Sunday, July 20, 2014

Immigrant-owned Businesses Leverage Exports

by Patricia Rimok in Montreal
Immigration Business Network ib2ib applauds the findings of a recent study done by the Conference Board of Canada that clearly shows immigrant entrepreneurs advance Canada’s export agenda outside of the U.S. more than non-immigrant Canadian Small and Medium Enterprises, SME’s. This is very important given the sluggish Canada-U.S. trade since the financial crisis began in 2007 which has pushed many Canadian SME’s to venture elsewhere to export their goods and the government to redouble its efforts to pursue free-trade deals, bilateral tax treaties and foreign investment protection agreements with fast-growing economies.
So why hasn’t Canada been more successful in leveraging its diverse immigration to increase its exports outside of the U.S.?
The main reasons brought forward by the Conference Board study are that immigrant-owned businesses exporting to non-U.S. markets are less operationally efficient, more likely to compete on price than innovation and product novelty, and represent limited long-term export potential especially the ones that are in the wholesale-retail trade sector.
Caution justified
We need, however, to be careful with some of these observations, especially given that the immigrant-owned businesses surveyed were established in Canada for only five years and have yet to be as sufficiently familiar with Canadian legal, fiscal, legislative and financing frameworks or have had the time to develop strong local business networks that they can leverage as non-immigrant based Canadian SME’s can. In fact, these same limitations have also been the primary reasons why more than half of the immigrant entrepreneurs and investors that came through the defunct immigrant entrepreneur and investor programs have left the country after five years with their capital.
[T]hese same limitations have also been the primary reasons why more than half of the immigrant entrepreneurs and investors that came through the defunct immigrant entrepreneur and investor programs have left the country after five years with their capital.
Had we also included immigrant-owned businesses established for over 10 years in the Conference Board survey as a control group to measure and compare long-term impacts in the various business sectors studied, we may not have arrived at the same observations and conclusions. For example, wholesale and retail chains like Aldo, Point Zero, Peerless, Mep and countless others are immigrant-owned success stories that exist today which started in similar conditions, and yet, have been able to grow, export, diversify, innovate and employ thousands of people.
Other examples
In New Brunswick, for instance, the retail and wholesale trade sector is very important and experienced significant growth despite the fact that it is not associated to a high-growth or innovative sector. GDP associated to that sector was $2.6 Billion in 2010, up from $1.9 Billion in 2000 and projected to increase to $3.7 Billion in 2020. In 2011, out of 57,400 people associated to that sector, 53 800 were employed.
longitudinal case study in 2009 in Spain (Peri and Requena), which measured the export-creating effects of immigrants from 1998 to 2008, was able to conclude that a rise in immigration to Spain from 1% to 10% in that period increased trade from 35% to 44% of Spanish GDP and the number of exporting firms grew from 58,000 to 100,000 over the same period. Both research economists also found that doubling the number of immigrants from a certain country in a Province led to an increase of the export values from the destination province to the country of the immigrant’s origin by around 10% thanks to their differentiated culture and goods, diaspora business and social connections which increase the diffusion of information and reduce the costs of doing business with their country of origin.
Both research economists also found that doubling the number of immigrants from a certain country in a Province led to an increase of the export values from the destination province to the country of the immigrant’s origin by around 10% thanks to their differentiated culture and goods, diaspora business and social connections which increase the diffusion of information and reduce the costs of doing business with their country of origin.
Closer home
Using similar principles and closer to home, thanks to the contacts in China of a Chinese-Canadian immigrant entrepreneur and member of our network, Immigration Business Network ib2ib was able to secure for a Quebec-based clean-tech waste management company over $3 billion of financing to build 23 plants across Canada and create 1,500 permanent jobs. Wait, there is more! Now China wants the same plants built in their country and Brazil, United Arab Emirates (U.A.E.) and others have expressed an interest to do the same. How is that for leveraging both Canadian imports and exports thanks to our immigration!
We need to continue this conversation with more Canadian immigrant-owned businesses that export as well as increase the connectivity and engagement of local Canadian SME’s with business immigrant and diaspora networks which bring foreign direct investment to Canada. The federal government has a great opportunity to continue improving on its more recent trade policies by incorporating them to their soon-to-be-released new immigrant entrepreneur and investor programs.
Patricia Rimok is President of the Montreal-based Immigration Business Network ib2ib Inc.
This content was developed exclusively for New Canadian Media and can be freely re-published, with appropriate attribution, please.