Canada’s FDI fundamentals: Political stability, economic environment and infrastructure
As published in The Future Economy on October 1, 2020
Current Operations and Future Investments in Canada
We have a long history in Canada, we stood for engineering excellence, innovation, reliability and quality since 1912 when the company was formed. So we provide solutions in the area of electrification, automation and digitalization in almost all the key sectors in Canada.
Siemens and its affiliates employ around 5,000 people coast-to-coast in Canada, we have 44 office locations and 9 production facilities in Canada. We are very strong and very focused on sustainability, so we have committed here in Canada to become carbon neutral by 2030.
So talking about future investments, we are investing quite a bit. Historically, we have been investing around $50 million in research and development (R&D) in this country. We have two global centres of competences, one being the cybersecurity centre, which is in Fredericton, and also in Fredericton, we have the smart grid global centre of competence. In this centre, we are creating together with our partners, New Brunswick Power and Nova Scotia Power, the grid of the future. So it is a very, very exciting $92 million R&D project, it is funded by the Strategic Innovation Fund from the federal government, with $36 million. So very, very exciting technologies being developed which will not only be used in Canada, but we hope to also export this technology around the world.
Then we also work very closely with Emissions Reduction Alberta (ERA). We are working on a waste heat recovery technology in the oil and gas sector, which could take the waste heat and create power from it. So that is another investment we do.
We work closely and we are going to invest even more with the Government of Quebec in their four industry 4.0 innovation hubs. So, Siemens is really investing in providing [state-of-the-art] technology in these hubs, which will help support the small- and medium-sized enterprises (SMEs) in Quebec to bring their production facilities into the next generation.
I am very excited about our investments in the transportation sector. As I said, we are working together with the transit agencies across Canada to electrify the buses, but [we are] also investing heavily in the large transit projects, which have been announced in Canada. So a lot of investment going into Canada.
Why Invest in Canada?
I feel when you talk about foreign direct investment (FDI), the first thing any company like ours would look [at] is the basics, the fundamentals. The fundamentals are basically the political environment and the economic environment, and the infrastructure.
I think [in the] political environment, we are number two in the world—extremely stable. We have a diverse and an inclusive economy and Forbes have rated Canada [sixth] as the best country to do business in out of 153 countries—we are number two in [the] G7—and there is quite a modern infrastructure, and more is being invested. So all the basics, the fundaments of FDI, are very strong in Canada.
What makes Canada even more attractive is the availability of skills. You know that 55% percent of citizens have post-secondary education, which makes Canada really the most educated population in the world, and that availability of talent is a key [criterion] so this is very, very strong.
What we also have is the free trade agreements. So we have the United States–Mexico–Canada Agreement (USMCA) or the old North American Free Trade Agreement (NAFTA); we have the Comprehensive Economic and Trade Agreement (CETA) with Europe; and then we have the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) with Asian countries, and bilateral agreements with many countries in South America. So this makes all these free trade agreements a big strength, I think [they are] unique.
There are a lot of positives in Canada and I think it is a great place to invest and we will continue to invest here.
What my favorite strength for Canada is [that] it is a great country to live in; it is inclusive, it is multicultural, and it has very interesting immigration policy. This is very, very valuable for a company like Siemens because we have the ability, when we work together with the government, to get work permits for our global talent and bring them to Canada within a matter of weeks. And I have not seen any country offering that. So, this creates an ability for us to create multifaceted, multi-cross-country teams into one location, which is a very good infrastructure.
Of course, what I also see, is [that] Canada is very progressive. Canada is aiming to take global leadership in the new economy. This is very attractive for us, especially when we are investing in smart grid or digital enterprise or cybersecurity, and the government is very cooperative. I must say, federal as well as provincial, there is appetite for investment in innovation and it is proven, just as I said, [by] our smart grid project. So, there are a lot of positives in Canada and I think it is a great place to invest and we will continue to invest here.
Canada’s Talent and Innovation Ecosystem
I feel the good thing about Canada’s innovation ecosystem is that it is based on collaboration. It is collaboration between the governments, between the utilities or the Crown corporations and the universities, and then the private sector. This is extremely important because if we want to solve the bigger challenges in this world, we have to co-create solutions—and this is something which is Canada’s strength—this inclusiveness and the spirit of collaboration to develop new things. So I feel the Canadian innovation environment is very strong, we have especially the talent and the future economy talent you see in Canada like for example, in Montreal or in Toronto, the artificial intelligence (AI) hubs. So we are really, really advancing here and we are in a good space I would say.
The good thing about Canada’s innovation ecosystem is that it is based on collaboration.
Canada’s Future Growth Sectors
I would start with the infrastructure sector and I think we all now realize with this change which COVID has brought upon us, that we have to rethink buildings. How we use buildings—how can we make buildings smarter? How can we make buildings safer? So I think there needs to be a lot of investment in this infrastructure. Then we also see the electrification of the transportation sector, with not only the buses but also the electric cars. So there is a whole infrastructure required to ensure that the transportation sector can efficiently make the switch from a fossil [or] petrol economy into the electric vehicle economy. So there will be a lot of scope, there is investment in the transit system—large projects have been announced. Thats I think where I am really bullish about the infrastructure sector.
What is also very interesting is I think the energy sector. There is a lot of change—the energy transition is happening. There is a lot of focus on renewables; Canada has committed to the reduction of greenhouse gases. So there I think the digital technology and smart technology [are] going to be a very attractive market[s]—but also new technologies like hydrogen, so there I feel very [excited].
Of course, the industrial sector, that is also very interesting because I feel we have a lot of small and medium enterprises, which are production facilities, and if you compare our SMEs with the global manufacturing companies, I do feel—and this has been also shown in some reports—that Canada is lagging behind when it comes to technology, when it comes to Industry 4.0. So there is work to be done.
I think it is also an opportunity now – as COVID has fast-tracked digitalization by a couple of years – to invest in that sector.
I think it is also an opportunity now —as COVID has fast-tracked digitalization by a couple of years—to invest in that sector, and we will be hoping [for investments], and as Quebec is already doing, I think others will also follow. So that is the third sector I would be very excited about, and [it is] all helping decarbonization.
Canada’s Cybersecurity Opportunity
You have touched on a very important topic. Cybersecurity is a big challenge, but it is also a big opportunity. We see the cost of cybersecurity attacks at about $600 billion USD, that is 1% of the global GDP. So it is a big challenge and by the end of this year, 20 billion devices will be connected to the Internet of Things, so there is a huge surge in connectivity, huge surge in digitalization. The big companies are investing 70% more versus previous years in to IoT technologies.
Cybersecurity is a big challenge, but it is also a big opportunity. We see the cost of cybersecurity attacks at a bout $600 billion USD, that is 1% of the global GDP.
Canada has a very strong regime when it comes to cybersecurity, our federal government has come up with a policy, so we are in a good space there. But where we see as a big opportunity is there has been a lot of work done on information technology (IT) cybersecurity. We split cybersecurity into two parts, the IT, that is your computer, that is your data, but then we [have] operational technology (OT), and that is about the critical infrastructure. So how do we protect—as our power plants, as our industries, as our signaling systems are being connected to the Internet of Things, how will we protect them? Because if there is a cyberattack on a critical infrastructure, the consequences are much bigger as compared to the IT cyber—so that is where the opportunity is.
Canada has a very strong regime when it comes to cybersecurity, our federal government has come up with a policy, so we are in a good space there.
So we chose New Brunswick, Fredericton, as the global centre of competence, and it was a very natural choice. As I said, we have a global smart grid centre of competence—smart grid is all about connecting the critical infrastructure of the utility through cloud platforms—and so it was a natural choice, and this has to be very secured and that is why we put the cybersecurity [centre there]. Of course, we are, and I would say just like with Canada, very happy with the ecosystem in New Brunswick. There is a very supportive government, there is very innovative Crown corporations like New Brunswick Power; we have a good presence of the SMEs who are willing to participate in this energy transition. So, all in all, a very good ecosystem.
Now coming to Canada, how can Canada leverage this growth in cybersecurity? I think Canada is in a good place, one, because of their collaborative nature of ecosystems which we have in Canada. But I do feel that maybe our biggest selling position for Canada is the political stability and the neutrality of the country. Because we have experienced working together with corporations around the world when it comes to cybersecurity and there is a large sensitivity about where the data will go and in which location the cyber operating centre will be. I feel Canada is a very good, stable political country, proven in the COVID crisis to take [on] that role for the world.
FDI Impact on Canada’s Economy, Companies and Communities
I think foreign direct investment on a high level brings us closer to the world. It creates jobs in Canada. Just to give you an example, every one job which Siemens Canada creates, there are four additional jobs created in the economy. So, if large companies are investing into Canada, it is good for the prosperity of the country—it brings us together.
The other important element, which the investors feel, is that Canada is a very diverse country. We have, even if you look at the Greater Toronto Area (GTA), more than 50% of people were not born here, they have come from outside. So there is a very good awareness about foreign countries and foreign cultures in Canada. So when we are investing here and working on a global centre, we have people from all over the world. So if we are doing business in, let’s say, Brazil, we have many members in our team who have come or migrated to this country from Brazil. So they fully understand the dynamics in those countries, so that I think really brings us closer. That is what we stand for, inclusivity and diversity, and FDI not only creates economic benefits but also social benefits I feel.
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