At a recent seminar in Tokyo designed to generate investment in Canada's natural resource sector, the interest among Japanese investors was evident. But it was equally clear that Canada faces stiff competition to woo investors who need compelling reasons to choose Canada over other equally attractive investment locations. Simply repeating that "Canada is open for business" and expecting the investment dollars to roll in won't work.
First, the good news. Canada as a safe, reliable place to invest resonated well with the more than 150 businessmen and delegates at the seminar. Japan is only two shipping days away from the Canadian West Coast, our corporate tax rates are highly competitive and Canada and Japan are now negotiating an economic partnership agreement.
It was clear that Japan will continue to make incremental investments in Canada, mostly with local partners or as part of consortiums designed to share risk. The Japanese also want to diversify their supply of natural resources, particularly oil and gas, beyond the volatile Middle East.
But we were also reminded that Canada is in competition to sell our resources. In particular, Australia, the United States, Russia, and Latin America were all described as attractive sources of gas. Moreover, Australia and the United States offer a similarly reliable environment for foreign investors with infrastructure already in place from which to export liquid natural gas.
Japan's interest in investing in the development of Canadian infrastructure is cautious. Investors at the seminar noted that rates of return on infrastructure are low, and in Canada's case risky because of our tight labour supply. They also noted Alberta's carbon tax and a planned export tax in British Columbia as two taxes could easily negate the corporate tax advantage Canada has worked so hard to create.
We came away from the seminar with a number of important questions that policymakers must address:
Should Canada guarantee Japan access to our oil and gas -- as we did with the United States as part of the Canada-U.S. free trade agreement -- in return for a guarantee of Japanese demand for our fossil fuels?
Did Canada take into account that infrastructure is the home of patient capital and that the timeframe for Chinese investments is far longer than that of the free market before it imposed investment restrictions on state-owned enterprises?
Are we undermining our national corporate tax advantage and adding to tax policy uncertainty by layering on provincial carbon and export taxes?
Are we moving too quickly to tighten up our temporary foreign workers program in reaction to a few abuses, before thinking through the impact that high labour costs have on resource development?
One idea with merit as a forum to discuss these and other questions is a Canada Council on Asia, as suggested by Canada's former clerk of the Privy Council Kevin Lynch and Kathy Sendall, a corporate director of Petro-Canada. The council would bring together Canadian and Asian leaders in business, academia, civil society, and politics to provide "wise counsel" to federal and provincial governments on the objective of trade diversification with Asia and would be chaired by the prime minister himself.
Canada needs a coordinated plan for resource development and, while a forum for consultation may seem highly bureaucratic, it will be difficult to build a national strategy without coordination and discussion with all the stakeholders. No one can lead this better than the prime minister -- the weight of his office and his powers of persuasion can go a long way toward making this happen. As Harper looks for new ideas for his fall agenda, this idea deserves his serious consideration.
Mike Coates is CEO and Chairman of Hill+Knowlton Strategies Canada, which took part in the Tokyo seminar along with Blakes, CIBC and TMX.