Sandip Lalli
President & CEO - Calgary Chamber of Commerce
Part of the Spotlight on Alberta's Economic Future

Predictable Policies, Lower Taxes and Less Regulation: Catalyzing Calgary and Canada’s Economies

Takeaways

  1. Canada’s performance in terms of investor confidence, tax competitiveness and regulatory processes cannot compete globally and must be addressed.
  2. Calgary has always had diversification, but has not highlighted its achievements in other sectors such as agriculture, supply chain and health sciences.
  3. Calgary and Canada should think of businesses as problem-solving ventures, not necessarily sector-specific ones.

Action

Instead of picking winning and losing sectors, Canadian governments need to focus on rebuilding investor confidence, cutting regulations and lowering taxes to create a competitive business environment.


What are some of the challenges Calgary’s economy is facing today?

When I came back into Canada, the biggest hurdle I came across was the cumbersome nature of doing business in Calgary in particular, but in Canada in general. I do not understand what caused the introduction of extra regulations, taxes and compounded costs. Canada was once a really vibrant free market economy. Having worked in that environment and then having had to close a business in the Calgary  marketplace really opened my eyes to the unease of doing business here. At the end of the day, it really boils down to improving competitiveness. Canada’s performance in terms of investor confidence, tax competitiveness and regulatory processes cannot compete globally. Investors have lost confidence in the Canadian economy because of its unpredictability, ever-increasing regulations and high commercial and personal taxes. The lack of political will is definitely weighing on investors more than it ever has. CEOs were able to manage and de-risk political will before but they cannot anymore. Finally, Calgary has a fair amount of businesses that want to scale up but do not have access to markets due to trade barriers.

“Calgary has a fair amount of businesses that want to scale up but do not have access to markets due to trade barriers.”


What should be done to improve Calgary and Canada’s competitiveness?

We have three recommendations for the Canadian government in order to improve Canada’s competitiveness around taxes. Firstly, the US tax cuts have really impacted investment into Canada and we are proposing a reduction in the federal general corporate income tax rate. Research has found that even reducing it by just 1% can result in a 2.5% increase in foreign direct investment. Secondly, Canada needs to introduce full expensing for new investments in machinery and equipment. Finally, our third recommendation is around broader business issues such as productivity, regulations and efficiency. It takes so long to get a permit in our natural resources space compared to what it does in the US, for instance. However, 80% of our market for any given industry is in the US.


How do Calgarians view the role of oil and gas in the city’s future economy?

There has always been diversification in Calgary’s economy, but we have never really highlighted other key sectors such as agriculture or the health sciences. When we say “diversification”, we almost mean that one sector ends and the economy starts doing something else. I do not think those words best describe what has happened in Calgary. Calgary is a persistent, gritty and forward-looking place. Its businesses did not just start in 2014 or 2015; they have been silently growing and are now getting recognition. There is certainly a segment of people who are leaving the energy sector and starting a different company. But that is more a product of skill accumulation and transfer than about oil prices. On the ground, Calgarians are looking at their venture as a holistic business first and focusing on the sector later. Calgary has a strong business community and is not just a sector-driven economy.

“There is certainly a segment of people who are leaving the energy sector and starting a different company. But that is more a product of skill accumulation and transfer than about oil prices.”

Governments try to pick winners and losers in specific sectors, which is the wrong way to approach economic progress. What we want is a competitive business environment that enables companies to grow, prosper and solve problems that have not been solved yet. For example, autonomous vehicles are industry agnostic and will disrupt many sectors in the future. I think industry sectors are going to collide, so the company that can figure out how to service that collision will succeed.


What are the key indicators by which businesses should evaluate Calgary’s economy?

I look at deal flow and investor confidence in the venture capital and private equity areas to see if economic growth is happening. Companies from Calgary have been attracting investment from Europe, the US and other parts of Canada, which is a positive sign. Secondly, Calgary’s future will probably see some degree of amalgamation of companies because they feel that they shrank too fast and now have the opportunity to cater to a larger marketplace.


How can we catalyze and foster better economic unity as a country?

It is incredibly upsetting when Canadian businesses can go into the United States easier than they can go into Saskatchewan, Ontario or BC.For many businesses, the right first step in terms of geographical expansion should be national and yet we make it very difficult for companies to scale nationally. We do not need to be competing regionally or provincially because there is enough international competition. We recently had a chance to speak about international trade with Andrew Scheer, the Leader of the Conservative Party and Leader of the Official Opposition. He said that the premiers need to come to the table collectively and reach some sort of alignment. The premier of your province needs to have the grit to be able to negotiate and work together with other premiers to get to a solution that is win-win. I imagine it would be the same for Prime Minister Trudeau.

“It is incredibly upsetting when Canadian businesses can go into the United States easier than they can go into Saskatchewan, Ontario or BC.”