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McKinsey & Company |

Looking toward the future:

Capturing growth opportunities in BC

May 28, 2013 Business Council of British Columbia Dominic Barton Global Managing Director, McKinsey & Company

McKinsey & Company | 1

LNG – Accelerate development of export capacity to Asia (from 6 Mtpa to at least 18 Mtpa by 2018) before new US and Australian sources come online 2 Gateway economy – Increase share of Asian trade from 5% to 10+% of NA total with Prince Rupert expansion. Build up broader economy with regional HQs of Asian companies, Asia-focused professional services (e.g., law, accounting), and transport services 1 Natural resources (e.g., forestry, coal, copper) – Invest in critical areas to ensure BC at least maintains share as Asia grows, despite recovery in US exports 3 Direct engagement – Create cabinet-level position on Asia to signal focus, establish business exchange programs, and convene a tri-sector task force on Asia 7 Agrifood – Develop global champions in high-demand protein crops (e.g., beef, seafood, dairy) and processed food to establish BC as net food exporter. Emphasize brand – food safety, quality, and luxury items 4 Education – Establish as top 3 export industry (from 4% to 9% of total exports). Convert at least 60% of language and vocational students to university/college students 5 Tourism – Establish BC as top 3 Western destination for Chinese tourists (70% increase to 375k visits per year). Simplify visa requirement (i.e., faster, less costly, and less complex) for short stays from target markets 6

Seven priorities for BC to pursue

McKinsey & Company | 2

Overview

Five global trends Opportunities in Asia BC strengths and opportunities 1 2 3 Lessons from other cities and countries 4

McKinsey & Company | 3

Five mega-trends reshaping the global economy

Pricing the planet The productivity imperative The market state The great rebalancing The global grid

McKinsey & Company | 4

Massive urbanization is underway—old Shanghai

SOURCE: skylander.net

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Massive urbanization is underway—new Shanghai

McKinsey & Company | 6

Unprecedented infrastructure development is anticipated over next two decades

SOURCE: OECD Development Center; McKinsey Global Institute analysis; United Nations; McKinsey Global Institute

New large- scale railways As many as 170 large-scale railway systems; currently only 70 in Europe More big cities Over 200 cities with population

• ver 1 million;

currently only 35 in Europe Huge city population 350 million additional people; more than entire US population Thousands

• f skyscrapers

As many as 50,000; equivalent to building 10 New York cities New large- scale railways As many as 170 large-scale railway systems; currently only 70 in Europe More big cities Over 200 cities with population

• ver 1 million;

currently only 35 in Europe Huge city population 350 million additional people; more than entire US population Thousands

• f skyscrapers

As many as 50,000; equivalent to building 10 New York cities

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3 billion new middle class consumers by 2030

Global middle class Billions of people

4.88 3 billion Asia-Pacific Europe North America Central and South America Middle East and North Africa Sub-Saharan Africa 2030 3.23 2020 3.25 1.74 2009 1.85 0.53

McKinsey & Company |

McKinsey & Company | 8

Incomes are rising in developing economies faster, and at a greater scale, than at any previous point in history

SOURCE: Angus Maddison; University of Groningen; Resource Revolution: Meeting the world’s energy, materials, food, and water needs, McKinsey Global Institute, 2011

9 840 1,023 27 48 28 10 Country 154 53 65 33 1700 1800 1900 2000 India 12 16 China South Korea 10 Japan Germany United States United Kingdom Year Population at start

• f growth period

Years to double GDP per capita Million

McKinsey & Company | 9 SOURCE: McKinsey Global Institute Cityscope 2.0

Percent contribution to global GDP growth, 2010–2025 100% = $50.2 trillion

6 27 26 100 28 Global growth Eastern Europe & Central Asia Developed countries Other emerging regions 2 3 Middle East & Africa 4 Latin America Southeast Asia South Asia 3 China region Asian cities Emerging 440 (440 largest cities in emerging markets)

440 cities in emerging markets will fuel nearly half

• f the growth in global GDP through 2025

47%

• f global

growth 440 largest emerging market cities

=

In China, 15-20 MM people move to a city each year – equal to adding New York City twice 313 cities in Asia

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Emerging market cities will become the leading consumer markets globally

Emerging Advanced 2025 Rank 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Elderly, higher- income consumers Shanghai Beijing Tokyo Tianjin Mumbai São Paulo Osaka Chongqing Delhi Nanjing Guangzhou New York Seoul Hong Kong Wuhan xx xx Municipal water demand Mumbai Delhi Shanghai Guangzhou Beijing Buenos Aires Kolkata Khartoum Dhaka Istanbul Dallas Pune Las Vegas Karachi São Paulo Young entry-level consumers Lagos Dar es Salaam Dhaka Ouagadougou Khartoum Ghaziabad Sanaa Nairobi Luanda Baghdad Kampala Ibadan Lusaka Kinshasa Kano Laundry care products São Paulo Beijing Rio de Janeiro Shanghai Mexico City Moscow Bangkok Istanbul Manila Johannesburg Belo Horizonte Porto Alegre Buenos Aires Tianjin Tehran

SOURCE: McKinsey Global Institute

McKinsey & Company | 11

Disruptive technology will have enormous economic impact by 2025

SOURCE: McKinsey Global Institute analysis

Range of sized potential economic impacts Impact from other potential applications (not sized) Low High X–Y

$ trillion, annual

Renewable energy 0.2–0.3 Advanced oil and gas exploration and recovery 0.1–0.5 Advanced materials 0.2–0.5 3D printing 0.2–0.6 Energy storage 0.1–0.6 Next-generation genomics 0.7–1.6 Autonomous and near- autonomous vehicles 0.2–1.9 Advanced robotics 1.7–4.5 Cloud technology 1.7–6.2 Internet of Things 2.7–6.2 Automation of knowledge work 5.2–6.7 Mobile Internet 3.7–10.8

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100 1,000 10,000 100,000 100 1,000 10,000 Potential economic impact across sized applications $ billion (log scale)

A small number of technologies will have disproportionate impact

SOURCE: Factiva; McKinsey Global Institute analysis

Mobile Internet Internet of Things Advanced robotics Autonomous and near- autonomous vehicles Cloud technology Automation of knowledge work

High impact technologies

Next- generation genomics Energy storage 3D printing Advanced materials Advanced oil and gas exploration and recovery Renewable energy

Media attention Number of relevant articles in major general interest and business publications over 1 year (log scale)

McKinsey & Company | 13 13

Amount of data is exploding in all sectors globally

220 B photos stored 1 M transactions every hour 2 M searches every minute 4 B page views every day

Mobile data traffic doubled

in 2012

More data transmitted online

in 2010, than all previous years

More information created

than from 0 AD-2003

15 out of 17 U.S. sectors have more data

per company than the U.S. Library of Congress

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33% 8% 6% 2006 10% 2010 33% 9% 2009 36% 2011 16% 6% 2007 7% 25% 2008 20% 2011 34% 10%

Purchase decisions and sales are increasingly being made online – in both Western markets and in Asia

Online Offline influenced by online

United States Shanghai

Online-related retail sales Percent of total retail sales

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People will need to work longer, retire later, and engage in lifelong learning

10 working adults support 1 retiree

2000

7 working adults support 1 retiree

2020

3 working adults support 1 retiree

2050

Emerging markets

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We will also face a global shortage of skilled workers and a surplus of low-skilled workers

94

• 45
• 41

Low-skill Medium-skill High-skill Global balance of workers, 2020E Million workers

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The continuing rise of emerging markets will further strain global resources to an unprecedented level

Water Food Energy Increasing gap between demand and supply of fossil fuels; e.g., by 2030

▪ 25% gap for oil ▪ 30% gap for gas

10,000 years of historical food production that must be matched in the next 50 years ~40% gap between supply and demand by 2030

McKinsey & Company | 18

Volatility – growth will not be a straight line (there will be asset bubbles) Rising income inequality plus technology Resource scarcity Interregional conflict Healthcare challenges – pandemics Education does not keep pace with urbanization

Risks associated with pursuit of growth opportunities

McKinsey & Company | 19

The lifespan for companies is decreasing

Estimated lifespan of S&P 500 companies, years

18 22 30 45 90 2011 1995 1975 1955 1935

McKinsey & Company | 20

Overview

Five global trends Opportunities in Asia BC strengths and opportunities 1 2 3 Lessons from other cities and countries 4

McKinsey & Company | 21 21

Six significant opportunities in Asia

▪ Consumers – $22 T consumption in emerging markets in 2025

and 2.7 B new middle class consumers by 2030

▪ Education – 1 B Asian youth to educate in any given year and

a 36 M shortage of skilled workers in China and India by 2020

▪ Infrastructure – $57 T global demand over next 18 years, with

$27 T expected spend in emerging Asia

▪ Tourism – approximately 80 million outbound Chinese travelers

in 2012, growing to over 110 million in 2015

▪ Agriculture & food – 2x global increase in meat demand by

2050 due to rise of emerging markets, anticipated 60+% rise in meat consumption in China

▪ Natural resources – 30% increase in global energy needs and

80% in steel needs by 2030

McKinsey & Company | 22

Emerging market consumption will be $30 trillion by 2025, nearly half of global total

$ Trillions 26 34 12 30 Developed Emerging 2025 64 2010 38 Brazil 3 India 10 China 8 Total 30 1 Other Poland 1 Turkey 1 Indonesia 1 Mexico Russia 2 3

SOURCE: McKinsey Global Institute

World consumption Emerging market consumption in 2025

McKinsey & Company | 23 SOURCE: McKinsey analysis; Global Insight; Economist Intelligence Unit

2,823 2000 1,858 1990 817 2010 +245%

Asian consumers’ disposable incomes have been rapidly increasing

• ver the last 2 decades

+165% 1990 N/A 2010 2000 381 1,010 1990 +133% 446 2000 465 1,040 2010 Indonesia +204% 2010 2000 2,464 7,480 2,989 1990 80 247 522 2010 2000 1990 +553% India Turkey Vietnam Urban China Per capita disposable income USD (2010 real terms)

McKinsey & Company | 24

The Chinese market is already rivals Western markets in regards to consumption

2nd largest digital camera market

after the US – more units than Japan, South Korea, and Singapore combined

Flat-screen TV sales of 50 million

– 42 M sold in the US and Canada

Largest retail market for laptop computers

(27 M units vs. 22 M units in the US in 2012)

Laundry softener sales have grown 20% annually for the past 5 years

– surpassing sales in Germany and France

McKinsey & Company | 25 SOURCE: FAO World Food and Agriculture to 2030/2050; FAO Expert Meeting on How to Feed the World in 2050; McKinsey analysis

Global growth by 2050

As incomes grow, caloric intake, especially from meat, will rise

892 ~2x 475 2050E 2010 Million tons of dairy 1.44 ~1.5x 1.00 2050E 2010 Billion tons of cereals 464 227 ~2x 2050E 2010 Million tons of meat

McKinsey & Company | 26

China – the world’s largest market for meat at $300 B – has substantial room to grow further

45 50 57 66 76 109 130 +61% Japan China South Korea Taiwan EU-27 US Hong Kong Per capita meat consumption 2010 kilo/year 50 85 90 94 50 15 10 6 100% = ROW China Dairy 383 Beef 260 Poultry 173 Pork 400

SOURCE: USDA, NBS

China’s share of consumption %, 100% = $B Total

McKinsey & Company | 27

22 120 79 22 119 74 23 119 77 22 116 93 21 109 113 Indonesia India China

20-24 15-19 10-14 5-9 0-4

School-age population, 2013 Millions

Ages

Asia has over 1 billion people to educate at any one time

436 M 583 M 110 M India needs to put 50 million people through vocational training each year—and yet has capacity for only 4 million

SOURCE: Economist Intelligence Unit

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Despite growing domestic education systems, China and India will not be able to meet demand for talent

SOURCE: McKinsey Global Institute

In 2020

41M 23M 45M 13M

global shortage of tertiary educated workers in China alone global shortage of high school graduates in India alone

McKinsey & Company | 29

50,000 100,000 150,000 200,000 2011-12 2010-11 2009-10 2008-09 2007-08 International students in the United States

China is sending more students abroad – while other countries stagnate

SOURCE: Institute of International Education

Turkey Mexico Vietnam Japan Canada Taiwan Saudi Arabia South Korea India China

McKinsey & Company | 30

112 78 70 57 31 +15% p.a. +26% p.a. 2012 2011 2010 2005 2015E

Overseas tourism has soared in China and is expected to grow further

SOURCE: CEIC, China tourism yearbook, Euromonitor

China outbound travelers Millions

McKinsey & Company | 31 31

% of total respondents

SOURCE: Insights China; 2010 China Consumer Survey, focus groups; team analysis

Relieving pressure and escaping to nature are Chinese travellers’ top motivators

63 11 19 Increase foreign exposure Learn knowledge and culture Relieve work pressure & relax 10 4 4 8 14 Other (e.g., visit family) Shopping Entertainment (e.g., karaoke) Folk culture Historic sites Natural landscape (e.g., sea, mountains) 59 % of respondents The first thing that we seek is natural landscape, especially things that we can’t see here such as the sea Wuhan participant Primary purpose for travel Top 3 motivations for travel

McKinsey & Company | 32

Canada has an opportunity to capture a much higher share

• f Chinese travelers

Mongolia 0.3 Canada 0.3 0.3 Germany 0.4 0.4 Indonesia 0.6 United Kingdom 1.1 Cambodia Thailand Australia Singapore 1.5 1.2 1.0 USA Russia 0.7 0.8 Vietnam 1.4 France South Korea 1.6 2.4 1.8 1.7 Taiwan Japan Malaysia

SOURCE: CEIC, China tourism yearbook, Euromonitor (2011)

China international travellers by destination Millions, 2011

McKinsey & Company | 33 SOURCE: McKinsey Insights China; McKinsey Global Economic Growth Database; McKinsey Global Institute 1 Stock of net fixed assets at the end of the year, assuming 5% depreciation rate for all the assets

Demand for infrastructure rises as income increases

5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 Capital stock per capita1 140 120 100 80 60 40 20 GDP per capita Urban China China India Germany South Korea Japan Italy UK US Capital stock vs. GDP per capita by country and year, 1980–2008 $ Thousands, sample of selected countries, constant 2005 prices and exchange rates

McKinsey & Company | 34 34

Length of expressways Thousand km Length of railways Thousand km Airports Number of airports Capacity of container terminals M TEU (20-foot equivalent units) 120 90 78 +33% 2020 2010 2007

China plans to rapidly expand infrastructure

100 65 54 +54% 2020 2010 2007 244 192 152 +27% 2020 2010 2007 240 136 95 +76% 2020 2010 2007

SOURCE: CIA factbook; S&P; World Bank; IWG; Difu; Yearbook of China Transportation and Communications; team analysis

McKinsey & Company | 35

Pudong District, Shanghai

$27 trillion

Asia infrastructure investment need 2013-2030

SOURCE: Lujiazui Road, Pudong District, Shanghai

$57 trillion

global infrastructure investment need 2013-2030

McKinsey & Company | 36

Emerging markets have significant infrastructure capacity to develop

SOURCE: CIA World Factbook 2012; Infrastructure Africa; Economic Research Institute for ASEAN and East Asia; World Economic Forum, Global Competitiveness Report 2011–2012; McKinsey Global Institute analysis

3 6 23 40 66 Kazakhstan Russia Indonesia China United States Germany 181 Japan 320 6 5 3 9 23 72 118 23 35 97 47 529 902 378 Developing Developed Airports Airports per million sq km Rail Rail km per 1,000 sq km Roads Road km per 1,000 sq km

McKinsey & Company | 37 SOURCE: Global Insight; IEA; UN Environment Program (UNEP); FAO; World Steel Association; McKinsey analysis

398 654 +33% 2030 492 2010 2000 568 2020 +80% 1,847 2,290 1,271 761 6,350 +41% 5,500 4,500 4,000 234 191 137 287 +50%

Rising middle class, urbanization, and infrastructure build-up will drive strong global resource demand

Fertilizer Million tonnes Water Cubic kilometers Steel Million tonnes Primary energy Quadrillion BTU1

1 British Thermal Units

McKinsey & Company | 38 38 SOURCE: McKinsey 2011 global copper, iron ore, steel, and metallurgical coal models

31 20 +55% 2,559 1,935 +32% 1,178 837 +41%

Global demand for basic materials will also rise significantly

Global demand Million metric tonnes Coal Iron ore Copper 2010 2020

McKinsey & Company | 39 39

China and India will account for over 60% of the growth in energy demand through 2030

Energy demand Quadrillion BTUs (British Thermal Unit), Percent

41 20 5 31 Share of growth % 4

SOURCE: McKinsey analysis

42% 36% 33% 28% 27% 28% 2030 654 9% 100% 5% 2020 578 India China Global (e.g., planes) OECD & EU-27 7% 25% 5% 2010 492 5% 20% 5% Rest of world 25%

McKinsey & Company | 40

Overview

Five global trends Opportunities in Asia BC strengths and opportunities 1 2 3 Lessons from other cities and countries 4

McKinsey & Company | 41

▪ Distinctive geographic positioning ▪ Competitive tax and regulatory environment – attracts

businesses and enables them to thrive

▪ Strong education system – highly respected schools and

educated workforce

▪ Natural tourist appeal – attracts over 4 MM visitors annually ▪ “Ready to work” with Asia – large immigrant population with

relevant language skills and cultural awareness

▪ Abundant natural resources – e.g., shale gas and timber

products to support the build-up of Asia 1

▪ Robust existing infrastructure – North America’s 5th busiest

port and Canada’s 2nd busiest airport 3 4 2 5 6 7

BC is well positioned to capture these trends

McKinsey & Company | 42

BC has grown the share of its exports to Asia, however Australia demonstrates how much stronger these relationships can be

82% 44% 43% 40% 36% 32% 27% 27% 24% 24% 23% 23% 21% 10 12 11 +7% p.a. Australia 04 03 02 2001 05 06 09 08 07

Trade with Asia Percent of total annual exports

British Columbia

McKinsey & Company | 43

BC is closer to Asia than any other Western economy

Travel time Beijing, Asia’s busiest airport Hours 14.2 13.7 13.0 11.6 11.1 10.8 New York London Los Angeles Sydney Vancouver Prince Rupert Shanghai, world’s busiest port Days 34.0 33.9 25.4 23.5 24.1 23.4

McKinsey & Company | 44

Metro Vancouver Port is the 5th largest port in North America

Los Angeles, CA 7.9 Prince Rupert, BC 6.1 Vancouver, BC 5.5 Savannah, GA 2.9 New York/New Jersey 2.5 Long Beach, CA 0.4 1 2 3 4 5 26

Top ports in North America by container traffic, 2010 Million TEUs (20-foot equivalent units)

SOURCE: American Association of Port Authorities

McKinsey & Company | 45

Prince Rupert, the North American port nearest to Asia, can increase capacity significantly

500,000 Before 2007 +3M TEUs 5,000,000 World-class port size Plan approved in 2013 2,000,000 2007 Prince Rupert Port Container capacity TEUs (20-foot equivalent units) per year

SOURCE: "Seizing the Continent: Opportunities for a North American Gateway", Asia Pacific Foundation of Canada

▪ Leverage unique

location – closer to Asia than any other West coast port by 3 days (2,000 miles)

▪ Increase container

handling capacity – cranes, docks, terminals

▪ Increase rail and

road capacity to prevent bottlenecks 5 M TEU volume would make Prince Rupert North America’s

4th largest port

McKinsey & Company | 46

BC’s infrastructure know-how can also be exported to other geographies

Contractor selected for HKG construction based on credentials and design from YVR Vancouver airport (YVR) developed by Ontario Transportation Capital Corporation Hong Kong airport (HKG)

McKinsey & Company | 47

China is BC’s second-largest forest product export market, and Canada has emerged as China’s second-largest supplier of softwood

SOURCE: Government of British Columbia, FAOSTAT

17% 12% 33% 38% Other Japan China United States Share of BC forest product export market Percent

Russia Canada NZ USA Other 2010 10.3 42% 39% 7% 5% 8% 2005 2.3 52% 11% 2000 1.2 10%

Source of softwood imports into China Million m3

McKinsey & Company | 48

Planned LNG export projects

Project name and sponsors Initial liquefaction capacity Mtpa1 Expected startup date 2020 2015 2014 2019

Several LNG projects have been proposed, but only 14% of proposed capacity is expected to come online within the next 5 years

1 5 12 12 14 Prince Rupert LNG LNG Canada Pacific Northwest LNG BC LNG Kitimat LNG

SOURCE: Company websites, Government of British Columbia

2021

Startup date >5 years Startup within 3 years 38 Mtpa 6 Mtpa

1 Million tonnes per annum

McKinsey & Company | 49

BC offers the lowest corporate tax rate in North America and one of the lowest in the world

SOURCE: Canada Revenue Agency, Finance Alberta, Revenu Québec; Internal Revenue Service, Australian Taxation Office

10 10 12 12 BC rate Quebec 27 15 Ontario 27 15 Alberta 25 15 British Columbia 25 15

1 General corporate tax rate; does not include small business deduction. Corporate tax rate for highest income bracket indicated for the United States (range for income above $75,000 is 34%-39%) Federal Provincial/State

17 12 9 30 Wash- ington US 35 35 Cali- fornia US 44 35 BC rate Indonesia 25 25 China 25 25 Tokyo, Japan 38 26 South Korea 22 22 Singa- pore Australia 30

Corporate tax rate1

Percent

McKinsey & Company | 50

BC has also committed to reducing regulatory burden on its citizens and businesses

SOURCE: Government of British Columbia

205,950 360,295

• 43%

2001 2012 Regulatory requirements in British Columbia Commitment through 2015 to

0 net new regulations

while maintaining health, safety, and environmental protections

McKinsey & Company | 51

BC has set an ambitious goal to attract 50% more international students by 2015

51 SOURCE: Government of British Columbia

▪ Aims to attract

students to meet BC’s future labour needs

▪ Maintains current

mix of students – 46% of students in language schools

12 31 18 17 65 42 58 28 43 11 12 34 13 13 103 113 94 38 126 141 15 52 2014-15 150 2013-14 50 2012-13 100 11.0% 12.0% 9.7% 10.0% 2015-16 2011-12 47 14 16

Private post-secondary Language schools K-12 Public post-secondary

BC international student population Thousands

McKinsey & Company | 52 SOURCE: Kevin Rudd speaking at the Business Council of British Columbia

Across developing Asia there is a premium opportunity and demand for what these universities offer in terms of globally accredited and credible academic qualifications and [there is an opportunity] to build on … the networks of alumni that come through them intelligently, creatively, and for the future

• Kevin Rudd, former PM of Australia, April 2013

The Asian student opportunity has been widely recognised

Ranked 30th in the world

McKinsey & Company | 53

There is great opportunity to grow education as a major export to Asia

SOURCE: “International Education: A Key Driver of Canada’s Future Prosperity,” Advisory Panel on Canada’s International Education Strategy, August 2012; Government of Quebec 53

United Kingdom United States Canada Australia International student market share (est.) Percent 10 18 5 13 International students Number 428,000 723,000 240,000 557,000 BC has 28% of Canada’s international students – despite having only 13% of Canada’s population

3 out of 5

university/college international students in Australia began their studies in an Australian language, technical or

• ther school

McKinsey & Company | 54

1. Thailand 2. Hong Kong (Macau) 3. Europe 4. South Korea 5. Taiwan 6. Malaysia 7. Singapore 8. Australia 9. Bali

• 10. Japan

SOURCE: Ctrip survey 2/2013; China Tourism Academy “China outbound travel satisfaction survey”

Singapore 79.5 Germany 80.0 South Africa 80.2 Brazil 80.3 Agentina 81.0 France 82.3 New Zealand 82.5 Spain 82.6 Italy 82.7 Canada 84.5

Canada is not a high priority destination for Chinese travelers – but those who do visit Canada enjoy it

Chinese tourist satisfaction rate Top 10 most requested destinations for Chinese outbound travelers Although an government-approved destination for Chinese tour operators, Canada is not in the top 20 destinations

McKinsey & Company | 55 SOURCE: Kevin Rudd speaking at the Business Council of British Columbia

We’re going to have a 100 M Chinese tourists travelling the world in the next couple of decades. Where are they going to go? Countries where they are met and greeted in the language they are familiar with. The assumption that English will be the global lingua franca at the end of this century is itself an arrogant assumption – English has only been the lingua franca since English speaking countries triumphed in WWII

• Kevin Rudd, former PM of Australia, April 2013

McKinsey & Company | 56

Three-quarters of new immigrants to British Columbia are from Asia

SOURCE: Citizenship and Immigration Canada

3 11 7 Middle East/Africa Europe 73 Asia 6 North America South America Country of origin for immigrants arriving in 2012, N = 36,164

McKinsey & Company | 57

Asian language fluency is common among Vancouver residents

SOURCE: StatCan Census 2011

2 3 5 7 19 Korean Japanese Punjabi Mandarin Cantonese

Language used primarily/regularly at home Percent

Vancouver

McKinsey & Company | 58

LNG – Accelerate development of export capacity to Asia (from 6 Mtpa to at least 18 Mtpa by 2018) before new US and Australian sources come online 2 Gateway economy – Increase share of Asian trade from 5% to 10+% of NA total with Prince Rupert expansion. Build up broader economy with regional HQs of Asian companies, Asia-focused professional services (e.g., law, accounting), and transport services 1 Natural resources (e.g., forestry, coal, copper) – Invest in critical areas to ensure BC at least maintains share as Asia grows, despite recovery in US exports 3 Direct engagement – Create cabinet-level position on Asia to signal focus, establish business exchange programs, and convene a tri-sector task force on Asia 7 Agrifood – Develop global champions in high-demand protein crops (e.g., beef, seafood, dairy) and processed food to establish BC as net food exporter. Emphasize brand – food safety, quality, and luxury items 4 Education – Establish as top 3 export industry (from 4% to 9% of total exports). Convert at least 60% of language and vocational students to university/college students 5 Tourism – Establish BC as top 3 Western destination for Chinese tourists (70% increase to 375k visits per year). Simplify visa requirement (i.e., faster, less costly, and less complex) for short stays from target markets 6

Seven priorities for BC to pursue

McKinsey & Company | 59

Overview

Five global trends Opportunities in Asia BC strengths and opportunities 1 2 3 Lessons from other cities and countries 4

McKinsey & Company | 60

▪ Set an explicit and ambitious growth target (e.g., additional 2-3% of GDP growth) ▪ Determine how growth target will be reached at a granular level (i.e., which cities, which

industries will deliver and how much)

▪ Establish formal government roles (e.g., cabinet-level ministry) and groups (e.g., Premier’s

Delivery Unit) to ensured increased focus on Asia and capture of opportunities

▪ Create joint government-business organizations to enable collaborative pursuit of

• pportunities (e.g., Malaysia economic transformation labs , Singapore Economic

Development Board)

▪ Establish both a physical (e.g., NZ in Shanghai) and virtual presence (e.g., tourism website

in Mandarin)

▪ Be willing to make significant, protected investments and invest for the long term (i.e.,

pay off may take 5+ years)

▪ Leverage both existing and potential diaspora (i.e., both Asians in Canada and Canadians

in Asia) as unofficial ambassadors (e.g., Committee of 100, Mexico Talent Abroad)

▪ Engage stakeholders early (i.e., at the planning stage, not only at the approval stage) and

allow transparency into objectives and risks

1 2 3 4 5 6 8

Lessons from around the world

7

McKinsey & Company | 61

Examples of where we have helped to drive economic development

Tanzania Turkey UK Georgia Malaysia Nigeria Dubai Brazil USA Germany Ukraine Morocco Ethiopia Columbia

McKinsey & Company | 62

▪ Be in the top 3 most competitive countries in Latin America ▪ Cultivate a business environment that attracts local and

foreign investment (30% of GDP)

▪ Raise the proportion of high value-added goods and

services to 60% of exports (19% in 2006)

▪ Quadruple GDP per capita, from $5,000 to $18,000 –

become a mid-high income country

▪ Substantially improve quality of life and decrease poverty

level to <15% (45% in 2006)

Colombia set an ambitious set of goals to improve its attractiveness to foreign businesses and consumers

Productivity Transformation Program

McKinsey & Company | 63

Leverage creative methods to co-create solutions with private and public sector

SOURCE: GTP, ETP

Malaysia Economic Transformation Programme

Intensive capability building Co- creation with the private sector Private sector participants Public sector participants

150 350

New Jobs

3.3 M

15,OOO

92%

▪ 131 entry point projects with

detailed plans and modeling

▪ Clear targets and milestones

• utlined

Increased GDP per capita Private sector funding (>RM1 trillion)

USD / Capita

8 week intense lab environment Delivery unit to monitor programme

McKinsey & Company | 64

A through-cycle, dedicated, tri-sector approach is needed to capture the opportunity in Asia

Coordinated relationship building

▪ Identify key decision-makers

(business, government, regulatory, etc.) in target markets

▪ Recruit domestic leaders to build

relationships in a coordinated fashion Support strategic objectives

▪ Counsel policymakers on goals

and strategic initiatives related to foreign partnerships

▪ Secure the right participants for

events and trade missions

▪ Proactively cultivate FDI and

support companies in finding suitable business partners

▪

Federal Minister for Asia

–

Cabinet rank

–

Responsible for whole

• f Asia agenda

–

Cuts across ministries

▪

Provincial leaders

▪

Educational institutions

–

Universities

–

Schools

▪

Cultural

–

Cirque du Soleil

–

Music

–

Sports

▪

NGOs R&D – from 1.8% to 2.5%

• f GDP

Business Government Social sector

McKinsey & Company | 65 65

Many countries are developing one-stop government centres

Provides venue and business services for trade events held by NZ businesses New Zealand Central in Shanghai

▪ Consolidates multiple NZ government bodies in one

location

▪ Centre set-up embodies “look and feel” of NZ

McKinsey & Company | 66

Years to break even Years to break even 11 7 8 4 10 8

Successful companies adopt a long-term investment mindset to build a sizeable, profitable business

SOURCE: Press search; company reports

7 7 9 8 7 4

McKinsey & Company | 67

New Zealand proactively cultivates long-term government and business relationships in China

SOURCE: New Zealand Ministry of Foreign Affairs, Press Search

PM John Key during visit to China April 2013

▪ Attended by New Zealand’s Prime

Minister John Key and 50 top New Zealand business leaders New Zealand-China Partnership Forum “The visit is an opportunity to support New Zealand companies in China through business support activities and major tourism and education promotional events being held in the three Chinese cities the delegation will visit – Guangzhou, Shanghai and Beijing” New Zealand has "a clear message for China: your investment is welcome” “It was great to meet with President Xi again and reaffirm the strong relationship between our two countries”

McKinsey & Company | 68 SOURCE: Literature search; press releases

Domestically, Australia is pursuing a number of initiatives to strengthen its ties with Asia

New direct currency trading agreement between AUD and RMB lowers cost and speeds up transactions – only 3 countries have direct currency trading with China (US, Brazil, Australia) Expanded curricula coverage of Asia to build next generation of ties with Asia (e.g., cross-subject curriculum to build cultural understanding, including offering Asian languages in course offerings, exchanges) Government offers training programs for individuals doing trade in China – covers processes involved in doing business in China and how to mitigate risk Strengthening of military ties through bilateral defense links between the Australian Defense Force and the People’s Liberation Army to build trust, confidence and transparency for the future

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Leverage the two-way diaspora

SOURCE: World Bank, Statscan, World wide webs: diasporas and the international system Lowy Institute

Mexico’s Network of Talent Abroad convenes high-skilled Mexicans abroad in a target set of cities

▪ Promote country’s image abroad ▪ Improve access to foreign capital,

information and contacts for those back in Mexico

▪ Irish president Mary Robinson

identified ‘important’ members of the Irish diaspora, proactively reached out to them with a request for activities they could do

• n behalf of Ireland

▪ Create organizations (e.g., Committee of

100) that engages members of diaspora in the receiving country in building relationships with their home country Treat migrants as well-placed, unofficial ambassadors Ask leaving citizens to remain connected Examples from other countries

Looking toward the future

Business Council of British Columbia

Dominic Barton, Global Managing Director McKinsey & Company May 28, 2013