Frank McKenna speaks at Toronto Board of Trade
Toronto Board of Trade
Frank McKenna Speech
January 26, 2010
Check against delivery
Thank you. You’ve had a lot of important people speak tonight. It’s getting late. I’m going to jump right into it.
I must confess that I am a little surprised to be your guest speaker. Firstly, I am a banker. A recent poll in the New York Times suggested the only group now held in lower regard than bankers are prostitutes and convicted felons.
Secondly, it’s not every day that a farm boy from New Brunswick gets to speak to 1,500 mucki mucks (that’s what we call important people back home) at the Board of Trade of Toronta (Toronta is how we pronounce Toronto back home. Trust me it’s a term of affection.) Speaking of that I want to give my heartfelt thanks to you not just for asking me to speak tonight but for your warm and uncompromising welcome to me over forty years as a student, Premier, a lawyer, corporate director and now a full-time employee.
If there is any value that I can bring tonight it’s giving you the perspective of an outsider with a different set of eyes talking about a city that I have come to love and respect. This is a city that is accommodating, egoless and embracing of others. Toronto is a special place with special people.
It is also a city that is taken for granted by those of us who live here. This city needs to get its swagger back - to see itself as others see it.
Here’s a look in the mirror at the Toronto that I see. Let’s start with quality of life.
Quality of Life
• Rated the most civil and civilized city in the world – national geographic
• Number 2 in North America for quality of living – Mercer Consulting.
• Number 1 for quality of life says FDI
• Best international city for work and family – Fortune Magazine.
• And it’s generous too. At a time of unprecedented economic stress108 million dollars was raised this year by United Way and this community.
• And this may come as a shock to you – Toronto has one of the lowest crime rates of any comparable city of its size. In fact, it may interest you to know that Readers Digest surveyed 32 countries in the world leaving wallets in public places to see which ones were stolen. Toronto was a close second to some city in Slovenia of 267,000 amongst 32 in the world as the most honest city. How’s that for impressive.
A major contributor to the quality of life of Toronto is its diversity. Over 180 languages and dialects are spoken. In fact, half of Toronto residents were born outside of Canada. It is the number one city in North America for diversity.
On the food side, Toronto is a cornucopia of temptation. There are over 10,000 restaurants in Toronto, many of them serving delicious ethic food.
On the creative side, Toronto is a cultural mecca.
• 1,000 festivals a year
• 125 museums
• 50 ballet and dance companies
• 6 opera companies
• 2 symphonies orchestras
• Toronto Hollywood’s north. It is the third largest centre for film and TV in the world. 25% of Hollywood films are done here.
• Toronto is the third largest English language live theatre market in the entire world.Governments, businesses and private citizens have recently invested over a billion dollars creating world class cultural centres.
• The Art Gallery of Ontario is one of North America’s largest art museums with 73,000 works of art.
• The Royal Ontario Museum is one of North America’s largest museums with sixty thousand pieces. It has been named as one of the seven new wonders of the architectural world and is visited by over a million people a year.
• The Four Seasons Centre for the Performing Arts is one of North America’s largest purpose built opera houses with over 2,000 seats.
• Canada’s National Ballet School is at the forefront of dance training globally. After a successful $80MM fund raising campaign, it has moved into its impressive facilities on Jarvis Street. It is now called the Jewel on Jarvis or as one commentator put it “a beacon on Toronto’s architectural scene”.
And that’s just the bricks and mortar. Look at the events
• Caribana Festival, North America’s largest festival celebrating Caribbean cultures and traditions with over 1 million people a year.
• Pride Week. The gay pride festival culminating with the pride parade with attendance of over 1 million per year.
• Luminato. The Toronto festival of arts and creativity with attendance of over 1 million a year.
• Nuit Blanche. An all night free celebration of contemporary art.
• The Toronto Jazz Festival with over more than 500,000 people per year.
• The Beaches International Jazz Festival with over 900,000 per year.
• The Toronto International Film Festival. One of the top five film festivals in the world in prestige and attendance with over 300 to 400 films screened per year.
Sports
And for the sports enthusiast, Toronto’s got it all. All the way from the Honda Indy to professional baseball, hockey, football, basketball and soccer. Not surprisingly, this spectacular quality of life, temperate climate and critical mass makes Toronto a magnet for highly skilled workers.
Human Resources
Toronto has the best educated work force in the G8. Because our health care costs are publicly funded, we have the lowest labour cost of all major North American centres.
Toronto also has the lowest R&D costs in all of North America making it a haven for innovation. It is also a magnet for immigration, attracting 43% of all new immigrants to Canada.
Business Environment
Toronto is a world class centre for business. Here’s one for you. The City of Toronto has a bigger GDP than the City of Hong Kong and the entire country of Ireland and Finland.
Its reputation is particularly strong in the financial services sector.
• Headquarters for the five largest domestic banks
• 44 foreign bank subsidiaries
• 119 securities firms
• 61 mutual fund companies
• Headquarters for six of Canada’s top insurers
• Two of our insurers, Manulife and Sun, are top 10 worldwide
• Home to 58 pension fund managers
• Home to 5 of Canada’s biggest pension plans with combined assets in excess of $300 billion
• Throw in Brookfield Asset Management with assets under management of over 90 billion
• The TSX is the third largest stock exchange in North America
• And the TSX is number 1 in the world in listing of mining and oil and gas firms
• And our financial institutions are world class
• The WEF has rated our banks the soundest in the world for two years in a row
• Standard and Poor recently analyzed the risk adjusted capital of 45 of the world’s largest banks. The four Canadian banks surveyed rated 6th, 10th, 11th and 12th.
• Moodys has rated only three banks in North America as AAA. Two are Canadian, TD and The Royal and the third is run by a Canadian.
• And our banks are growing across North America and around the world creating even more jobs here in Toronto
When you add it all up, it’s little wonder that Toronto is the third largest financial services centre in North America behind New York and Chicago. And it is the fastest growing financial services sector in North America. The sector drives directly and indirectly over half a million jobs. And let’s not gloss over the stunning weight of the non-bank financial sector. The Toronto based institutional investors are seen globally as the most sophisticated in the world. This includes Onex, who has been at the forefront of private equity investing in North America and Brookfield Asset Management. Brookfield, is a case in point, 85% of its 90 billion dollars of assets are located in 20 other countries on four continents around the world. It includes the largest privately owned hydro power business in the entire world and the largest assembly of office space in the entire world. It also owns the third largest port in the United Kingdom and is part owner of the largest coal export terminal in the world in Australia.
Our pension funds are world powerhouses. Omers has over 12 billion dollars in assets dedicated to global infrastructure investments. The most exciting new discovery in oil and gas is in Brazil. Ontario’s Teachers has a significant stake in it. Let’s just look at recent headlines. Canada Pension Plan – bidding for EDF Energy, a giant UK electrical distribution network. Ontario Teachers – close to buying a British education company. Canada Pension Plan lands Scotland’s largest shopping centre.
Teachers - stake in Bristol airport.
Transurban, an Australian toll road, seeking bids from Canadian pension funds.
Teachers buying into mortgage insurance market.
And it’s not just financial services companies that make Toronto an economic powerhouse.
• Toronto’s home to 40% of Canada’s head offices
• Home to nine of ten of Canada’s biggest law firms
• Home to nine of ten of the top accounting firms
• Ten of ten leading HR firms
• It has the third largest bio tech centre in North America
• The third largest information technology sector in North America
• And it has the fourth largest health community in North America
• And it has critical mass. The total population that resides within a five hundred mile radius with the Metro area is a 120 million people greater than that of any other North American city And if all of that is not enough, consider this. The Path holds the Guinness World Record for the biggest underground shopping complex in the world. And that’s not all. Yonge Street holds the Guinness Record for the longest street in the world. The Caribana Festival holds the record for the longest festival parade in the world. I suspect the Don Valley Parkway holds the record for the biggest paved parking lot in the world. Seriously, to a guy from New Brunswick who spent his life marketing the tidal boar, magnetic hill and reversing falls, this marketing Toronto would be a dream assignment. And the beautiful thing is that the fish are jumping into the boat. The world is beating a path to our door.
• In 2010, we will host the G8, the most prestigious geopolitical event in the world. Also in 2010, we will host the G20 with more than 30 delegations, hundreds of thousands of the people and up to 50,000 hotel nights and most importantly of all, the eyes of the world upon us.
• In 2011, Toronto hosts the International Indian Film Academy Awards. These Bollywood Oscars will have a viewership of some 350 million people worldwide. It is the first time these annual awards are held in North America for the Indian film industry which is the largest in the world.
• In 2014, Toronto will host World Pride with an expected attendance of well over 1million.
• And the cherry on the cake. In 2015, Toronto will host the Pan American Games.They will be held in Toronto for the very first time with an expected attendance of over 10,000 athletes, 250,000 visitors and hundreds of millions of viewers around the world.
But truly, you are saying there must be some flaws that everything about Toronto is that perfect. Of course, there are short comings. Every city has them. But the biggest, single short coming is the flipside of your success.
• Things are good in Toronto
• There is no sense of urgency
• There is no burning platform
• There is no sense of crisis
Some of the most transformational change in the world has come about as a result of extraordinary stress. The reconstruction of Japan and Germany after the Second World War represent the most graphic examples. But there are other most recent examples as well. Finland was a major trading partner of the Soviet Union, and when the Soviet Union collapsed, it suffered one of the worst recessions any European country has ever seen. The GDP fell 10% in three years. Its unemployment rate soared to 17%. The enormous stress produced extraordinary innovation. It went from a resource extraction economy to an innovation economy. It is now number one in the world in math, number one in the world in reading and leads the planet in the world economic forums competitiveness index. Nokia has gone from making gum boots to making phones. Another extraordinary example is Israel. It is a little known fact that Israel’s Silicone Wadi is the second most important technology cluster in the world after Silicone Valley. Why, because its survival depended on it. With its back to the sea and its face to the desert and hostile neighbours, Israel had no choice. As Tom Friedman recounted in a recent visit to Israel’s Ben Gurion University. When he asked a professor why Israel was doing so well, the professor said “Israel has struck oil”. The professor pointed out the university students said “these are our oil wells”.
Here are my five recommendations for finding oil wells in Toronto:
Firstly, we must take our lessons from great cities from years gone by. The New York’s, the London’s, the Tokyo’s, the great cities of the world. They did not become great cities by accident. They, and cities like them, were river ports, or seaports or railheads. They grew around the transportation imperative. They grew where they were for a reason. The great centres of growth in the next millennium will be based on knowledge. They will grow around universities, community colleges, healthcare institutions and R & D facilities. And where these knowledge bases are present, just like an oasis in the desert, we will see a flowering of culture, of knowledge, industry and jobs and activity and energy. It is no coincidence that top U.S. computer science departments are at Berkley and Stanford which spawned Silicon Valley and MIT which spawned Route 128. In fact, MIT is a spectacular story in itself. It has spawned 4000 companies creating over a million jobs. In Canada, our very own Kitchener/Waterloo area has enjoyed considerable success with Research in Motion being one of its most spectacular accomplishments. We must understand that in a world that is flat, where all competition is global, where the Ricardian theory of comparative advantage will be ruthlessly efficient in the allocation of resources, we have no choice but to invest in the only sustainable advantage – knowledge.
This is our burning platform.
We must get rid of old fashioned separation of academe, industry and government. The new buzz phrase on university campuses should be “collaborate or perish”. I know we think that we have a high level of educational attainment. By some measures, we do. We have very high post secondary education participation rates, largely because we have many people in community colleges. But we are huge underachievers when it comes to advanced degrees in scientific and engineering education. Ontario produces only half as many people with Masters degrees as the United States as a percentage of the population. And about 75% as many with Doctoral degrees. By the way did you know that China will graduate over the next 10 years as many PhDs as the entire population of Canada. And, it gets worse. In Canada, science and engineering degrees make up about 25% of all new degrees. This is well below the OECD average. In countries such as Korea, science and engineering degrees are 40% of all new degrees. In terms of engineers alone, about 6% of our undergraduates earn such degrees. In Japan, Germany, South Korea and France, engineers are one fifth of all graduates and in China, 45% of all baccalaureates are in engineering.
In a recent article, Roger Martin and James Milway were arguing that we also have a significant shortfall in terms of business leadership. In business education, we graduate only 59% of as many students per year as the United States. We have great institutions; we must light a fire under them.
One great advantage we have is our openness to immigration. The United States effectively shut its doors to international students after 9/11. The tap has only been partially turned back on and market share has been picked up by Canada, Australia and Europe. This is an enormously rich source of human raw material. One study indicates that for every 100 foreign students who got an American PhD in engineering or the physical sciences, the United States got 62 patent applications. What a return on investment.
It goes without saying that not only must we attract more highly qualified immigrants but we must make sure that they are properly treated when they get here. Our record at the present time is pretty abysmal.
Secondly, one aspect of the innovation agenda involves improving our productivity. We are bad and getting worse. So far this decade, our gains in productivity are roughly 60% of the group of seven average. The most important capital investments to increase productivity are in the area of information and communications technology.
Unfortunately, it is here that we are at our worst. Canadian workers only had 46% of the ICT capital stock per worker as did their U.S. counterparts. Is it little wonder that we trail the United States in productivity by 19% which translates to over $75 billion in lost government revenue, according to one study. With the rising Canadian dollar, this is lethal. This is a burning platform. While capital investments are important, probably the most important elements in creating a more productive and innovative economy is investment in human resources.
Thirdly, governments must play a leadership role in a new prosperity agenda. Ontario deserves credit for getting its tax structure and R&D structure much more supportive to a growth agenda. There is much more that government can do, from integrating immigrants, to making sure that business success is applauded. Here’s a suggestion. By ensuring that the envy of the world, Canadian banks and other financial institutions, who didn’t blow up the financial system are selected for the choice mandates that further embellish their global credentials. Governments must also ensure that centres of excellence flourish to support the needs of the private sector and that a high quality trained workforce is available. And governments must support critical mass. For example, Toronto has a critical mass in financial services. To that end it would be irresponsible if the national securities regulator was not headquartered here.
Fourthly, this city must break the log jam on transportation. The average commuter in Toronto requires more time to get to work than the average commuter in Los Angeles, New York or London, England. An OECD study says congestion is costing $3.3 billion in lost productivity. There have been lots of announcements. If announcements were streetcars, they would stretch all the way to Montreal. This is a burning platform, this is an urgent situation. Fifty years ago, the Alaskan Highway was built in the dead of winter. It was 2,450 kms in length. Thirteen kilometres were built every day, 133 bridges were constructed and thousands of culverts. It was finished in eight months. It can be done!
It is not enough to have the steak, you also have to have the sizzle. I am guessing that a lot of you were not aware of the facts about Toronto that are recited in this speech. But you should. Because we should all be ambassadors on behalf of the city. This is not the Mayor’s city, not the Premier’s city, it is your city.
