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Five issues Canada needs to address if it wants to attract foreign capital

Martin Pelletier: Money laundering, oligopolies, companies behaving badly — Canada’s image as a place to do business has suffered

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Over my years as a business owner, one psychological exercise I’ve found particularly useful is to always put yourself in the shoes of other people, and to actively seek out opinions that differ from your own.

Whether it is assessing potential partnership opportunities or trying to attract new clients, this simple process of trying to understand the other side of the argument can help expose you to the areas in which you need to improve if you want to succeed.

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Unfortunately, many people are not willing to do this, and will cling stubbornly to their own world views, no matter what the cost.

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In Canada, we have seen that kind of inflexibility on multiple fronts recently, especially when it comes to the economy, where it is easy to cherry pick data to suit a particular view.

Canada has some significant problems that require immediate attention if we want to attract foreign capital, something that is critical in building a strong and diverse economy. In particular, we see five main areas that if properly acknowledged and addressed, would go a long way toward restoring our global reputation as a great place to do business.

A blind eye to money laundering

Shocking reports by former RCMP deputy commissioner Peter German and law professor Maureen Maloney showed that more than $40 billion of dirty money was laundered through Canada’s economy last year through our housing market, casinos and businesses via organized crime.

Money laundering not only exposes a country to criminal activity but it also takes control of economic policy away from the government and creates an uneven playing field, in which legitimate businesses and corporations are unable to compete against those offering services well below cost as a means of laundering money.

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The government needs to take this issue seriously, and eliminate the distortions these problems are introducing into the economy.

Companies behaving badly

Past and present governments have been unwilling to reduce support for companies with a track record of making poor business decisions or worse, behaving badly such as allegedly undertaking illegal and unethical business practices both domestically and abroad.

Coincidentally, many of those companies seem to reside in one particular province that happens to have tremendous political sway because of its ability to influence election outcomes.

What kind of a message does such government support send to those who might be considering opening a business or expanding within those sectors in Canada?

Attacking small business

For some reason the current Federal government appears to have it out for small business owners, despite the fact that they are the backbone of the Canadian economy.

It started with the pervasive tax changes last year that aggressively targeted shareholders and capital providers; now small businesses have learned that they will be responsible for shouldering more than half of the approximate $6 billion in carbon taxes per year.

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If you treat homegrown innovators this way, how will you treat those looking to bring their businesses and their capital here?

Stymieing competition

I have written about this numerous times: Canada is a nation of oligopolies in banking, finance, wireless communications and airlines.

Unfortunately, regulation has been used as a means of protecting these industries from outside competition and as a result many of our industries have become complacent while the world around us is rapidly changing and disrupting the status quo.

Diversification denied

The energy sector is one of a few industries where you can quite literally create economic activity just by turning on the taps. The money that the sector generates can then be used to diversify into other areas of the economy that may take longer to respond, such as clean energy or technological advances including artificial intelligence and cognitive computing.

However, outside organizations have been allowed to hijack public opinion towards anti pipeline development within our own country and as a result influence government policies such as Bills C-69 and C-48. These developments are unfortunate, as the taps that could be fuelling economic diversification now appear to be shut.

Addressing any of these five issues in a significant way would help make Canada more attractive to foreign investment. But we need to look at both our economy and the underlying markets the way those on the outside looking in see them, in order to begin to make some positive changes.

Martin Pelletier, CFA is a Portfolio Manager and OCIO at TriVest Wealth Counsel Ltd, a Calgary-based private client and institutional investment firm specializing in discretionary risk-managed portfolios as well as investment audit and oversight services.

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