Foreign investment dollars pour into Nova Scotia

It might be Canada’s second-smallest province known largely for its exports, but Nova Scotia appears to be punching above its weight when it comes to foreign direct investment.

According to a report by fDi Intelligence, a division of The Financial Times, Nova Scotia was the “best-performing region in North America,” for attracting foreign investment in 2012. It also attracted more FDI projects per capita than any other state or province.

Three of the four largest job-creating FDI projects in Canada went to Nova Scotia in 2012 with major investments by IBM, Admiral Insurance, and Stream, according to Dr. Henry Loewendahl, vice president, North America for fDi Intelligence.

He said the ranking is based on a per capita ranking, and includes greenfield projects – which are new developments and expansion that create jobs.

“Overall, California attracts the highest absolute number of FDI projects,” says Loewendahl, “as would be expected by its population and GDP.”

The fDi Intelligence markets database tracks everyday and worldwide greenfield FDI projects and uses the dataset for 2012 to compare performance.

While the province has a number of incentives for investment, Loewendahl says they are often "icing on the cake for investors not the main driver of investment."

"We would also note that Nova Scotia has a strong track record in services from the times when Canada had such a big cost advantage over USA and was a near shore location and many recent investments are expansions of existing investors," he said.

Nova Scotia Business Inc. (NSBI), the province's business development agency, was quick to promote the ranking, and to cite consulting firm KPMG’s ranking in 2012 of capital city Halifax as the fastest-growing hedge fund administration centre in Canada.

NSBI also claims the province’s information and communication technology sector (ICT) has grown more than any other province in Canada over the past five years.

"Nova Scotia is a competitive jurisdiction that has attracted some of the world's largest companies in every key sector and offers a solution for companies looking to expand their global footprint," said Stephen Lund, President and CEO of Nova Scotia Business Inc.

Nova Scotia's two-gear economy

Does this mark a turnaround for the most populous province in Atlantic Canada? Not so fast warns the Conference Board of Canada in a new report released Friday which warns about the province’s “two-gear” economy.

“The Nova Scotia economy is operating at two very different speeds — a modest pace for the Halifax region and a much slower speed for the rest of the province,” the Conference Board says, noting the problems it will create for governments scrambling to provide comparable public services across the province.

“This two-gear economy will present mounting challenges in the years ahead.”

The report notes that Halifax’s economy is operating at “normal speed,” of about 2.25 per cent this year and 2.75 per cent in 2014, which is alongside other Canadian cities with the exception of booming parts of Western Canada.

However, the rest of the province is expected to grow at a much slower pace of 1.5 per cent or less.

“Given that the Halifax region represents over half of the province’s economy, some simple arithmetic reveals that the growth prospects for the rest of Nova Scotia are not rosy,” the report says. “The economic fundamentals — growth in population, employment, and private consumption — for the rest of the province are weak.”

Conference Board senior economist Prince Owusu says while Nova Scotia performed well by attracting strong FDI in 2012, “and hope that they can keep it up” statistics show it was a rare event.

He points to Statistics Canada which shows that, on average, Nova Scotia ranked sixth among the provinces over 2004-2011, coming behind the resource economies of Alberta, Newfoundland and Labrador and Saskatchewan.

According to Owusu, most of the FDI inflows into Nova Scotia land in the Halifax area helping to boost the economy in that region leaving the rest of the province lagging behind in economic performance.

“This is what was pointed out in the report released today by the Conference Board,” he said. “To address this disparity and to improve economic performance, the government needs to focus on three things: Improvement to human capital deepening and labour force growth (fundamental changes to strategies for attracting and retaining immigrants is required); investment in physical capital; and most importantly fostering business innovation and productivity growth.”