Canada’s Competitiveness Ranking in the 2003 World Economic Forum Index

October 30, 2003

Dear Klaus,

I know that you are en route to China but I have been assured that the contents of this letter will be communicated to you upon your arrival.

I was greatly surprised and disappointed to learn yesterday that Canada fell from 9 to 16 in the World Economic Forum’s 2003 Growth Competitiveness Index Rankings, and from 10 to 12 in the Business Competitiveness Index Rankings.

My misgivings were compounded this morning by the prominent front-page treatment given to the rankings in Canada’s leading newspapers.

There are two major reasons for my concerns. The first is that I do not believe that the rankings accurately reflect the reality of Canadian economic and competitive performance. As you know, the Canadian Council of Chief Executives carefully tracks a wide number of factors of economic competitiveness, both in Canada and within the G-7. Our research is based on hard analysis and not on mere impressions.

Let me offer you just a sampling of comparative data.

• Canada led the G-7 in economic growth from 1997-2002, and the IMF, the OECD, and private sector forecasters expect Canada to be among the G-7 growth leaders this year and next.
  
• Canada had the strongest productivity performance in the G-7 from 1997-2002.
  
• Since January 1, 2002, our economy created 612,000 jobs while the United States has shed 900,000 jobs.
  
• Canada’s average annual real per capita GDP growth from 1997-2002 has been the best in the G-7 at 3.1 percent.
  
• Canada was the only G-7 country with a fiscal surplus in 2002 and will be the only G-7 country in balance or better this year and next. Our federal debt to GDP ratio is less than 44 percent, the second lowest in the G-7.
  
• We continue to experience strong export performance and we have a current account surplus with the world despite the global economic slowdown.
  
• According to KPMG, Canada has the lowest business costs in the G-7.

I realize that in the 2003 survey, Canada was significantly marked down in areas involving public governance. While there is some justification for concern here, and my Council has not been shy in speaking out on this subject, international assessments of the overall quality of Canada’s public governance (and corporate governance) place us easily among the best performers in the world.

The second reason for my disappointment in the 2003 findings is that they are based, as you know, on a very small sampling of executive opinion. Having participated directly in the process over a number of years, I value the WEF’s work and I have used it as a point of reference on many occasions. However, I also know its limitations. A change in rank of this magnitude based on survey responses from just 75 executives (as reported in this morning’s press) simply does not merit headline treatment in our national newspapers and electronic media — at least not without clarification of the methodology involved.

In addition, I worry that findings so much at odds with the reality of Canadian competitive performance run the risk of having the work of the World Economic Forum in this area subject to ridicule. Some soundings that I have taken this morning among my CEO colleagues and senior government officials bear this out.

Despite their methodological limitations, the WEF’s findings have a worldwide audience and an inaccurate portrayal of Canada may have an unwarranted impact on perceptions in the foreign investment community of Canada’s economic performance and prospects. Fortunately for us, other respected international assessments have given us high marks. I refer you, for example, to The International Institute of Management Development’s 3rd place ranking of Canada’s competitiveness according to its 2003 report. I also refer you to The Economist Intelligence Unit’s 1st place global business environment ranking of Canada for 2003-2007.

Having made these points, Klaus, you know that I have been a persistent critic of Canada’s fiscal and competitiveness failings in the past, and that I am no "cheerleader" for Canadian achievements that have no real merit. But the Canada of today is a world beater in many respects and I wish more people knew it. As a long-time colleague and friend, it is important to me that you have the real facts at your command.

Recently, you raised with me the idea of a special Canadian programme at the 2004 Annual Meeting of the World Economic Forum in Davos. In the light of Canada’s precipitous drop in the WEF’s competitiveness rankings, we at the Council would value an opportunity to set the record straight.

I look forward to chatting with you about the contents of this letter when you are free to call me. In the meantime, I extend to you my warmest regards and, as always, I remain committed to working closely with you in ensuring strong and active Canadian involvement in World Economic Forum activities.

As ever,

Thomas d’Aquino
President and Chief Executive

c.c. Membership
Canadian Council of Chief Executives