82% of Canadian firms planning Asian expansion
Eric Beauchesne
CanWest News Service
Wednesday, February 15, 2006
OTTAWA -- More Canadian companies than ever are planning new or expanded investment in the Asia Pacific region, survey results released yesterday suggest.
However, despite the strong Canadian dollar, there is relatively little new investment planned by Canadian companies to outsource production and jobs to Asia to supply the Canadian market, the survey by the Asia Pacific Foundation indicates.
"That is a surprise," said Ron Richardson, an official with the Vancouver-based think-tank.
However, the reason is that unlike in the United States, where there has been a surge in outsourcing to supply the domestic market, most Canadian manufacturing firms are relatively small, making the cost of outsourcing prohibitive, Mr. Richardson explained.
Still, the survey found two-thirds of Canadian firms expect to increase their investment in Asia over the next 12 months, and 82% expect to do so over the coming half decade, including more than half who say they intend to substantially increase that investment.
The proportion planning to boost their stake in Asia is "far higher" than in previous surveys, said the report by the foundation, which is funded by the federal and British Columbia governments, and which promotes economic and other relations between Canada and countries in the Asia Pacific region.
Overall, the 110 companies that responded to the survey were more bullish on Asian investment than at any time in the seven years the survey has been conducted, with 30% expecting to boost their Asian holdings substantially in the coming year, up from 23% a year earlier.
Further, none expected to reduce their Asian exposure, it noted, adding it sees the results as being especially reliable as all the companies already have factories or sales offices in the region and are well-informed on economic prospects there.
According to Statistics Canada, Canadian firms had $32.3-billion invested in operations in the region at the start of last year, double what they had a decade ago.
The emergence of China has had a "substantial" impact on the planning or activities of 37% of the companies and a "moderate" impact on another 39%, the survey found.
Canadian firms are stepping up their Asian operations in line with efforts by the federal government to develop a national Pacific Gateway Strategy, said Yuen Pau Woo, president of the think-tank.
"The very strong private sector response to opportunities in Asia underscores the importance of federal and provincial government efforts to improve ... our economic links with the region," Mr. Woo said.
The new Conservative government of Stephen Harper has pledged nearly $600-million to support the strategy launched by the former Liberal government to eliminate road, rail and border bottlenecks to Asia-Pacific trade.
The survey suggests the top destination for new Canadian investment in Asia remains China, the likely target of one-quarter of potential investment.
If projects planned for Hong Kong and Taiwan are added, 35% of all the planned Asian investment will go into the greater China region.
The next largest target is Southeast Asia, although investment there should be less than half that of greater China.
The survey was sent out over the past two months to companies that already have a physical presence in Asia Pacific.
© National Post 2006