Retiring boomers create immigrant opportunities

SURESH MADAN

Special to Globe and Mail Update

Published Wednesday, Jun. 15, 2011 2:44PM EDT

Last updated Wednesday, Jun. 15, 2011 2:49PM EDT

Thirty years ago when Indian immigrants came to Canada, they typically became taxi drivers.

Ten years ago they frequently took jobs at local factories as engineers or as site managers.

Now, when Indian immigrants move to Canada, they aspire to be business owners.

Canada's points-based immigration system has ensured that new arrivals are more educated than most second- or third-generation Canadians. Almost all of them are post-secondary graduates and many of them are professionally qualified doctors, engineers, lawyers and MBAs. Almost all of them have good language skills and a wealth of experience operating businesses. As the Indian economy has opened up in recent years, a large number of immigrants have experience working for multinationals and they have a good understanding of systems and procedures for operating companies.

Indians are known to have higher savings and in many cases they have start-up cash at their disposal.

Immigration Canada calculates that nearly 40,000 immigrants are coming directly from India and additional immigrants of Indian origin are arriving from a number of other countries with similar skill sets.

Looking for a job in their new home, especially when Canada continues to face a relatively high unemployment rate, is a daunting task. They are particularly disadvantaged if they have to retrain themselves at an educational institution for two or three years, then start again at the bottom of the ladder, essentially erasing all their prior education and experience.

Canadian business are undergoing a demographic tsunami as baby boomers – born between 1946 and 1965 – are reaching the age of 65. That generation accounts for 33 per cent of the Canadian population and well over half of the working population. According to Statistics Canada, there are 1.4 million small businesses in Canada. Almost all of them are owned by baby boomers.

In a recent study conducted by a major Canadian bank, more than 500,000 Canadian small-business owners are planning to retire over the next five years, and another 750,000 are expecting to retire by 2020. This offers a considerable opportunity for Indian immigrants to acquire businesses.

Jim Treliving, chairman and founder of Boston Pizza International, at a recent event organized by The Indus Entrepreneurs (TiE) organization, stated that more than 25 per cent of Boston Pizza franchisees are Indian entrepreneurs. Boston Pizza has in excess of 400 locations. Indian entrepreneurs have also made considerable in-roads in the broader retail and hospitality sectors.

Many others are taking advantage of various programs through TiE, and they are setting up businesses in information and communications technology, clean tech, health care and other innovative sectors.

Special to The Globe and Mail

Suresh Madan is a Toronto-based fund manager and president of TiE Toronto. TiE, the world's largest non-profit focused on promoting entrepreneurship, organizes a number of events to help aspiring entrepreneurs start and operate new businesses. Successful entrepreneurs are matched with aspiring owners to help guide and mentor them. More than 400 aspiring entrepreneurs are currently working to develop their ventures, and more than 25 of them have already raised in excess of $1 million in funding. Some have already made successful exits.

Buying Canadian has rarely made more sense

DAVID ROSENBERG | Columnist profile

From Tuesday's Globe and Mail

Published Monday, Jun. 13, 2011 7:08PM EDT

Last updated Tuesday, Jun. 14, 2011 1:38PM EDT

My colleagues and I recently made a presentation to a group of well-heeled and sophisticated investors out in warm, sunny California.

What these people came to hear about was the potential for investing in Canada, that big, far-away, snowy chunk of land at the top of the map. Few had anything but a peripheral understanding of just how large, vibrant and independent their northern cousin’s economy is, and what investment opportunities Canada has to offer.

So what were they told?

That, over the past 10 years, a period that encompassed two huge bull markets and two mammoth bear markets, the S&P 500 – the benchmark U.S. stock index – was flat on an annual rate, while the Toronto Stock Exchange grew at a 5-per-cent annual rate in local currency terms, and the Canadian dollar rose at nearly a 5-per-cent annual rate.

In other words, Canadian equities produced a combined return from both stock market gains and currency appreciation of about 10 per cent a year more than U.S. stocks. And about half the outperformance came from currency appreciation.

One would think that the Canadian dollar’s rise over par would be wreaking havoc on Canadian industries. Instead, the data reveal that exports are up 10 per cent in the past year, manufacturing shipments have risen 10 per cent, and factory payrolls have managed to eke out a 2-per-cent gain.

Being in a good currency has its advantages. And the Canadian dollar is in a long-term bull market, interim corrective phases notwithstanding.

Several forces have placed Canada’s economy in the sweet spot. Let’s examine a few:

Natural resources: Global investors are looking for reserves in the ground. This is true whether or not China endures a few quarters of subdued growth to quash its inflation buildup. Whether it be equity market capitalization, shipments or exports, Canada has triple the commodity share the United States has.

Canada is the world’s 14th-largest oil exporter while the United States is the largest importer – and with crude seemingly in a semi-permanent new and higher range, the balance-of-payments effect will continue to act as a huge underpinning for Canada’s currency.

Yield: Global investors are looking for safety and income at a reasonable price. In equities, the TSX delivers a 2.6-per-cent dividend yield, 64 basis points above the S&P 500. (A basis point is 1/100th of a percentage point.) Canadian banks pay out a 3.7-per-cent yield, versus 1 per cent stateside. Consider that the yield on the Canadian banks is higher than you can get on a 10-year U.S. Treasury bond.

Stability: The recent federal election saw the Conservatives – the party that emphasized fiscal integrity and ever-lower corporate tax rates in its campaign platform – emerge with a majority government. This appeals to global investors, who are seeking political stability in a world awash with uncertainty.

The last time Canada had a Conservative majority government was in the late 1980s, which ushered in an era of free trade with the United States, deregulation measures and tax reform, and was a great time to be long Canadian dollars.

Organic growth: Global investors are searching for economies that can grow organically, without being propped up by the crutch of fiscal and monetary stimulus.

Canada is a winner in this regard. The federal government stopped easing fiscal policy well over a year ago and the Bank of Canada has not embarked on any “quantitative easing” programs either. In contrast, since mid-2008, the U.S. Federal Reserve Board’s balance sheet has expanded 20 times more than that of the Bank of Canada’s.

Meanwhile, the Bank of Canada has raised interest rates four times. And guess what? Even with rising rates and a stronger currency, the Canadian economy expanded at a 3.2-per-cent rate compared with 2.9 per cent south of the border.

Look ma – no strings attached!

Fiscal sanity: Global investors are looking for strong fiscal balance sheets as well. On this score, with a 31-per-cent net federal debt-to-GDP ratio, Canada is near the bottom rung on the debt ladder compared with other developed nations.

I don’t mean to wrap myself in the Canadian flag but often I am asked when I will start to ease up on the positive Canada story. It will be when the good news has been fully discounted.

The potential in Canadian investments relative to our neighbour south of the border has rarely been as compelling as it is now.

David Rosenberg is chief economist and strategist for Gluskin Sheff + Associates Inc. and a guest columnist for Report on Business.