No Time Like Now to Invest in Canada
A host of factors including tax competitiveness, lower Canadian dollar, political stability as well as a merger boom makes Canada the right destination to invest in, say Kasi V.P. Rao and Raj S. Sahni, representatives from the Canadian Law firm Bennett Jones. We caught up with the duo on their stopover in Bangalore.
The informative roundtable in Bangalore was hosted by Jennifer Daubeny, the Consul General of Canada in Bangalore, in the presence of a few members from the business community in Bangalore.
Tell us about the purpose of your visit.
Kasi: We’re on a three-city visit – Mumbai, Bangalore and Delhi in an effort to get Indian companies to invest in Canada. We’ve had the Canadian Consul General and the trade commissioner join us. The whole idea is to have Canadian diplomatic representation in partnership with the law firm [Bennett Jones] to make a pitch for Canada to interested businesses.
Why is this a good time to be looking at investment opportunities in Canada?
Raj: Given the fact that we have a new president-elect in the United States and there’s some uncertainty as to what policies will be implemented. Everybody is hopeful that it will be stable and pro-India. However, in all this uncertainty Canada represents a good entry point – it is a member country to two free trade agreements. One is NAFTA (North American Free Trade Agreement) – which gives access to the north American market which is the US, Mexico and Canada and includes 500 million people. The other is CETA (Canada-European Trade Agreement) signed in November this year– that’s another 500 million. This means Canada offers a safe entry point for a market of 1 billion people. It offers stable financial systems, our banks came out unscathed from the 2008 financial crisis, no bank failed. We also have the lowest tax rates in the G7 countries, 46% lower taxes than the United States. This makes setting up a business or corporation easy and straightforward.
What are some of the other advantages for Indian businesses?
Kasi: The legal systems in Canada will be familiar to Indian businessmen English is the universal language for business, which makes it easier. Setting up a business in India and setting up a business in Canada is not that different. It is a much familiar territory than if you would go to China or some other places.
There’s also less bureaucracy, corporate structures such as corporations and limited partnerships are very similar to what you would expect here in India.
Another factor is that the rupee hasn’t fallen against the CND and it traditionally trades lower than USD cutting costs by 30%. Now Canada is experiencing a low Canadian Dollar against the US Dollar; while India is experiencing a low rupee comparison to the US dollar.
Are there any sectors or industries that might particularly benefit from being in Canada?
Kasi: Our idea is to find those who are already thinking of expanding beyond India and making a case for Canada to them. Our focus is multi-sectoral, but not untargeted. For the first time, we are seeing a real interest in the Canadian advantage, a reason for it is unlike a lot of G7 countries – it is the only G7 country providing a very liberal trading regime. Particularly in the context of Bangalore, the Canadian government has made its consulate the head for South India, so there is a focused effort to attract business interest from here. Canada is increasing its immigration as well.
In Bangalore, we are looking beyond IT, there are a lot of start-ups. Canada has great centres of innovation such as Vancouver and the Toronto-Waterloo Corridor is full of academic talent and universities – companies in India are recognising this now. Even when they need technical expertise, I would say Canada stands out.
Canada already has Tata Consultancy Services, Wipro, Infosys, so now the discussion is beyond IT. There are a lot of other sectors as well.
The Ontario Agri-food mission has come to India – the agriculture minister was here with the delegation. This isn’t just commodities – but also technologies. On the national level ministers, Navdeep Bains (Minister of Innovation, Science and economic development) and John Mccalum (Immigration Minister) were in India. With all these official visits, the Canadian brand is becoming better known in India.
Raj: There are opportunities of different kinds. There is a focus and recent push in the food and agricultural space. In the IT sector, relationships are already well established. The other sector is energy, not only oil and gas but also green and alternative energy.
The next area is distressed opportunities in Canada. While India has just introduced the bankruptcy legislation, Canada has had restructuring legislation for a very long time. It has been successfully used by both domestic and foreign buyers to buy assets, try and cleanse those companies of existing liabilities so that you can buy into restructuring opportunities. You can come to Canada without spending a lot on the acquisition.
India and Canada already share a lot of opportunities and interests
Raj: Yes, there are a lot of areas where there is a natural symbiotic relationship between India and Canada. On the energy side, for example, Canada provides India with nuclear fuel. The Indian nuclear project is based on Canadian technology. Canada is also present in India with IT Companies. So now, the discussion is moving much beyond - OK we know that there are certain easy areas where the two countries have started. But there are newer areas - Canadian pension funds have started investing in the infrastructure sector in India. They regard India as a key place to invest in but have a very long term focus. Canadian investors are very patient, they are not expecting returns in two or three years. They believe in India’s growth story.
What are the inhibitions that Indian businesses tend to have about Canada?
Raj: The main doubt that most have is the geographical distance compared to say Africa or Europe. If you are an investor you will think it is far away and the population is only 35 million - so it’s a very small market in a very big geographic area. But Canada is about easy access to the north American market and the European market. Part of the issue is the lack of information.
Tell us about Indian success stories in Canada?
Kasi: In the financial sector, ICICI bank is a great example: they had a presence in Canada before they had it in the US. SBI is present in Canada as well.
Raj: The Birla group bought a pulp and paper mill in Brunswick in Canada’s Eastern province. The mill was under an insolvency proceeding and had problems finding buyers in Canada due to the industry being in a downward spiral. The Birla group used it to make viscous fibre for polyester and rayon finding a unique use for the mill. Tata Steel bought an iron ore, New Millennium Iron Corp, in Quebec. There are also Indian companies that have bought steel companies – such as Essar, Arcelor and Mittal. Last year Husky Energy exported 1 million barrels to India to be refined here. It has been shown that Canadian heavy oil can be refined in India.
In Canada there’s not a protectionist sentiment as in the US, our immigration policy is gearing more towards openness. We are attracting more people, for example for students who study in Canadian universities in India, our immigration policy rewards them with points. We very much want to attract people to Canada, people who want to work hard will find it rewarding.
Elizabeth Raj | Blogger – Arsha Consulting