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Alberta best in the country at creating positive investment climate; Ontario floundering in fifth spot

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Release Date: December 4, 2008

VANCOUVER, BC-Alberta continues to set the pace and leads the country in terms of creating and maintaining a positive investment climate, while Ontario is struggling, according to the 2008 edition of the Canadian Provincial Investment Climate Report, released today by independent research organization the Fraser Institute.

Alberta was Canada's top province with a score of 8.5 out of a possible 10 in the Institute's annual index that objectively evaluates the public policies that create and sustain a positive investment climate. Saskatchewan and British Columbia ranked second and third in a virtual tie (Saskatchewan scored 5.9 out of 10, BC 5.8).

But the most striking result is that Ontario, Canada's most populous province and largest economy, ranks fifth overall with a score of 5.0, behind fourth place Newfoundland & Labrador which scored 5.4.

"Alberta is clearly in a league of its own among Canadian provinces in terms of creating a positive investment climate, while Saskatchewan and BC also have strong showings," said Niels Veldhuis, Fraser Institute director of fiscal studies and co-author of the report.

"Much more troubling for the nation is the poor ranking for Ontario. Historically, Ontario has ranked first or second but in recent years the province has implemented polices that are not conducive to attracting investment."

The remainder of Canada's provinces all scored below 5.0, indicating relatively poor performance in terms of creating and maintaining a positive investment climate. Manitoba scored 4.3; New Brunswick scored 3.7; Quebec scored 3.5; Nova Scotia scored 3.3 and Prince Edward Island ranked last with a score of 3.1.

"Quebec's dismal score is very troubling given that it is one of Canada's most populous provinces and of great importance to the Canadian economy," added Keith Godin, co-author of the study and Fraser Institute senior policy analyst.

The index is composed of seven areas identified by Canadian investment managers as the most important policies contributing to investment climates: corporate income tax, fiscal prudence, personal income tax, transportation infrastructure, corporate capital tax, labour market regulation, and burden of regulation.

Alberta ranked first on most indicators including corporate income taxes, corporate capital taxes, personal income taxes, fiscal prudence, and labour market regulation. It ranks second on the overall burden of government regulations or "red tape." However, Alberta ranked seventh out of 10 on transportation infrastructure with a score of 5.7 out of a possible 10. This component assesses the transportation infrastructure in each province, including highways, urban transit, air, rail, and marine service by examining the extent, use, accessibility, accessibility, cost, and condition of each mode of transportation.

Saskatchewan and British Columbia also receive high ratings on tax and fiscal prudence measures. BC and Saskatchewan rank second and third respectively on personal income taxes and third and fourth on corporate income taxes.

Saskatchewan (3rd) beats BC (4th) on fiscal prudence which measures how well provincial governments have managed their budgets and whether government spending is sustainable. Saskatchewan (2nd) and BC (3rd) also rank well on corporate capital taxes. Unfortunately, the overall scores of both provinces were dragged down by there performance on transportation infrastructure (Saskatchewan ranked 9th and BC 10th).

Newfoundland & Labrador's ranking on the overall Canadian Provincial Investment Climate Index was greatly aided by its first place ranking for burden of regulation and second place ranking for fiscal prudence and labour market regulation. However, it was ranked last for personal income tax.

Ontario scores well in transportation infrastructure and labour market regulation (2nd in each category). It ranks in the middle of the pack on personal income taxes (4th), corporate capital tax (4th), fiscal prudence (5th), and the overall burden of government regulations (5th). However, its overall ranking is brought down by its low score in corporate income tax (7th).

Quebec scored well on corporate income taxes (2nd), but poorly on all other indicators. Most critically, the province ranks ninth in corporate capital tax and last on fiscal prudence and the overall burden of government regulations.

The remaining Atlantic provinces - New Brunswick, Nova Scotia, and Prince Edward Island - generally trail the rest of the country in fiscal prudence, burden of regulation, and with the exception of Prince Edward Island (6th), corporate capital tax. Nova Scotia is also ranked first for transportation infrastructure.

"The allocation of investment capital, both internationally and domestically, is increasingly acknowledged as a leading contributor to a jurisdiction's economic success or failure. Provinces that receive low scores in the index are pursuing policies that are failing in terms of providing their citizens with increased economic opportunities and higher standards of living," Veldhuis said.