2011 Energy Summit - CME Presentation by Ian Howcroft


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2011 Energy Summit - CME Presentation by Ian Howcroft

  1. 1. Roadmap to Recovery Economic Outlook 2011 Clarington Board of Trade & Office of Economic Development May 30, 2011
  2. 2. A Strategic Approach <ul><li>Importance of Manufacturing </li></ul><ul><ul><li>Critical driver of job creation & economic growth </li></ul></ul><ul><li>Recession </li></ul><ul><ul><li>Stabilize : Policies that respond to recession and help turn the corner to recovery </li></ul></ul><ul><li>Recovery </li></ul><ul><ul><li>Support : Policies that reduce barriers to recovery & accelerate job growth </li></ul></ul><ul><li>Reset </li></ul><ul><ul><li>Sustain : Policies that help manufacturers respond to the challenges and take advantage of the opportunities resulting from the structural changes that will reshape the Canadian economy over the next five years </li></ul></ul><ul><li>The Role of Government </li></ul><ul><ul><li>Governments don’t create jobs. Customers do. Government’s role is to help sustain customer demand and ensure a supportive environment for business and job creation. </li></ul></ul>Canadian Manufacturers & Exporters
  3. 3. What is Manufacturing? <ul><li>Companies that add value by producing goods (official definition) </li></ul><ul><li>The business of providing value to customers through a product (more realistic definition) </li></ul><ul><li>The business of adding value in global product supply chains – including services </li></ul><ul><li>What drives value creation – and job growth – in manufacturing? </li></ul><ul><ul><li>Customers = New market development around the world </li></ul></ul><ul><ul><li>Knowledge = Product innovation & commercialization </li></ul></ul><ul><ul><li>Technology = Process improvement & adoption of productivity enhancing technologies </li></ul></ul><ul><ul><li>People = Highly skilled and qualified workforce </li></ul></ul><ul><ul><li>Differentiation = Specialization, customization, services, agility, niche opportunities </li></ul></ul><ul><ul><li>Global supply chains = Investment, partnerships, exports & imports, knowledge management </li></ul></ul><ul><li>Production anchors value creation – companies that produce things create jobs throughout the economy (including government) </li></ul>Canadian Manufacturers & Exporters
  4. 4. Manufacturing in Canada <ul><li>Companies that produce things </li></ul><ul><ul><li>A $540 billion business across Canada ($650 billion in 2008) </li></ul></ul><ul><ul><li>A $260 billion business in Ontario ($300 billion in 2008) </li></ul></ul><ul><ul><li>13% of Canada’s GDP (16% in 2005) </li></ul></ul><ul><ul><li>10% of workforce = 1.75 million Canadians (2.4 million in 2005) – 800,000 in Ontario </li></ul></ul><ul><li>A highly diversified sector </li></ul><ul><li>Manufacturing accounts for two-thirds of Canada’s exports </li></ul><ul><li>Highly integrated with the US market </li></ul><ul><li>75% of business sector R&D </li></ul><ul><li>85% of new product commercialization </li></ul><ul><li>Canada’s leader in GHG emission reduction (10% reduction since 1990) </li></ul><ul><li>The business of manufacturing = A $1.6 trillion business </li></ul><ul><ul><li>Every dollar of output in manufacturing drives $3.25 of total economic activity </li></ul></ul>
  5. 5. Manufacturing Sales By Province (Oct 2008 – Oct 2009) Canadian Manufacturers & Exporters
  6. 6. Manufacturing Sales (June 2009 – June 2010) Canadian Manufacturers & Exporters
  7. 7. Economic Outlook 2011 <ul><li>Economic growth is expected to slow from 2.8% in 2010 to 1.5% to 2.0% in 2011. </li></ul><ul><li>Exports and business investment will lead the Canadian economy in 2011. </li></ul><ul><li>In fact, Canada will rely on exports and business investment in 2011 to sustain economic recovery. </li></ul><ul><li>Consumer demand, housing, and government spending will all slow significantly. </li></ul><ul><li>Export volumes are expected to expand by 10% in 2011. </li></ul><ul><li>Business investment in machinery and equipment s expected to increase by 16.5% in 2011. </li></ul>
  8. 8. Economic Outlook 2011
  9. 9. Canada’s Export Rebound 2010 <ul><li>In 2010, merchandise export volumes increased 7.5% led by automotive products (+55%) and industrial goods and materials (+12.5%) </li></ul><ul><li>Export sales rose 9% in 2010 – exports of goods increased 10.5% while the value of services exports was up by 3%. </li></ul><ul><li>Export sales increased around the world: </li></ul><ul><ul><li>United States + 5% </li></ul></ul><ul><ul><li>Japan + 10% </li></ul></ul><ul><ul><li>European Union + 15% </li></ul></ul><ul><ul><li>Other Countries + 30% </li></ul></ul>
  10. 10. Manufacturers’ New Orders & Sales
  11. 11. Manufacturing Sales by Sector (October 2009 – October 2010)
  12. 12. Manufacturing Sales by Sector (October 2009 – October 2010)
  13. 13. After-Tax Profits Rebound <ul><li>Before-tax profits are expected to increase by at least 10% in 2011 and 2012. </li></ul><ul><li>In addition, corporate tax rate reductions will generate significant economic benefits for the Canadian economy as a result of their positive impact on after-tax business profits </li></ul><ul><li>Federal Budget and Election </li></ul><ul><li>Ontario Budget and Election </li></ul>
  14. 14. Canada’s Corporate Tax Rates are Falling <ul><li>Federal and provincial corporate income tax rates have fallen significantly in Canada over the past ten years. </li></ul><ul><li>The statutory federal tax rate on general corporate income has been reduced from 28% of business profits in 2000 to 16.5% as of January 1 st , 2011. It is scheduled to fall to 15% on January 1 st , 2012. </li></ul><ul><li>Provincial governments are also lowering their corporate tax rates. Planned reductions in federal and provincial tax rates will reduce Canada’s average combined statutory corporate tax rate from 31% in 2010 to 25% in 2012. </li></ul>
  15. 18. Impact on Employment Federal Tax Rate Reductions between 2000 and 2010 Federal Tax Rate Reductions between 2007 and 2010 Rate Reduction from 18% in 2010 to 15% in 2012 Year of Estimated Impact 2010 2010 2012 Impact on After-Tax Profits + $16.5 billion + $7.0 billion + $6.2 billion Impact on After-Tax Profits as a Percent of GDP + 1.02 percentage points + 0.43 percentage points + 0.39 percentage points Impact on Canada’s Unemployment Rate - 0.68 percentage points - 0.29 percentage points - 0.26 percentage points Impact on Employment + 127,000 net jobs + 54,000 net jobs + 49,900 net jobs
  16. 20. Corporate Tax Rate Reductions 2011/12 <ul><li>Increase after-tax business profits by $12.4 billion or 10.6% </li></ul><ul><li>Lower Canada’s unemployment rate by 0.52 percentage points and boost employment by 98,800 net jobs </li></ul><ul><li>Increase total business investment by $6.2 billion or 4.4%. (Investment in new facilities can be expected to rise by $3.0 billion and investment in machinery and equipment by $3.2 billion.) </li></ul><ul><li>Increase business spending on research and development by $546 million or 4.4% </li></ul><ul><li>Boost nominal GDP by $51.6 billion or 3.2% </li></ul><ul><li>Increase personal incomes of Canadians by $30.4 billion or 2.4% </li></ul><ul><li>Increase per capita personal income by $880 </li></ul><ul><li>Contribute $2.6 billion to $3.7 billion in additional net revenues for all levels of government </li></ul>
  17. 21. Risks <ul><li>Global financial turmoil </li></ul><ul><li>Above par & volatile Canadian dollar </li></ul><ul><li>Surge in interest rates </li></ul><ul><li>International trade restrictions </li></ul><ul><li>Cost competitiveness </li></ul>
  18. 22. Surprises <ul><li>Stronger than expected US recovery </li></ul><ul><li>Concerted & constructive energy policies </li></ul><ul><ul><li>Oil sands </li></ul></ul><ul><ul><li>Nuclear </li></ul></ul><ul><ul><li>Alternative </li></ul></ul><ul><li>Coordinated economic strategies focused on value creation: </li></ul><ul><ul><li>Manufacturing strategies </li></ul></ul><ul><ul><li>Tax measures – Extended 2-year Depreciation, Refundable SR&ED </li></ul></ul><ul><ul><li>Education & Skills </li></ul></ul><ul><ul><li>Competitive regulations </li></ul></ul><ul><ul><li>International business opportunities </li></ul></ul><ul><ul><li>Infrastructure </li></ul></ul>
  19. 23. Business as Usual is not an Option <ul><li>Leadership – New strategies & effective implementation </li></ul><ul><ul><li>Become an integral part of customer/supplier success </li></ul></ul><ul><ul><li>Focus on solutions, not products </li></ul></ul><ul><li>New market development – Finding new customers in new supply chains </li></ul><ul><li>Innovation – New & improved solutions, products, services, production and business processes </li></ul><ul><li>Logistics & Supply Chain solutions – Agile, just-when-needed solutions </li></ul><ul><li>Cash Flow – Cash management & financing </li></ul><ul><li>LEAN cost reduction – Focus on what customers value & eliminate waste in business & production processes </li></ul><ul><li>Achieving results through people – skills and workforce capabilities </li></ul>
  20. 24. CME Policy Priorities <ul><li>Coordinated economic strategies focused on wealth creation and on business innovation, manufacturing and exporting </li></ul><ul><li>Follow through with corporate tax rate reductions </li></ul><ul><li>Extend the eligibility period for the two-year write off for investments in manufacturing and processing technologies by at least five years </li></ul><ul><li>Make the SR&ED tax credit refundable and improve administration </li></ul><ul><li>Tax credits for workplace training and regulatory compliance </li></ul><ul><li>Lean regulations </li></ul><ul><li>Strengthen technology transfer to Canadian industry </li></ul><ul><li>Strengthen support for exporters – leveraging procurement </li></ul><ul><li>Open markets for Canadian exporters, eliminate protectionist restrictions, but enforce trade rules </li></ul><ul><li>Strengthen programs for labour mobility and workplace training </li></ul>
  21. 25. Open For Business <ul><li>Regulatory Reform </li></ul><ul><li>Focus on Results – Not process </li></ul><ul><li>Legislation Just Passed – Bill 68 – ( Passed October 21, 2010) </li></ul><ul><li>Manufacturing sector lead – CME </li></ul><ul><li>60 day initiative </li></ul><ul><li>Roundtable Assessment </li></ul>Canadian Manufacturers & Exporters
  22. 26. Economic Benefits of Refurbishment <ul><li>Assumed refurbishment of 10 reactors in Ontario </li></ul><ul><li>Nearly 25000 Jobs </li></ul><ul><li>Employment Income of $2.9 billion </li></ul><ul><li>Fuel Cost $189 million </li></ul><ul><li>Ontario Equipment, Materials & Supplies =$1.89b </li></ul><ul><li>Annual economic activity of $5 billion </li></ul>
  23. 27. Nuclear Supply Chain Opportunities <ul><li>Ontario - $33 billion - 20 years for Nuclear (New & Refurb) </li></ul><ul><li>United States - $17.5 billion in loan Guarantees in 2005 </li></ul><ul><ul><li>About half remains unclaimed </li></ul></ul><ul><ul><li>Whitehouse is preparing to add another $36 billion in 2012 </li></ul></ul><ul><ul><li>Focus of the DOE has been Emissions Standards for generation </li></ul></ul><ul><ul><li>Legislative and regulatory uncertainty in the US </li></ul></ul><ul><ul><li>California Recently Passed Cap and Trade Regulation </li></ul></ul><ul><li>EU – November 2010 – adopted “Energy 2020” </li></ul><ul><ul><li>2/3 of Energy from low carbon sources by 2020 </li></ul></ul><ul><ul><li>Focus on R&D, safety and security standards </li></ul></ul>
  24. 28. Nuclear Supply Chain Opportunities <ul><li>India – Target 63,000 MW of Nuclear Capacity by 2032 – 16 Indigenous Reactors - PHWR </li></ul><ul><ul><li>40,000 MW of LWR with “International Cooperation” </li></ul></ul><ul><ul><li>April 4 th , 2011 India deferred approval of 4 reactors – tighter scrutiny </li></ul></ul><ul><li>China: Plan to grow nuc capacity to 6% (70-80GW) by 2020 </li></ul><ul><ul><li>250 GW nuclear by 2030 (16% capacity) </li></ul></ul><ul><ul><li>ACPR 1000 – China’s ambition to export by 2013 </li></ul></ul>
  25. 30. Business as Usual is not an Option <ul><li>Leadership – New strategies & effective implementation </li></ul><ul><ul><li>Become an integral part of customer/supplier success </li></ul></ul><ul><ul><li>Focus on solutions, not products </li></ul></ul><ul><li>Cash Flow – Cash management, financing, hedging, pricing, outsourcing </li></ul><ul><li>LEAN cost reduction – Focus on what customers value & eliminate waste in business & production processes </li></ul><ul><li>Innovation – Solutions, specialized products & services, customization </li></ul><ul><li>New market development – In Canada & around the world </li></ul><ul><li>Logistics & Supply Chain solutions – Agile, just-when-needed solutions </li></ul><ul><li>Achieving results through people – skills and workforce capabilities </li></ul>
  26. 31. <ul><li>Leadership makes the difference </li></ul><ul><li>Advocacy /// Intelligence /// Business Opportunities /// Best Practices /// Networking </li></ul><ul><li>Making a difference on issues that are critical for our members: </li></ul><ul><li>Manufacturing Competitiveness & Innovation </li></ul><ul><li>Business Opportunities in the United States </li></ul><ul><li>Business Opportunities in International Markets </li></ul><ul><li>People & Skills </li></ul><ul><li>Energy & Environment </li></ul>