World Report

A quiet revolution in education and business-focused state intervention has turned Quebec into an economic powerhouse, attracting top foreign companies to set up and trade

ith its astonishingly rapid rise to prominence in global markets and an agreeably leisurely lifestyle, it is perhaps surprising that more Britons are not heading for Quebec. The French certainly are and they have now overtaken the British as the province’s second major trading partners.
Quebec is, at 1.7million sq km, about seven times the size of the UK, but has a population of just 7.2 million. So, how has this vast territory levered itself into a position where some of the world’s largest corporations and manufacturers, from aircraft makers to pulp and paper producers, are headquartered there?
Forty years ago, Quebec had one of the lowest education levels in the Western world and produced a correspondingly low level of entrepreneurship. But then the province made education its top priority, investing heavily in what was called ‘the quiet revolution’.

Today, Quebec boasts one of the highest educational levels in the world. Two of the three key factors that attract foreign investors are the high quality of research and the relationships made with its universities, in particular the medical schools at McGill and Montreal universities, which have gained an international reputation.
This drive to improve education standards was coupled with a ‘Building Quebec’ programme in the 1970s, which embraced an aggressively capitalistic, state-interventionist economy. The state actively encouraged investment, particularly in R&D, often taking a stake in an enterprise to provide not only capital but a guarantee at the same time.

A quarter of a century ago, many of the Quebec businesses that are now internationally renowned were either non-existent or small, domestic enterprises. Today, Montreal, the pulp and paper manufacturing capital of the world, is also an international aerospace centre on a par with Toulouse (where the Airbus is made). Bombardier, which collaborates with its counterparts in Toulouse, is the third biggest aircraft manufacturer in the world. Quebecor is the biggest printer in North America and Europe, and Alcan is one of the world’s biggest aluminium producers.
Multimedia City in Montreal has attracted many foreign hi-tech firms, including Motorola, Ericsson (with its largest R&D centre outside of Sweden), Bell Canada and BCE Emergis. Nortel has a data transmission manufacturing centre in St Laurent. It is estimated that between 75 and 80 per cent of all Canadian internet traffic is conducted over equipment made in Montreal.

Girard
‘In R&D; our programmes are very competitive’

Quebec has thriving pharmaceutical, power generation and petrochemicals industries, as well as the traditional timber, pulp, paper and furniture manufacturing sectors. Tourism is increasingly important.
“All this has been made possible thanks to our massive investment in education in the 1960s,” says Jacques Girard, the president of Montreal International, a private investment and promotion agency.
The other major factor that makes Quebec so attractive is its tax advantages, particularly rebates on salaries. “In R&D, our programmes are very competitive,” says Mr Girard. “That is one of the reasons why Rolls-Royce decided to move one of its main research projects to Montreal.”
He adds: “France is in second place as our trade partner, ahead of the UK and behind the US. This can vary from year to year. We are very pleased to see France in second place, but if the UK regains second place, it means it will have invested even more.”

Mr Girard adds one further factor which can be crucial for anyone deciding to settle in cities that blend the best of North American modernity with European characteristics. “Sometimes a foreign company that has just moved to Montreal wants to bring in people from its country or other countries.
“We ease their arrival by accelerating the formalities for a visa or work permit, registering their children at school and getting them acquainted with the healthcare system. We also have an experimental programme to help the strategic worker’s spouse to find employment. Very often, strategic workers are married to someone who has had an interesting job and doesn’t want to sit about at home.”

Landry
‘We are going to use the slump to better prepare for the comeback’

The province’s premier, Bernard Landry, believes Quebec’s economy is one of the most diversified in the world. “If we are holding up better than others in bad times, it’s probably because of our diversification,” he says.
Quebec’s natural resources and agriculture, its mineral deposits (copper, zinc, iron and gold) and its hydropower capacity provide the province with a stable economy with long-term growth prospects.
Montreal is a growing financial centre and Nasdaq, the hi-tech stock exchange, chose the city for its second North American bourse after New York.
“Montreal used to be the financial capital of Canada, but lost this status to Toronto,” says Mr Landry. “We haven’t yet won it all back, but we are in a period of growth and Nasdaq is the symbol of that. There is Quebec’s new economy.”

He is also confident that Quebec will weather the current US-driven recession. “Even if it isn’t looking very good right now in North America on an economic level, Quebec is doing very well,” he says. “Canada is the first trading partner of the US, so our base is positive and solid. We are going to use the slump to better prepare for the comeback.”
The premier is determined that Quebec should not lose any of the characteristics that have set it apart, however. “We don’t want globalisation to be synonymous with the destruction of languages, cultures and national identities,” he insists.
“We have been fighting for three-and-a-half centuries to stay what we are in very adverse conditions. We don’t want globalisation to make us like the leaves in an autumn wind.

Roquet
‘Quebec’s biotechnology companies work at the cutting edge of research’

“Nor do we want globalisation to be synonymous with government by multinationals. We have socio-economic objectives, which can all be regulated by international institutions capable of civilising globalisation. If the IMF (International Monetary Fund) and the World Bank do their jobs well, and the UN and its diverse agencies do their job well, globalisation will be beneficial.”
Quebec, he adds, is the Quebecois ideal – “a synthesis between our values in the continent of America and those of Western Europe, with which we are still very much in touch”.
Invest Quebec (IQ) differs from other investment promotion agencies in that it is mandated by the government to manage all the support programmes for investment offered by the government of Quebec. “We can therefore participate in the financial development of a project,” says IQ president, Louis Roquet. “Our three functions are as a promotion agency, as the manager of incentive programmes and as a financial institution.

Investment in the hi-tech sector continues to grow

“We do not invest in the project – we are not a venture capital company such as SGF (Societe Generale de Financement) – but we work at the leverage level. We do financing by loans or we offer guarantees to companies to encourage them to participate in certain financing, known as project financing, without [their having to] resort to corporate guarantees.”
Quebec’s biotechnology companies are working at the cutting edge of research, adds Mr Roquet. There is a great deal of cooperation between the universities’ research departments and industry. Investment continues to grow in the hi-tech sector, as well as in telecommunications, optical equipment manufacturing and pharmaceuticals and chemical companies.