Thin Air Labs Capital Partner James Lochrie on thinking long term to diversify the economy. CBC (July 2020)
Look out Montreal, Toronto ... even you, Houston.
Jason Kenney has named names. And he's looking to lure away your entrepreneurs and businesses with low taxes and incentives, and a pitch for a better life in Alberta.
"I think they're being irresponsible if they don't consider moving operations to Alberta," the province's premier said this week.
A major push to draw business to the province — including Bay Street financial firms — is one part of the province's aggressive drive to reboot and diversify its economy. "We are going to be placing a huge emphasis on finance and financial technology," Kenney said Monday.
"What do you think we're going after? Well all of those banks and insurance companies down on Bay Street that are paying way more taxes. Their workers are paying way more taxes. They are paying way more for rent. They are fighting Toronto traffic.
"We are going to be telling them that they can save money for their shareholders, for their workers, for their operations, by relocating financial and fintech [financial technology] jobs to places like downtown Calgary, downtown Edmonton."
There's a sore need for new businesses in those cities as the oil sector's struggles drag on and the ranks of Albertans who've lost jobs have swollen to more than 300,000.
But the challenge confronting Alberta's strategy in trying to attract some of the world's most sought-after talent is twofold. "I think they're being irresponsible if they don't consider moving operations to Alberta," Alberta Premier Jason Kenney said Monday. (Jeff McIntosh/The Canadian Press) First, its plan will need to demonstrate it has the right tax and policy incentives to be competitive as well as provide the kind of long-term certainty companies are looking for. Second, even if the economic siren call is heard, would Alberta's charms be enough to convince businesses to pick up sticks and choose Calgary or Edmonton rather than, say, Austin or Vancouver?
The competition is fierce — even before the COVID-19 pandemic strew havoc throughout the global economy, there were a host of geographic voices all vying to woo businesses and talent.
Cutting corporate taxes
One key part of the new Alberta strategy is lower taxes.
The UCP government is speeding up the implementation of corporate tax cuts, slashing the rate to eight per cent from 10 per cent starting from the start of July.
Kenney said it will give the province among the lowest rates in North America.
How much that could actually spur job creation — and how soon — is a fierce political debate. NDP Leader Rachel Notley branded it another giveaway to "already profitable" corporations. But when it comes to making Alberta more attractive for business, corporate tax rates are often a key issue, according to one expert who tries courting companies to Calgary. "Depending on where you are in the world, the things that they're looking for are low tax rates and great talent," said Mary Moran, president of Calgary Economic Development (CED). "And I think with this lower tax rate, it's going to be hard for jurisdictions to compete with that." Albertans will have to wait to see how many companies find those lower taxes too alluring to pass up, but taxes will be only one part of the pitch. There's also volumes of low-cost office space.
And Kenney teased a number of other sector-specific strategies to be unveiled in greater detail in the coming days and weeks.
These include efforts to help the three pillars of Alberta's economy: energy, agriculture and tourism.
But it also includes high-growth sectors, like technology and innovation.
Tech companies, and all those tech jobs, are often spoken of in terms that make them seem like golden rings to be captured, and boost an economy.
Back in the tech game
Kenney described an "innovation employment grant" as the most attractive incentive for job creation in the tech and innovation sector in Canada. Details are pending.
Another is the province's additional $175 million investment in Alberta Enterprise Corporation, helping to connect investors with entrepreneurs and technology start-ups who need access to capital.
Adam Legge, who sat on a working group that wrote a report to the government on how to grow Alberta's tech industry, says what's been announced so far shows the province is back in the technology-and-innovation game.
This, after some previous concerns voiced by the sector that a lack of support could have companies packing up and moving on.
"Every jurisdiction now is competing for technology, innovation companies," Legge said.
Thus, he said it was important the province create a pool of capital for entrepreneurs and start-ups from which to draw, and enable early investments in research and development. "What [this does] is put Alberta back on solid competitive footing with other jurisdictions, including our counterpart provinces, but also other jurisdictions in North America." Not everyone was as impressed, though.
American video game developer Keith Warner opened an office in Calgary last year because of the tax credits that the then-NDP government offered, and the UCP subsequently scrapped.
He told CBC News on Monday that he didn't hear anything in the government's announcement for him. His Canadian growth plans are now in Montreal, not Calgary. The situation speaks in part to the high competition Alberta faces in attracting new businesses to the province, but perhaps also the opportunities.
When Calgary bid for Amazon's second headquarters three years ago, it revealed just how many cities, provinces and states in North America are fighting for many of the same jobs. And how difficult it is to stand out.
Yet there are places around North America that have retooled, diversified and thrived in new ways. Communities like Raleigh, in North Carolina, have become startup hubs. "There's so many things to consider that drive the decision of where to locate your business," said Andreas Park, an associate professor of finance at the University of Toronto.
Park, research director of the Rotman FinHub, the Rotman School's financial innovation hub, said a jurisdiction (such as Alberta) might attract a few firms with tax incentives. But what tech firms need most is "talent."
Places like Toronto, Montreal and Vancouver, says Park, are hubs for young talent and entrepreneurs in the tech field. "A better approach is the other way round," he said. "If you actually enable people who want to be innovators, who are already there, to start something up."
In fact, the sector has had some homegrown wins in Alberta, including financial giant Morgan Stanley's $1.1-billion US purchase of Calgary-based Solium last year.
But those kinds of successes take years to achieve. Some say Alberta needs to take a similarly long view when it comes to diversifying its economy — perhaps itself a hard sell considering the immediate economic concerns in the province. Calgary-based tech entrepreneur James Lochrie, who has invested in tech enterprises across Canada, believes Alberta is really at the beginning of a decade-long process. It's one that will necessarily include working with universities, making adjustments to the workforce and taxation, as well as a host of other policies — and taking into consideration what competing jurisdictions around the world have to offer.
"I hope the government continues to focus on what's working, can refine the things that aren't working, and can ignore the naysayers and just stay optimistic," Lochrie said.
'Convince my wife'
As the details of the Alberta government's strategy to lure business to the province are made public, government officials won't be going door-to-door to convince people to move. Kenney says Investment Alberta will use its international offices to pitch the province to potential investors.
And the premier will continue to pitch — as he did on Monday — the Alberta lifestyle as part of the draw. But there's no formula with a guarantee of success.
One Toronto-based financial executive, asked what it would take for Kenney to get him to move to Alberta, laughed and said: "Convince my wife."