The Honourable Joseph McGuire, Minister of the Atlantic Canada Opportunities Agency, today welcomed the Atlantic Canadian results of the 2004 KPMG Competitive Alternatives international business cost study, the fifth consecutive report of its kind to rank Canada the lowest-cost G-7 country in which to do business.

“The fact that Canada continues to offer the lowest business start-up costs in North America and Europe is clearly great news for this government and for all Canadians,” said Minister McGuire. “When business comes to Canada, it means jobs for Canadians and a stronger economy for us all.”

The 2004 results show Atlantic Canada holding a 12.3 percent cost advantage relative to the United States, which is used as a baseline for the study. Furthermore, Atlantic Canadian cities rank higher than all of their international counterparts, particularly those south of the border. Charlottetown, Prince Edward Island, ranks as the second lowest-cost city of all featured international cities, after Sherbrooke, Quebec. Moncton, New Brunswick, ranks an impressive third, Halifax, Nova Scotia, ranks fourth.

“These results confirm what Atlantic Canadians have always known – if you want to start, grow or relocate your business, then Atlantic Canada is the most cost-competitive place to do it,” said Minister McGuire. “Combined with our exceptional quality of life, we feel Atlantic Canada has more to offer than any other region in the world."

Atlantic Canada also emerged as the lowest-cost region in 14 of the 17 industries analyzed in the KPMG report, offering the most significant cost advantages in the areas of research and development, corporate services and precision manufacturing. Atlantic Canada also has significant labour cost advantages relative to the United States.

“The main challenge now is to raise Atlantic Canada’s profile internationally and correct the misconceptions that are sometimes held of our region,” added Minister McGuire. “Through ACOA’s Atlantic Investment Strategy, we are working to raise awareness of the many advantages this region has to offer investors, and to promote Atlantic Canada as a profitable place to do business.”

This year’s Competitive Alternatives report provides the most thorough comparison of G-7 business operations ever undertaken, featuring 121 international cities and 17 industry sectors. The 10-month international study of leading industrialized countries – including all of the G-7 countries, as well as Australia, the Netherlands, Iceland and Luxembourg – compares after-tax costs of starting up and operating a business for a period of 10 years. The analysis takes into account labour, transportation, energy and facility costs, as well as both income-based and non- income-based taxes.

In addition to the 60-page report, KPMG’s comparative Web- based cost model allows companies to easily compare and rank all 121 cities, and examine individual cost factors relevant to their industry.

The Canadian results were launched on February 18, 2004 at simultaneous news conferences in Toronto and Montreal.

The online cost model, KPMG news release and full study can be viewed at www.competitivealternatives.com. More detailed Canadian results and collateral materials are available at www.investincanada.gc.ca/competitivealternatives.

The following background documents are available on the 
ACOA Media Room at www.acoa.gc.ca/MediaRoom :

•   Backgrounder – 2004 KPMG Competitive Alternatives Study 
•   Frequently Asked Questions – 2004 KPMG Competitive 
Alternatives Study 


For more information, contact:

Stephen Heckbert
Office of the Minister of the Atlantic Canada Opportunities 
Agency
(613) 948-7293

Diana Zandberg
Senior Communications Officer
Atlantic Canada Opportunities Agency
(506) 851-2132

KPMG Competitive Alternatives Study The CEO’s Guide to International Business Costs – 2004 edition

Canadian Highlights

• For the fifth consecutive time, Canada has emerged as the most cost-competitive country in KPMG’s Competitive Alternatives international business cost study. • Canada’s average business costs are 9% below those in the United States, which was used as a baseline in the study. • Canada is the lowest-cost country in 9 of the 17 industries analyzed, including aerospace, specialty chemicals, electronics assembly, medical devices, pharmaceuticals, wireless communications, biomedical R&D, clinical trials, and back office/call centres.

• Sherbrooke, Quebec is the number one most cost- competitive city among all of the featured international cities. • Canada has the lowest overall labour costs in the countries studied. Compared with the United States, Canada has a cost advantage of 20 percentage points for technical/professional labour and 23 percentage points for senior management. • Canada has the best corporate income tax rates for R&D operations and one of the lowest corporate income tax rates for manufacturing operations. In addition, Canada offers the lowest costs for electricity and some of the lowest costs for industrial land and construction, office leasing, and telecommunications.

Atlantic Canadian Highlights • Once again, Atlantic Canada has emerged as the most competitive region among all countries examined in KPMG’s Competitive Alternatives study. • Atlantic Canada’s average business costs are 12.3% below those in the United States. Costs in the four Atlantic Canadian cities – Charlottetown, Moncton, Halifax, and St. John’s – are approximately 10% lower than their New England counterparts.

• Atlantic Canada is the lowest-cost region in 14 of the 17 industries analyzed, offering the most significant cost- savings in the areas of research and development (biomedical R&D, clinical trials, electronic systems development and testing) and corporate services (back office/call centres). • Charlottetown, PEI, is the second most cost-competitive city among all of the featured international cities. Moncton, NB, ranks third; Halifax, NS, ranks fourth; St. John’s, NL, ranks eighth.

• Atlantic Canada’s labour and benefit costs are highly competitive. The average costs for the four Atlantic Canadian cities analyzed in the 2004 study are 23.7% lower than labour and benefit costs in the United States.

• Atlantic Canada’s electricity costs are 30.8% lower than the United States, and the region offers some of the lowest costs for industrial land and construction, office leasing, and telecommunications.

• When the additional 23 Canadian cities (population: under 100,000) analyzed by KPMG are benchmarked against the costs of the featured cities, Pictou, Nova Scotia, ranks number one.

COUNTRY / Region	COST INDEX	ATLANTIC CANADA’S ADVANTAGE (in percentage points)
Atlantic Canada	87.7	n/a
Canada	91.0	3.3
Australia	91.5	3.8
United Kingdom	97.6	9.9
Italy	98.7	11.0
France	99.1	11.4
Luxembourg	99.1	11.4
United States	100.0	12.3
Iceland	103.3	15.6
Netherlands	104.0	16.3
Germany	113.9	26.2
Japan	123.8	36.1

The study expresses total business costs in each country as an index. For comparison purposes, the United States was assigned a cost index of 100.0 and represents the study baseline, with a 12 industry average used for the study. Technical Facts

• The KPMG Competitive Alternatives of presents an analysis of business costs in 11 industrialized countries, including all the G-7 countries plus Australia, Iceland, the Netherlands, and Luxembourg.

• This is the fifth published edition; previous studies were done in 1996, 1997, 1999, and 2002.

• The study measures the combined impact of 27 location- sensitive cost components as applied to the industry sectors analyzed. These cost factors generally represent between 35 and 90 per cent of the total operating costs for manufacturing operations and service operations, respectively.

• The 17 industries studied in the 2004 edition are: aerospace, agri-food, automotive, metal components, specialty chemicals, electronics assembly, medical devices, pharmaceuticals, plastic products, precision manufacturing, wireless communications, biomedical research and development, clinical trials, electronic systems development and testing, advanced software design, web and multi-media services, and back office/call centres.

• More than 2,000 individual business scenarios were examined and more than 30,000 cost items were analyzed in the study.

• The study does not consider cost of living factors, such as personal taxes, cost of housing, and healthcare and education costs. It also does not consider other key factors that have a bearing on business environment and quality of life, such as labour availability and skills, access to markets and suppliers, transportation infrastructure, crime rates, healthcare and education facilities, culture and recreation, etc.

• The study uses the Canadian exchange rate of $1.3328 (US$0.75). According to the KPMG analysis, even if the Canadian dollar were to appreciate by 20 per cent relative to the U.S. dollar, Canada would retain its No. 1 ranking and competitive advantages.