A couple of days ago I read an interview with Frank Giustra, one of Canada’s few true mining tycoons. Among other things, Giustra answered questions regarding the “hollowing out” of Canada’s corporate landscape, commenting that there is little merit to the thesis, and that foreign ownership may not necessarily hurt the Canadian mining industry and the overall economy.
In the July 9 issue of “Maclean’s,” Giustra said that “the Canadian mining industry is the global leader in terms of mining operations, technology, and the raising of capital. There is a tremendous number of new mining companies created all the time. The fact that one or two have been taken out or consolidated — I think we’re still very strong, the technology is here, the expertise is here, there’s an entire culture that exists in this country surrounding mining.”
Yet even when real insiders such as Giustra say that hollowing out, at least in the mining industry, is really not a concern, I still cannot help but worry. Canada recently lost Inco Limited to Brazil’s CVRD and Falconbridge Limited to Switzerland’s Xstrata.
While losing two giants may not seem like much, losing two historical landmarks of sorts in the industry most certainly qualifies as a huge loss. Also, don’t forget that the whole steel industry has consolidated itself out of Canada, including Dofasco Incorporated, Canada’s “steel magnolia.”
Giustra is also ignoring what is happening in other sectors in Canada. Just to list a few examples, we have lost ATI, designer of graphic chips; Masonite International, a door manufacturer; Moore Corporation, a retailer; Four Seasons, a hotel giant; and so on. I was horrified to find out that from 2001 to 2006, 455 Canadian companies drifted away to foreign owners to the tune of US$137 billion!
With 455 companies leaving Canada’s corporate landscape, we have lost thousands of jobs, hundreds of corporate listings, and millions in tax revenues and charitable donations, not to mention sector dominance. I’m afraid whichever way we may look at it, the glass is most certainly half empty, if not more.
Simply, we are fresh out of second chances. Canada may still be a player in the mining industry and to an extent, in the financial sector. But in most other sectors, we have lost our competitive edge, and then some.
Until there is a shift in corporate and economic thinking toward creating globally strong companies that operate within a diverse palette of industries, Canada will not be a player. If the hollowing out remains at this pace, we’ll end up high in the nosebleed section, forgotten and irrelevant, as the rest of the world looks on at what is happening in the center of the stadium.