As Canada gets set to host the world at the G8 and G20 summits, business leaders across the country are increasingly looking at global markets as crucial to the future of their companies.
In the latest C-Suite survey of Canadian corporate executives, more than three-quarters of executives say that foreign customers are already important to their company's growth. The number hits almost 90 per cent for those in the manufacturing and resource sectors.
And a surprising number are looking far beyond the rich market just south of the border. While the United States' importance to Canadian business is unanimously recognized, 96 per cent of those surveyed also said China will be very important or somewhat important to Canada's economy.
That position could be reinforced further if China's new flexible currency regime allows the yuan to rise and opens up the world's most populous country to further imports from the West.
The C-Suite survey, which took place in late May and early June, contacted 154 top executives. It was conducted for Report on Business and Business News Network by Toronto research firm Gandalf Group.
The survey shows that interest in international markets travels well beyond the U.S. and China.
More than 90 per cent of executives cited India as a key export target, and almost 80 per cent said Brazil will be crucial - it got almost the same ranking as Western Europe. Mexico, Japan, and other parts of Asia are also on executives' radar screens.
"The free-trade agreement got us focusing on the U.S. in addition to Canada, and paid huge dividends" said Philip Deck, executive chairman of Waterloo, Ont.-based software firm MKS Inc. "We have to add the rest of the world as well."
Mr. Deck, cautioned, however, that companies still need to keep the U.S. in their sights, even as they look farther afield. "The U.S. is still one of the most flexible, dynamic economies in the world," he said. "No one should de-emphasize the U.S., but it can't be your only focus."
That's precisely the approach being taken by Ag Growth International Inc., a Winnipeg maker of grain handling and storage equipment. While 70 per cent of the company's revenue currently comes from the United States, Ag Growth is broadening its horizons by actively pursuing markets in China, Brazil, Ukraine, Russia and Kazakhstan, said chief executive officer Rob Stenson.
"We'd never ignore the U.S. because it's where our bread and butter has been," Mr. Stenson said, "But the big growth driver for our [business]is going to be in those emerging markets." Because the storage of grain is a fairly new concept in these countries, and the agriculture industry is blossoming, "the opportunity is just huge," he said.
Mike Barry, chief financial officer of Vecima Networks Inc., a Victoria company that makes telecommunications hardware, echoes that view. Vecima is now working harder to attract business in Asia and South America, he said, and is re-engineering its products so they work with the technology used in those markets.
The U.S. economy is not yet firing on all cylinders after the recession, he said, and at the same time "the rapid growth in [developing]countries has made us want to get a piece of that action."
Indeed, C-Suite executives are concerned about the U.S. economy in the short and long term. Almost one-third expect the U.S. economy to shrink in the next year, and 30 per cent said the U.S. economy will be weaker in 10 years than it is now.
While Canadian firms expand their global horizons, many foreign companies are also eyeing Canada as a place to invest. C-Suite executives are concerned enough about takeovers that they believe some limits on foreign purchases of domestic companies are justified.
Almost three-quarters of executives would support restrictions to keep majority control of fresh water supplies in Canadian hands. And almost two-thirds said foreign ownership of our banks should be restricted. More than half would also support limits on foreign ownership of broadcasters. In other sectors, opinions are widely split.
Dean MacDonald, CEO of Newport Partners Income Fund, a diversified investment fund, said he's conflicted on the issue. On the one hand, "I'd like to see no restrictions, because that means the value of existing Canadian stocks would go up," he said. "But as a Canadian, honestly, if [restrictions]are removed companies may very well be owned by foreign interests and it would become more difficult to have the same level of control."
Mr. MacDonald can also see why so many people are in favour of national control over water resources. "Water is the next oil and we've got lots of it," he said. "It's a precious commodity and we need to protect it at all costs."
Julie Dill, president of Chatham, Ont.-based Union Gas Ltd. - a U.S.-owned enterprise - said she sees little need for foreign investment restriction in most industries, as long as the investor is "safe and reliable and responsive to communities," and brings value to Canada.
However, she said she can see the benefits that have accrued from the ownership restrictions on our banks, which weathered the financial crisis much better than banks in other countries. "I would hesitate to mess with that model," she said.
While executives appear divided on the need for foreign investment restrictions, there is a strong consensus that Ottawa should have a veto on big takeovers in strategic situations.
Close to 80 per cent of those surveyed agreed that the federal government should review foreign takeovers of major Canadian-owned firms and retain the power to block them if they are not in the interest of the country.
ECONOMY
Most Canadian executives are looking for moderate growth in the economy over the next year, and not many expect a decline. They are a bit less certain about the U.S. economy, with a significant number predicting it will slump. Weak growth south of the border is the biggest concern among executives, closely followed by worrisome levels of personal debt.
WORLD MARKETS
Foreign markets are important to Canadian firms striving for significant sales growth. But with the long-term outlook for the U.S. economy cloudy, they are looking farther afield, and China and India are at the top of the list. But other parts of Asia, Brazil and Mexico are also on the radar screen, competing for attention with Western Europe.
FOREIGN INVESTMENTS
Canadian executives acknowledge that the federal government needs to have a veto over foreign takeovers of Canadian entities if Ottawa deems a deal to be against the national interest. Many senior managers worry about the disappearance of domestic head offices, but when it come to legislative protection from foreign ownership, only water and banking get strong support.
About the survey
The quarterly C-Suite survey was conducted for Report on Business and Business News Network by the Gandalf Group, and sponsored by KPMG.
Between May 26 and June 11, 154 executives were surveyed. Respondents represent ROB 1,000 companies from across Canada in the manufacturing, service and resource sectors.
The margin of error is plus or minus 8 per cent, 19 times out of 20.
Each quarter, a $1,000 charitable contribution is made on behalf of a survey participant. For the March survey, a donation will be made on behalf of Peter Salamon, chief executive officer of Argosy Energy Inc., to a charity of his choice.
Want to know more about what the country's business leaders think? Join host Michael Hainsworth Wednesday night on Business News Network for the C-Suite Survey at 8 p.m. (ET).