforce of 52,000 British Columbians. Tourism accounts for about five per cent of the provincial gross domestic product and over 40 per cent of tourism revenues are earned from out-of-province visitors. British Columbia’s superb tourist amenities, spectacular environment and international accessibility create enormous potential for tourism development. British Columbia is also rapidly developing as an international service center for trade, investment and finance. There is a growing local pool of risk capital for start-up ventures in the high-technology sector. Potential investors have access to top national and international firms providing brokerage, accounting, tax, legal and management services. Vancouver is a provincially designated International Financial Center (IFC), a federally designated International Banking Center (IBC) and an International Maritime Center (IMC). These designations allow qualifying companies to conduct international business in a deregulated environment with certain tax advantages.
Primary resource activities contribute 13 per cent of British Columbia’s gross domestic product and employ about 10 per cent of the workforce. British Columbia accounts for 60 per cent of Canada’s lumber exports, almost half of its chemical pulp exports and 36 per cent of its kraft paper exports. Higher value-added production and exploiting under-utilized species for pulp and other uses offer potential for future growth. The province produces almost 70 per cent of Canada’s coal exports and over 98 per cent of its copper and molybdenum ore exports. Potential exists for mining small high-grade ore deposits and anthracite. British Columbia ranks third nationally in hydroelectricity generation and second in natural gas production. Potential exists for increased natural gas exports, petrochemical production from natural gas and energy-intensive manufacturing. Already a major world exporter of canned and frozen salmon, British Columbia is also home to a small but promising aquaculture industry. The cultivation of shellfish, mollusks and aquatic plants offers potential for diversification in mariculture. British Columbia’s agriculture industry is the third-largest component of its resource-based sector. New activities such as commercial game farming and specialty food processing have joined traditional sectors such as dairy farming and fruit production to bring added potential to this highly diversified industry.
Markets and Trade Infrastructure
British Columbia also has a larger share of its export trade with western Europe than does the rest of Canada: seven per cent versus about six per cent.
The entire western Canadian market (U.S.$235 billion) is also within a 36-hour range. The North American Free Trade Agreement provides duty-free access to the U.S. market. Companies in British Columbia can take advantage of this agreement, regardless of corporate nationality, provided that their U.S. exports meet North American content requirements.
Vancouver, the province’s largest port, offers shipping times to major Asian ports that are two to three days shorter than shipping times from Los Angeles. Prince Rupert is British Columbia’s second major deep-water port and is the closest North American port to Asian markets.
British Columbia has an excellent industrial relations record in the secondary manufacturing and service industries — the dominant and fastest-growing employment sectors in the economy. British Columbia’s recent industrial relations record in secondary manufacturing compares favourably with those of Canada’s other major manufacturing provinces. Between 1995 and 1999, there was zero time lost to work stoppages in B.C.’s advanced manufacturing sector. Unfortunately, there is a widely held perception that Canada’s industrial dispute record is poor relative to other OECD countries, especially the U.S. This mistaken impression is created by reports that use non-comparable statistics. Adjusting for differences in the coverage of disputes, the fraction of time lost due to work stoppages in Canada and the U.S. is very similar.
The code provides for union representation at places of work where this is desired by a clear majority of workers. Where union contracts are in place, the law prohibits work stoppages during the term of a collective agreement. If disputes arise while a collective agreement is in effect, these must be settled through an established grievance procedure or arbitration. The accompanying table presents a brief summary of important labour legislation in British Columbia.
Business Incentives Incentives are available in British Columbia to encourage investment, research and development, and job training. Investment and research and development are encouraged through tax and financial incentives. Job training is supported through contributions to direct training costs and wages.
Provincial assistance is directed primarily at economic diversification and increasing venture capital investment in small- and medium-size businesses. The British Columbia government’s Power for Jobs program offers low-cost electricity to new energy-intensive industries, and there are special tax concessions available for manufacturing investment, R&D, film production and international financial services. Federal assistance is available in the form of flexible loan financing aimed at small- and medium-size firms.
The provincial and federal governments also provide direct financial assistance to encourage investment in advanced technology and applied research.
Business Taxes Business taxes in Canada are levied by federal, provincial and municipal levels of government, and are similar to the basic forms of taxation in the United States. The corporate tax environment in British Columbia can be more favourable than in the U.S., especially for manufacturing, processing and research-intensive firms, and for small businesses.
For example, the tax burden* for an electronics manufacturer operating in British Columbia is lower than for its counterparts in the province of Alberta, Washington State, Oregon and California. In all of the U.S. locations, taxes unrelated to profitability, which are essentially fixed costs, represent a much higher proportion of the total tax burden than in British Columbia. While these results are considered to be representative for a broad range of high-technology and secondary manufacturing activities, investors should seek appropriate professional tax advice in assessing their potential tax liabilities in relation to specific investment proposals. (* The tax burden measure used here should not be confused with the corporate income tax rate. It is the total amount of all taxes paid as a proportion of revenue less all non-taxexpenses except depreciation. This provides a comprehensive and comparable measure of the total tax burden.)
A firm performing research and development in British Columbia enjoys significantly larger tax savings than its U.S. counterparts. This provides a cost advantage that is available directly to foreign-owned companies based in Canada, or indirectly to foreign corporations contracting research and development to Canadian firms.
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Lower rates apply to manufacturing. **Federal corporation income tax, social insurance and unemployment insurance rates apply in all provinces. Note: Nominal tax rates alone are not a reliable guide to effective tax burdens.
Workforce British Columbia’s workforce is well educated and versatile. Labour costs are internationally competitive and labour relations in secondary manufacturing, high technology and the service industries are excellent. The province’s workforce numbers more than two million. Annual labour force growth averaged 1.5 per cent between 1994 and 1999, slightly higher than for Canada as a whole. Fifteen per cent of the province’s workforce is under 24 years of age, and 52 per cent is between 25 and 44. Almost 19 per cent of British Columbia’s total workforce has university degrees, and a further 43 per cent has other post-secondary education or vocational training, which equals the Canadian average. In the first quarter of 2000, average weekly earnings in British Columbia were 1.8 per cent above the national figure, and increased at 1.6 per cent annually between 1994 and 1999, compared with 1.4 per cent nationally.
Lower overall payroll taxes and much lower costs for company-paid health insurance (an almost universal benefit in Canada and the U.S.) significantly increase British Columbia’s wage rate advantage over its U.S. neighbours. Total hourly compensation is relatively uniform among the largest industrial provinces. British Columbia has the lowest provincial workers’ compensation levies, and imposes no provincial payroll tax for health care premiums.
Average salaries for highly qualified workers in British Columbia are 15 to 30 per cent lower than in the Pacific Coast U.S. states. Differences among locations in Canada are generally small.
A 1998 Angus Reid national survey found that Vancouver ranked as the number one Canadian city in which to live and work. Also, 82 per cent of workers in Vancouver would not accept a matching job offer in another location, whereas 47 per cent of workers living in the Toronto and Montreal area would relocate. Although it is often expedient for industry to rely on attracting workers from other regions, the British Columbia government recognizes the importance of developing "home grown" talent. Provincial jurisdiction over education and apprenticeship programs makes post-secondary academic and vocational training responsive to the needs of the economy. Both federal and provincial governments provide financial incentives to support private training initiatives (see Business Incentives).
Land and Energy Costs
Industrial lease space is also available in the Vancouver area at competitive rates. Rents for prime office space in Vancouver’s central business district compare favourably with other major North American international business centers. Fully serviced, multi-tenant industrial parks are located in major centers throughout the province. Greenfield sites suitable for large-scale industry are also available. Research parks and industrial lease space are concentrated in the Greater Vancouver region. Smaller centers are an attractive alternative to Vancouver for industries that do not need a metropolitan location. Land is significantly cheaper and labour costs are also generally lower, reflecting greater labour market slack and lower housing costs.
Firms in British Columbia benefit from some of the cheapest electricity in North America. For example, an average industrial user in Vancouver pays 65 per cent less than a firm in Los Angeles. Industrial consumers of natural gas enjoy the lowest prices in the Pacific Coast region. Natural gas marketing is deregulated in British Columbia, allowing industrial customers to contract directly with gas producers and negotiate discounts.
Higher Education The quality of educational and research infrastructure is a key competitive factor in a knowledge-based economy. British Columbia’s infrastructure for higher education and training includes six public universities, five vocational institutes, five university colleges and 11 community colleges. A new technical university, Tech BC, opened in 1998. The provincial government’s Open Learning Agency and Knowledge Network form an innovative "distance learning" system offering televised university, vocational and continuing education programs throughout British Columbia. These institutions provide highly qualified graduates in a multitude of disciplines. The level of post-secondary education in British Columbia compares favourably with the national average. A higher percentage of the population holds university degrees or trade or non-university certificates in British Columbia than in the rest of Canada. The province’s universities and technical institutions also collaborate actively with the private sector in performing research and development and have numerous commercial products and patents to their credit. Research and business parks for high-technology firms and private research establishments are located at the University of B.C., Simon Fraser University and the B.C. Institute of Technology. The scientific, engineering and technical capabilities in these institutions are an important resource for industry. The government of British Columbia is committed to excellence in the development and application of scientific talent, creativity and technical skill in its education and research institutions. The tables on the following pages summarize some of the key features of the province’s institutional infrastructure.
Quality of Life The lifestyle preferences of skilled and creative people increasingly determine where business locates. Cultural and intellectual stimulation, leisure opportunities, a livable climate, personal security and a clean environment are typically important values. British Columbia rates highly on all these factors.
The southwest part of the province, where most of the population lives, has a temperate climate. This contrasts sharply with the climatic extremes endured on the Prairies and in Eastern Canada. Summers are dry, sunny and warm, rather than hot or humid. Winters are mild and snowfall is minimal.
British Columbia Offers -
proximity
and easy access to key North American markets;
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British
Columbia is poised for continuing economic growth and ranks as one
of North America’s most attractive locations for new investment.
The
New Economy
Industrial
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