JANUARY 1996 Edition
THE 1996 ECONOMY
The Conference Board estimates that only Ontario and
British Columbia will grow faster than the national average in 1996. B.C.'s
strength will come from a recovery in North America's housing industry and
higher demand for paper which will fuel the province's forest industry, while
Ontario will be helped by a stronger U.S. economy. The Board estimates the
economy as a whole will expand 2.8 per cent in 1996, up from 2.1 per cent in
1995. Although goods-producing industries in B.C. had a tough time in 1995, strong
population growth, continued export strength and vigorous tourism activities
boosted the service sector giving the province a strong year. In 1996, B.C.'s
GDP will expand 4.1 per cent, up from 3.2 per cent in 1995.
HIGH-TECH CRIME
Chubb Corp. of Warren N.J., probably the largest insurer
of technology companies worldwide, estimates that $8 billion worth of computer
components--microprocessors, memory chips and modems--are stolen each year.
Chubb estimates that this will balloon to $200 billion a year as crooks realize
the advantages of stealing expensive, easily transportable, highly resellable
pieces of technology. The average U.S. high-tech theft is $500,000. In
California's Silicon Valley, more than $1 million worth of high-tech goods are
stolen each week which can add $150 to the cost of every computer, whether in a
personal computer, car, plane, fridge or microwave.
SAVINGS
Canadians' contributions to registered retirement savings
plans rose 86 per cent between 1990 and 1994 according to Statistics Canada,
despite a recession and steep erosion in family income. In 1994, 5.3 million
Canadians made a record $20.9 billion in contributions to RRSPs, a 9 per cent
jump over the previous year. In 1982, 2.1 million Canadians made RRSP
contributions. In 1994, the average RRSP contributor was 43 years old with a
median employment income of $34,200.
PRESCRIPTIONS
According to a University of Toronto study, half of
Canadians who are prescribed drugs either fail to take their medicine or take
it improperly. This leads to up to $9 billion in extra cost to the health-care
system and the economy each year.
BORROWING
Weak consumer confidence and better government balance
sheets led to a sharp drop in new borrowing in the first half of 1995. The
amount borrowed by non-financial institutions
fell to $47 billion in this period, a decline of more than a third from
$71 billion a year earlier. A steep rise in interest rates in early 1995,
stagnating employment and low confidence among consumers led households to cut
back on big-ticket items. Borrowing for mortgages was $2.9 billion against
$11.6 billion in the same period the previous year. New consumer borrowing
totalled $1.6 billion, a drop from $3.7 billion and the total public sector
borrowing fell to $22.5 billion from $32.9 billion. Borrowing by corporations
remained high while their operating profit margins were at the highest level
since 1989.
GATEWAY
Starting next July, Cathay Pacific Airways' Hong Kong to
New York flight will stop at the new international terminal at
Vancouver Airport five
times a week. This is known as the "gateway" concept and the core of
the new terminal will be a "sterile' zone--passengers arriving from Asia
will be able to leave their aircraft, go through Canada and U.S. Customs, and
then shop at duty-free stores, buy snacks and gifts before reboarding their
flights to the U.S. Pre-clearing U.S. Customs here will gain the added bonus of
avoiding line-ups in the Chicago, New York, Los Angeles and Miami airports, all
notorious for customs delays. The biggest bonus of gateway flights will be the
dollars left behind for aircraft refuelling, cleaning, maintenance and
in-flight catering, which will add an estimated $10 million a year to the local
economy. The Vancouver Airport Authority is also working on Air China,
Philippine Airlines and Korean Air to use Vancouver as a gateway.
WILDLIFE
The Canadian Museum of Nature reports that the value of
insect pollination of crops and orchards in Canada surpasses $1.2 billion.
Also, benefits associated with the recreational use of wildlife are estimated
at more than $6 billion annually.
DISNEY
The Walt Disney Co. plans to open animation studios in
Toronto and Vancouver in order to get first crack at Canada's internationally
recognized talent pool. The multi-million dollar project will generate about
200 jobs, mainly for animators, and the two studios will collaborate on up to
three productions a year. According to a Disney spokesman, "There are a
number of very creative people who don't want to leave Canada, so we are coming
to them." The prospect of more jobs for animators is welcome news for the
Vancouver Film School which graduates 15 students every three months.
LUMBER
The Canadian government is proposing new concessions to
head off yet another U.S. trade case against Canadian softwood lumber. In
return, Canada wants guarantees that the U.S. lumber industry will stop filing
complaints under U.S. trade law claiming that Canadian two-by-fours are
unfairly subsidized. The concessions could include boosting the amount
provinces charge lumber companies to cut trees on Crown land, raising export
prices or simply limiting lumber exports to the U.S.
FAIR SHARE
B.C. is being short-changed by Ottawa when it comes to
doling out billions of dollars worth of work for federal government departments
and agencies. A study by KPMG Management estimates B.C. has been short changed
by about $$1.3 billion a year in the
early 1990s, if one accepts that federal procurement contracts should be handed
out according to the relative economic clout of all the provinces. In 1992-93,
B.C. would have received $4.3 billion instead of the $2.9 billion it actually
received. This shortfall represents about 1.3 per cent of the province's GDP.
B.C. fared worst followed by Alberta, Quebec and Ontario.
MOVIES
U.S. movie theatres had record ticket sales during the
five-day Thanksgiving holiday, with estimates that sales were up as much as 11
per cent from the year-earlier record. It is estimated that the total
box-office grosses for the holiday were as much as $155 million (U.S.). A year
earlier, ticket sales totalled $140 million. The big winner was Toy Story,
a full-length computer-animated feature film which sold $38 million in tickets,
followed by GoldenEye with $27 million in sales. Studios roughly split
box-office grosses 50-50 with theatres.
CONSTRUCTION
Vancouver has already posted another $1-billion-plus
construction year. With two months left to year-end, the city had issued
permits worth $1.002 billion, compared to $846 million for the same period last
year. Residential construction totalled $663 million compared with $463 million
a year ago.
CRUISING
According to the Vancouver Port Corporation, congestion
in Alaska, not competition from Seattle, is the biggest threat to Vancouver's
$130 million cruise ship business with 13 consecutive years of growth straining
the Alaska infrastructure. A dozen international lines sell Vancouver to Alaska
cruises and 20 luxury ships are based in Vancouver during the summer. Next
year's fleet will include the newly-built 77,000-ton Sun Princess, the world's
largest cruise ship which carries 1,900 passengers. 83 per cent of cruise
customers are Americans.
U.S. INVESTMENT
Canada dropped from being the most popular foreign
location for U.S. manufacturing investments in 1991 to seventh place last year
according to Ernst & Young. Britain was the first choice for U.S. manufacturers
opening new plants, making acquisitions or expanding. China was second in line
for U.S. investment, doubling its projects from the previous year with France
and Germany taking third and forth places. In 1994, U.S. manufacturers made 25
investments in Canada, down from 47 in 1993. Eighteen of those were
acquisitions. However, U.S. firms looking to expand--or consolidate--under free
trade would have made most of their moves in the early 1990s under the
Canada-U.S. agreement. Once NAFTA came along, they were more likely to consider
Mexico.
INTER-PROVINCIAL TRADE
Provincial trade ministers are still sharply divided over
how to widen free trade within Canada. An internal free-trade agreement was
struck by the provinces in 1994, but many of the provisions have yet to be
approved. Several provinces, including British Columbia, are still refusing to
add in two key elements, energy and non-government procurement. The provinces
cannot agree on rules that would allow power companies to sell their power to
any other province and use a neighbouring province's transmission lines to get
it there. Also, Ontario, Saskatchewan and B.C. are resisting removing barriers
which would allow out-of-province suppliers to sell to public sector agencies
such as municipalities, universities, schools and hospitals.
CHINA
China has unveiled its biggest trade liberalization
package in more than a decade by pledging to slash import tariffs by 30 per
cent. It will also lift about 170 tariff quotas, give permission for the
creation of Sino-foreign trading companies and push through a currency reform
that might make business a little cheaper for foreigners in the world's most
populous market. Tariff cuts will be applied to more than 4,000 of the 6,000
items China imports and the average tariff will drop to about 22 per cent from
35.9 per cent. The package of liberalizations is aimed at winning support from
the United States and other nations for China's troubled attempts to join the
World Trade Organization.
B.C. EXPORTS
B.C. exported $20.1 billion worth of products for the
first nine months of 1995, up 21 per cent over the same period the previous
year. Exports to China increased by 89 per cent, representing just two per cent
of overall exports. Japan exports increased to $5.3 billion and accounted for
26 per cent of all exports, while exports to Korea increased by 59 per cent.
FEDERAL CONTRACTS
More federal contracts are being awarded without
competitive tendering. In 1993-94, the government awarded 183,000 contracts
worth $10.7 billion for everything from toilet paper to tanks. Of that number,
155,000 were worth less than $30,000 each and therefore did not require
competitive bidding but taken together, those contracts totalled $1.2 billion.
In 1991-92, 102,000 contracts valued at $600 million were awarded
without competition.
These trends in contracting practices seem to defy Treasury Board efforts too
promote lower prices through competition. It has been suggested that some
officials responsible for federal purchases are dividing a large contract into
chunks worth less than $30,000 to escape the bidding process.
TRIVIA
* Canada has twice as many restaurants per capita as the
United States according to the Canadian Restaurant Association.
* Worldwide, half the books being published are in English.
EXPERTS!
"Computers in the future will weigh no more than 1.5
tons." Popular Mechanics, 1949.
"There is no reason why anyone would want to have a
computer in their home." Ken Olson, founder of Digital Equipment Corp,
1977.
"640K ought to be enough for anybody." Bill Gates of Microsoft,
1981.
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