ALBERTA’S FINANCIAL SECTOR: STRENGTH IN NUMBERS AUGUST 2014 VIEW OF DOWNTOWN CALGARY Photo courtesy Matthews Southwest INVESTING IN CANADA WITH A STRONG AND STABLE ECONOMY – ONE THAT CONTINUALLY OUTPERFORMS THOSE OF MOST OTHER COUNTRIES – CANADA IS ONE OF THE MOST WELCOMING AND PROFITABLE PLACES FOR INTERNATIONAL BUSINESS AND FOREIGN DIRECT INVESTMENT. 1 INVESTINGGLOBAL TOP IN 10 CANADA Canada ranks among the top 10 on a range of key investment-related indices, including: • ECONOMIC WELL-BEING1 • COUNTRY CREDIT RATING2 • EASE TO START A BUSINESS2 • SOUNDNESS OF BANKS2 • STRENGTH OF INVESTOR PROTECTION3 • QUALITY OF MANAGEMENT SCHOOLS2 • PROPERTY RIGHTS3 • LABOUR MARKET EFFICIENCY1 • JUDICIAL INDEPENDENCE3 Forbes magazine consistently lists Canada among the top 10 best places in the world for business. In 2012, the aggregate Canadian market capitalization reached US$2.19 trillion – one of the top 10 in the world.3,4 CANADA’S BANKING SYSTEM HAS BEEN RANKED THE SOUNDEST IN THE WORLD, SIX YEARS IN A ROW.2 1 Centre for the Study of Living Standards (2011). Moving from a GDP-based to a well-being based metric of economic performance and social progress. Retrieved from http://www.csls.ca/reports/csls 2011-12.pdf 2 World Economic Forum (2014). The Global Competitiveness Report 2013-2014. Retrieved from http://www.weforum.org/reports/global-competitiveness-report-2013-2014 3 World Federation of Exchanges. WFE database. Retrieved from http://www.world-exchanges.org/statistics 4 Alberta Securities Commission (2014). The Alberta capital market: A comparative overview. Retrieved from http://www.albertasecurities.com/Publications/alberta-capital-market-report-2014.pdf 2 Canada is one the world’s largest and most advanced economies, as well as one of the most welcoming places for international business and foreign investment. Canada was among the first G-7 economies to emerge from the global recession and is expected to continue to be a leader among major industrial nations in the coming years. The country’s strong performance is due mainly to its dynamic business environment, diversified economy, broad resource base, strong financial system, sound fiscal management, low corporate tax rates, and highly skilled population. One of the key drivers of Canada’s economy is its broad resource base, including the world’s third largest oil reserves.5 The majority (over 98%) of this massive concentration of oil is found in only one of Canada’s provinces—Alberta.6 CANADA’S OIL RESERVES ARE AN ATTRACTIVE INVESTMENT OPPORTUNITY – LARGE RESERVES IN A POLITICALLY STABLE LOCATION THAT IS OPEN TO PRIVATE INVESTMENT. 5 Canadian Association of Petroleum Producers. Basic statistics. Retrieved from http://www.capp.ca/library/statistics/basic/Pages/default.aspx 6 Alberta Energy. Facts and statistics. Retrieved from http://www.energy.alberta.ca/oilsands/791.asp 3 INVESTING IN ALBERTA ALBERTA Vancouver Toronto Chicago New York City Houston Edmonton Calgary 4 5 FASTEST GROWING ECONOMY IN CANADA Alberta is Canada’s new economic engine. During the past 20 years, it has surpassed every other province with an average annual GDP growth of 3.4%. In 2013, the Alberta economy experienced a solid expansion of 3.9%.7 Alberta’s economic growth is expected to continue in the coming years in response to rising global demand for energy resources and agricultural products. ALBERTA’S GROWTH IN SELECTED INDICATORS: 2002-2012 % CHANGE 24.3 POPULATION 10.8 28.2 EMPLOYMENT 14.4 37.0 GDP 19.9 95.1 GOODS EXPORTS 17.0 130.3 INVESTMENT 83.0 ALBERTA CANADA Source: Statistics Canada and Alberta Innovation and Advanced Education 7 Alberta Innovation and Advanced Education. Highlights of the Alberta Economy 2014. Retrieved from: https://albertacanada.com/files/albertacanada/SP-EH_highlightsABEconomyPresentation.pdf 6 STRONGEST ECONOMY IN CANADA The province of Alberta is blessed with an abundance of natural resources, including land, forests and energy commodities. These raw materials form the foundation of Alberta’s thriving economy, but it is the province’s firmly engrained pro-business culture, lowest overall taxes in Canada and no long-term debt that have sustained it. While Alberta has developed a reputation as a world-class producer of oil and natural gas, it has capitalized also on its strengths in agriculture, alternative energy, forestry, manufacturing, and technology to develop a dynamic economy. 7 STRONGEST ECONOMY IN CANADA Alberta’s Triple A credit rating (since 2001) remains solid as it continues to be the only province in Canada with total financial assets that exceed total liabilities.8 PROVINCIAL NET FINANCIAL ASSETS/DEBT AS % OF GDP (2012-2013) 3.5% ALBERTA -5.0% SASKATCHEWAN -17.2% BRITISH COLUMBIA -27.2% NEWFOUNDLAND AND LABRADOR -27.6% MANITOBA -33.3% NEW BRUNSWICK -35.9% PRINCE EDWARD ISLAND -36.3% NOVA SCOTIA -37.4% CANADA -37.5% ONTARIO -49.4% QUEBEC Source: Conference Board of Canada 8Alberta Treasury Board & Finance. Provincial Borrowing. Retrieved from http://finance.alberta.ca/business/borrowing/index.html 8 THE WORLD’S MOST ACCESSIBLE OIL RESERVES Only 21% of the world’s proven oil reserves are accessible to private sector investment (i.e. are not state-controlled). Of these, 52% are in Alberta. WORLD OIL RESERVES (PROVEN, AS OF JANUARY 1, 2014 ) 300 298 World Oil Reserves Accessible Oil Reserves 266 250 52% Canada’s Oil Sands 79% 21% State Owned Other or Controlled 48% Other Accessible Reserves 200 173 169 157 150 140 BILLION BARRELS 102 92 100 80 48 37 50 32 30 25 24 ALBERTA 0 IRAQ IRAN U.S.A LIBYA SAUDI CHINA QATAR RUSSIA KUWAIT ARABIA NIGERIA CANADA ABU DHABI VENEZUELA KAZHAKHSTAN Sources: Canadian Association of Petroleum Producers (CAPP) and Oil and Gas Journal9 9 Oil and Gas Journal. Worldwide Look at Reserves and Production 2014. Retrieved from http://www.ogj.com/articles/print/volume-112/issue-1/drilling-production/worldwide-look-at-reserves-and-production.html 9 TOP GLOBAL INVESTMENT DESTINATION IN CANADA Alberta is one of the world’s top investment destinations. From 2008 through 2012, capital investment in Alberta totaled over $654 billion, much of which went to support the development of the province’s vast oil resources. Capital expenditures in the province hit $111.2 billion in 2013 and are expected to reach over $113 billion in 2014.10 Alberta’s strong investment environment is reflected also by the success of its companies in public markets. While the province accounts for only 11% of the Canadian population, over 30% of the country’s publicly traded billion-dollar firms are located in Alberta.11 TOTAL INVESTMENT IN ALBERTA CAPITAL EXPENDITURES ($ BILLIONS) 2007 6.6 14.8 22.5 40.0 83.9 2008 8.5 13.4 25.2 42.7 89.7 2009 8.5 10.4 23.2 23.6 65.7 2010 8.9 13.5 22.3 36.7 81.3 2011 8.2 12.5 22.3 47.0 90.0 2012 7.5 14.9 25.4 54.6 102.4 2013* 8.0 16.2 31.4 55.6 111.2 INSTITUTIONS HOUSING NON-ENERGY OIL & GAS *Preliminary Actual 10 Statistics Canada. Capital expenditures by sector, by province and territory (Alberta). Retrieved from http://www.statcan.gc.ca/tables-tableaux/sum-som/l01/cst01/busi03j-eng.htm 11 Centre for Digital Entrepreneurship and Economic Performance (2014). “Canada’s Billion Dollar Firms: Contributions, Challenges and Opportunities”. Retrieved from http://deepcentre.com/wordpress/wp- content/uploads/2014/07/DEEP-Centre-Canadas-Billion-Dollar-Firms-July-2014_ENG.pdf 10 LARGEST PER CAPITA INVESTMENT IN CANADA In 2012, per capita investment in Alberta was $25,251, more than double the national average of $11,265.12,13 PER CAPITA INVESTMENT IN CANADA (2012) ALBERTA $25,251 SASKATCHEWAN $19,208 NEWFOUNDLAND AND LABRADOR $19,054 CANADA $11,265 BRITISH COLUMBIA $10,239 MANITOBA $9,845 QUEBEC $8,789 ONTARIO $8,634 NEW BRUNSWICK $7,750 NOVA SCOTIA $7,187 PRINCE EDWARD ISLAND $6,795 12 Alberta Innovation and Advanced Education. Highlights of the Alberta economy 2014. Retrieved from http://albertacanada.com/SP-EH_highlightsABEconomy.pdf 13 Statistics Canada. Capital expenditures by sector, by province and territory (Alberta). Retrieved from http://www.statcan.gc.ca/tables-tableaux/sum-som/l01/cst01/busi03j-eng.htm 11 TOP GLOBAL INVESTMENT DESTINATION IN NORTH AMERICA Alberta consistently tops the list of North American jurisdictions with the best investment climate because of its low corporate taxes, economic freedom, transparency and lack of public debt. With no provincial retail sales tax, provincial capital taxes, payroll taxes or machinery and equipment taxes, Alberta offers one of the most competitive business and personal tax environments in North America.14 COMPARISON OF CORPORATE INCOME TAXES ALBERTA TEXAS UNITED STATES BRITISH COLUMBIA JANUARY 2013 32.7% 6.3% 39.0%* COLORADO ALBERTA ALASKA JANUARY 2013 15.0% 10.0% 25.0% LOUISIANA FEDERAL PROVINCIAL/STATE ONTARIO * 6.3% represents the average top general state corporate income tax rate U.S. rates known as of January 2013 Source: Alberta Innovation and Advanced Education, Tax Foundation and Federation of Tax Administrators NORTH DAKOTA NEW YORK PENNSYLVANIA QUEBEC 14 Alberta Innovation and Advanced Education (2014). Highlights of the Alberta Economy Presentation 2014. Retrieved from https://albertacanada.com/files/albertacanada/SP-EH_ highlightsABEconomyPresentation.pdf 12 A STRONG COMMITMENT TO ECONOMIC FREEDOM Alberta benefits from very high levels of economic freedom and consistently ranks among the top 5 in North America.15 This commitment to free enterprise creates a business-friendly environment that rewards investing and locating business in the province, and empowers Alberta businesses to successfully compete in the global arena. ALBERTA IS THE MOST ECONOMICALLY FREE JURISDICTION IN NORTH AMERICA SCORE RANK ALBERTA 8.3 1 TEXAS 7.7 4 BRITISH COLUMBIA 7.6 7 COLORADO 7.6 10 ALASKA 7.5 15 LOUISIANA 7.5 16 ONTARIO 7.4 25 NORTH DAKOTA 7.3 31 NEW YORK 7.3 33 PENNSYLVANIA 7.2 41 QUEBEC 7.1 49 Source: Economic Freedom of North America 2013, Fraser Institute 15 Fraser Institute (2014).