FDI Intelligence

 

March 30th, 2011

 

Montreal leads the pack!

Quebec’s largest city has outperformed all other major North American cities during the recent economic recovery.

 

In late March of this year BatHium Canada, a subsidiary of the Bolloré Group, announced a major expansion of its Montreal south shore site. The lithium-metal-polymer battery developer, which received help from Montreal International and the Quebec government, invested $176 million in its site, and will boost employment there from 67 people to well over 300. The move provided a strong vote of confidence for Quebec’s largest city, at a time when many large North American metropolises were suffering from double digit unemployment.

 

Companies like BatHium come to Montreal for a variety of reasons noted Jacques St-Laurent, president and CEO of Montreal International.  “The city has fabulous natural assets that give businesses and international organizations a slew of advantages. These range from its envious geographical position and low tax rates, to its competitive and creative labour force,” said St-Laurent. “One of our main jobs is to tell people about them.”

 

Weathering the storm

Economic cycles come and go, but when businesses choose where they want to conduct operations, they naturally favour cities that do well over time. That’s good news for Montreal, which has weathered recent economic turbulence well.  The Greater Montreal area has led the way during the recent economic recovery, producing the strongest job growth of the 20 largest North American cities, during the period between the start of the recession in 2008 and 2010.

 

In fact this year, a publication released by the Brookings Institution and the London School of Economics titled Global Metro Monitor: The Path to Economic Recovery, ranked Montreal 27th in the world in terms of the amount of jobs created and per capita income growth. That was the best performance of all North American regions, with the exception of Austin Texas.

 

Much of Montreal’s strength relates to its geographic advantages. Through its strategic location bordering the St-Lawrence Seaway less than one hour away from the American border, Montreal provides businesses that are located there with unparalleled access to major continental markets in the North American Free Trade Area (NAFTA), particularly in the United States, Canada’s largest trading partner.

 

The city is less than a 90-minute flight from major urban centers such as New York, Boston and Toronto and that proximity has led to the development of a strategic transportation infrastructure, to take advantage of it. This includes two international airports, one of North America’s biggest ports as well as comprehensive rail and intermodal housing and transfer facilities.

 

Cost competitiveness and incentives

Few companies move to cities just because they are pretty, creative or well-located. In today’s tough economic environment, a solid business case is needed to justify any relocation or expansion. As a result, financial incentives and tax policies play a major role in luring new businesses says St-Laurent.

 

For example, according to KPMG’s study on Competitive Alternatives 2010, Special Report: Focus on Tax, companies in the Greater Montreal region benefit from the lowest tax costs on the planet. In fact the favorable tax environment enjoyed by Montreal businesses could get even stronger during the coming years, if the federal government follows up on its commitment to cut the corporate tax rate to 15% in 2012.

 

Knowledge economy businesses that conduct extensive research and development do particularly well in Montreal, benefitting from a 16.5% cost advantage relative to average levels in US cities.  In fact, the study, which evaluated the fiscal competitiveness of 41 large international cities in 10 countries, ranked the Montreal first in North America in terms of tax competitiveness for businesses in the R&D sector and second in the world. In the business IT sector, the Greater Montreal region also advanced to second place in the world.

 

In fact Montreal’s favorable research and development environment was a strong selling point in convincing BatHium to expand there, because in addition to manufacturing its next generation of electric vehicle batteries in the Montreal region, the company also wants to set up a center of excellence to work on future models.

 

Access to talent, abundant, qualified work force

For knowledge-based companies like BatHium, business today is increasingly focused on people, rather than capital investments in plant, equipment or even new technologies. Experts note that well-positioned companies, that have second class workforces, almost all inevitably eventually lose their competitive edges to others, that may start out a little farther behind, but that have good teams in place.

 

In fact its people, many of whom are trained in the city’s world class educational institutions, are a key advantage that Montreal brings to the table. The city hosts eleven centers of higher learning that feed its talent pool. These include four major universities, numerous junior colleges (CEGEPs) and a slew of specialized training programs, which host close to 350,000 students that in turn benefit from the largest pool of research funding in Canada. In fact Montreal hosts more recently trained graduates than any other city in the country.

 

When they graduate from those schools, Montrealers, and Quebecers in general, make terrific employees. They are well educated, loyal, creative, and many speak more than one language. More than half of the city’s population speaks both French and English and 20% are conversant in three or more languages. This diversity, tolerance for individual differences and overall openness translates into relaxed but highly creative work environments. Not surprisingly turnover rates in Montreal businesses are extremely low; which in turn saves businesses a lot of money, given the increasingly high costs of training new staff in specialized, technical and creative fields.

 

As writer Richard Florida noted in books such as The Rise of the Creative Class and Who’s your City?, one of the key reasons that Montreal attracts and keeps such a large number of workers in creative fields relates to the city’s impressive quality of life. The city is safe, attractive, has large green spaces and low pollution levels compared to many of its rivals.

 

Innovation and high technology

Montreal’s position as North America’s third most important music center, and its role a center for theatrical, film and television production talent, correlates well with its overall business sector creativity.

Urban planners increasingly recognize that creative people like to associate with other creative people - even if they come from different fields. As a result, urban planners regard events that may at first glance not appear to be business-related, such as Montreal band Arcade Fire’s recent win at this year’s Grammy Awards, or the Cirque de Soleil’s vast international success, as highly relevant to cities’ efforts to attract creative talent in other fields.

 

With its strong educational institutions, which include McGill University and the University of Montreal, it should come as no surprise that Montreal is a major leader in fields requiring extensive research and development. This is evidenced by the city’s large industrial clusters in fields such a video game production, aerospace, information and communications technology (ICT) and clean technology. Furthermore, these industries, which employ a critical mass of qualified people, are backed by a sound intellectual property protection regime, protected by comprehensive international treaties.

 

Montreal’s international outlook

One of the things that St-Laurent most enthusiastically promotes is his city’s global focus. As a result, he is particularly proud of Montreal International’s role in helping to create momentum for the BatHium expansion. “Our main mission is to contribute to the (Montreal’s) economic development by spurring foreign investment, international organizations and qualified workers, so this announcement is a big deal for us and the city,” said St-Laurent. “We hope to spur many more such moves in the years to come.”

 

If the past is any guide, St-Laurent’s hopes will likely become reality. In fact Montreal International has already helped to attract more than $7.5 billion in foreign investment to the Greater Montreal region, which in turn has led to the creation and maintenance of 43,000 jobs.

 

“Montreal’s unique personality, which places it at the crossroads of Europe and North America, have made it a city of choice for international organizations, close to 80 of which are located there,” said St-Laurent. “In fact it’s a major reason that the people from BatHium’s parent company, which is based in France, were so comfortable about coming here.”

 

 

Peter@peterdiekmeyer.com

 

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