Companies make the decision to open new facilities, offices, and branches based on the potential contribution to company growth and profit. This is especially true when it comes to selecting the best locations in which to open offices and other facilities overseas.. Among the many criteria considered, companies are often swayed by an attractive financial package of incentives, subsidies, tax breaks and more.Companies make the decision to open new facilities, offices, and branches based on the potential contribution to company growth and profit. This is especially true when it comes to selecting the best locations in which to open offices and other facilities overseas. Among the many criteria considered, companies are often swayed by an attractive financial package of incentives, subsidies, tax breaks and more.
Recently, we have seen provinces, states and other localities devote significant funds and other enticements to attract foreign companies to open facilities in their jurisdictions. For example, this past September Wisconsin closed a $3 billion incentive package for the technology giant Foxconn, enabling the Taiwanese company to become the United States’ largest foreign recipient of state subsidies. A few years ago, Pennsylvania promised Royal Dutch Shell $1.65 billion in subsidies.
However, what about the other characteristics of a location? Do these not also play a significant role in fostering the proper ecosystem in which the company can thrive in the long term?
Case in point: Amazon has announced that it is accepting bids from cities to host its second North American headquarters.
Amazon expects to invest over $5 billion in construction and grow its second headquarters location to be fully equal to its current campus in Seattle, creating as many as 50,000 high-paying jobs. In addition to Amazon’s direct hiring and investment, construction and operation of Amazon HQ2 is expected to create tens of thousands of additional jobs and tens of billions of dollars in additional investment in the surrounding community.
Unlike most smaller and large companies alike, Amazon has actually released an RFP for city/regional economic development organization representatives to be able to bid on the project!
Supposedly, a sprawling list of over 100 cities throughout North America has been scrambling to put together the most enticing package to woo the corporate giant.
Rather than offering big cash incentives and surely engaging in a bidding war with other locations, the Canadian province of Ontario has decided to focus its bid instead on expanding the number of science, technology, engineering and math (STEM) graduates by 25%, from 40,000 to 50,000 annually, and spending $30 million to grow the number of students graduating with artificial intelligence master’s degrees to 1,000 annually.
Ed Clark, Premier Kathleen Wynne’s business adviser, says Ontario “is not offering any new financial incentives to Amazon, nor any incentives that are not available to others who seek to grow or locate such jobs here.”
Clark emphasizes that Ontario has many alluring features for business that are more valuable than simply monetary gifts such as:
• Skilled employees who cost 30% less than in the US
• Canada’s streamlined immigration policies, with access to a “vast pool of talent” from overseas who can arrive within two weeks, compared to increasing restrictions on immigration in the US
• An existing pool of skilled people with world-class education levels
• More higher-education grads per capita than any OECD country;
• Largest cluster of information computer technology firms in North America after Silicon Valley;
• A rising ICT presence, with 77,000 ICT jobs added between 2010 and 2015;
• 40,000 STEM graduates a year, which on a per capita basis is second only to Massachusetts.
Only time will tell which lucky city or region will land the new Amazon headquarters and how much (or little) money will exchange hands in the process. However, Ontario’s approach of emphasizing its core advantages as well as dedication to investing in and building the proper infrastructure for its present and future business–friendly ecosystem represents a notably refreshing strategy. It demonstrates that the province views attraction of such a corporate giant not as an all-out battle for spoils and bragging rights but rather part of a natural process of regional economic development for the welfare of the citizenry.
Companies seeking to open an office in North America would do well to consider thinking of Canada as well and specifically Ontario with its responsible, future-oriented attitude. EDI, which represents the province in Israel, stands ready to advise and assist Israeli companies to explore the opportunities that the province offers.
VP Strategy & Business Development
Michael, EDI's VP Strategy & Business Development, is responsible for business development and inward investment promotion for EDI’s clients. His primary tasks include targeting potential leads, business development consulting, conducting market research, writing feasibility studies and facilitating communication between companies.