The CEO of Toronto-based Canadian Imperial Bank of Commerce (CIBC) says Canada must boost its global competitiveness and prepare for a future downturn by offering clearer foreign investment rules, matching a U.S. policy which allows companies to immediately write off the full cost of capital investments and attracting more skilled immigrants.
Victor Dodig said Tuesday in a wide-ranging speech that a lack of clarity on foreign investment rules is making business leaders and their clients hesitant to make significant long-term investments in Canada. Canada’s approval systems need to work better and more predictably, as there are other destinations where the returns and rules are more certain, he added.
“This brand halo can only go so far,” he said. “They need confidence, they need an element of certainty… We need to be attracting that capital, we need to be attracting those people to our country to help cushion us during the downturn — and there will be a downturn.”
His comments come just weeks after the Trans Mountain pipeline project expansion, which would double the existing line from Alberta to B.C. to triple the amount of oil shipped to the coast, was struck down by the Appeal Court on grounds including a lack of proper consultation with First Nations by federal government. Ottawa now owns the existing Trans Mountain line after purchasing it and other assets earlier this year for $4.5 billion to ensure the expansion gets done.
Dodig on Tuesday in his speech to the Empire Club of Canada pointed to Trans Mountain as an example of one of the problems “we’ve created on our own.”
The chief executive of Canada’s fifth-largest bank stressed that decisions should be made more quickly, “at this point especially, as we’re getting towards the end of an economic cycle.”
He warned about rising global debt levels and interest rates that have been “too low for too long.”
“That same debt that helped the world recover is actually infusing risk into the global financial system today and it’s generating headwinds… There’s a real serious global challenge of this low interest rate party developing a big hangover of debt.”
He added that Ottawa should allow companies to expense capital investments with a one-year period, a measure which is now in place south of the border under U.S. President Donald Trump.
Dodig said changing this rule in Canada would spur immediate capital investment and help level the playing field.
The CIBC CEO’s comments echoed that of Royal Bank of Canada’s CEO earlier this year. Dave McKay told the Canadian Press in April that there is an investment capital exodus from Canada to the U.S. happening in “real time” due to tax reforms, including a corporate tax cut to 21 % from 35 %, and a U.S. change that enables American companies to immediately write off the full cost of new machinery and equipment.
Dodig also said that Canada should remove interprovincial trade barriers to drive economic growth, barriers which he called “an embarrassment to our country.”
He also called on the federal government to do more to attract skilled immigrants to Canada, pointing to the fact that although unemployment is low there are some 400,000 jobs that went unfilled for four months or longer, according to the Canadian Federation of Independent Business.
Dodig added that “at a time in the world where others are saying no” Canada needs to do more to continue to attract the best and brightest.
“There is a lot of talented technology refugees that aren’t welcome in certain markets, that should be welcomed into our market. To help our companies become stronger and more competitive in the future.”