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Blows keep coming for our economy, and the Bank of Canada will be left to clean up the mess – Financial Post



The Canadian economy is off to a terrible start to 2020 as four years of inept government policy are starting to come home to roost.

Manufacturing sales have posted their fourth consecutive negative reading, retail sales were stagnant to end 2019 and signs are that GDP growth is stalling and may actually be negative when accounted for on a per-capita basis.

We worry that our booming housing market may not be enough to prevent this situation from worsening, with the potential for a recession that could drag interest rates and the loonie lower as well.

And concerns about the coronavirus and its global economic impact couldn’t come at a worse time.

The other broader issue is what it could ultimately do to Canada’s reputation as a place to do business

BMO chief economist Douglas Porter

The problem is that the PMO has for the most part appeared more concerned with other issues, such as securing a UN Security Council seat, than it has on ensuring the economy stays on track.

Instead of nipping anti-pipeline blockades in the bud, they were allowed to rapidly expand and paralyze both the country’s economy and our reputation globally as a secure place to do business. Grain shipments have been halted costing hundreds of millions in lost sales, thousands of rail jobs have been temporarily lost and the lack of propane shipments to the Atlantic provinces have left inventory levels dangerously low.

Douglas Porter, chief economist at BMO, highlights a much more important takeaway: “But the other broader issue is what it could ultimately do to Canada’s reputation as a place to do business, and ultimately that might be the most potentially damaging aspect of this episode.”

The same message was sent this weekend when Teck Resources Ltd. announced it had decided to cancel its $20 billion Frontier oilsands mine citing worries over Canada’s inability to create a framework that “reconciles resource development and climate change.”

Frontier isn’t an isolated incident: It now joins the $100 billion of resource projects that were scrapped from 2017 to 2019, according to the C.D. Howe Institute. Consider for a moment the massive opportunity cost this represents for the country as a whole, simply due to bad policy implemented during a period of volatile energy prices.

For those who say that ramped-up fiscal spending by the Federal Government will help offset some of the damage, don’t forget that Ottawa hiked higher personal tax rates and attacked small business in a bid to raise revenues to cover some of that spending while concurrently having to deal with debt servicing costs.

For example, according to a recent report by the Fraser Institute, “At the federal level, the amount that will be spent on interest payments in 2019-20 ($24.4 billion) is higher than what the government expects to spend on Employment Insurance benefits ($19.3 billion) and the Canada Child Benefit ($24.1 billion).”

In the end, we think it will be left up to the Bank of Canada to deal with this mess. This means they may finally have to give up the hallowed ground they have defended for so long and implement an emergency interest rate cut. With oil prices in the toilet, they may be removing a key support for the Canadian dollar.

For those wondering what the potential impact will be, we recommend having a look at the Australian dollar which until May of last year had a strong correlation with our currency’s relationship to the U.S. dollar. Back then both were at 0.75 but the AUD has since been walloped down to 0.66.

This would be terrible news for Canadian consumers especially since we import so many of our goods from the U.S. But it would be extremely beneficial to our exporters including our resource and manufacturing sectors. It could also add gasoline to our housing market especially considering the government recently loosened mortgage-lending standards.

Either way, a lack of focus on the importance of the Canadian economy and leaving it up to the Bank of Canada to rescue us is not a policy that instills much confidence. And confidence is something all of us Canadians could use a bit more of these days.

Martin Pelletier, CFA is a Portfolio Manager and OCIO at TriVest Wealth Counsel Ltd, a Calgary-based private client and institutional investment firm specializing in discretionary risk-managed portfolios as well as investment audit and oversight services.

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RBA warns of big hit to the economy from pandemic – MarketWatch



SYDNEY–The Reserve Bank of Australia left interest rates unchanged Tuesday and affirmed its current targeting of bond yields while warning the economy will be hit hard by the corona pandemic in the second quarter.

The RBA’s official cash rate was left at a record low 0.25%, the bank said. The three-year bond yield target was also kept at 0.25%.

“There is considerable uncertainty about the near-term outlook for the Australian economy…a very large economic contraction is expected to be recorded in the June quarter and the unemployment rate is expected to increase to its highest level for many years,” RBA Governor Philip Lowe said in a statement.

Interest rates are set to remain low for a long period, he added.

“The board is committed to doing what it can to support jobs, incomes and businesses as Australia deals with the coronavirus,” Mr. Lowe said.

“The Board will not increase the cash rate target until progress is being made towards full employment and it is confident that inflation will be sustainably within the 2%-3% target band,” he added.

The RBA deployed alternative policy measures in March for the first time as the coronavirus pandemic forced social distancing on the population, shut firms and closed borders to international traffic.

When compared with other major economies, Australia has managed to limit the number of deaths from the coronavirus, but it has been hard hit nonetheless with tourism and education exports flattened while consumer spending has weakened.

Federal and state governments have responded to the pandemic with massive fiscal stimulus but despite the outlays, Australia is set to sink into its first recession since the early 1990s, economists have warned.

Data earlier Tuesday showed job advertisements fell by 10.3% in March, the biggest fall since the global financial crisis.

Still, consumer confidence was up with the ANZ attributing the rise to government measures to support incomes and keep workers on payrolls.

Write to James Glynn at

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Quebec hatches plans to bolster economy as Legault eyes postpandemic world – The Globe and Mail



Quebec Premier Francois Legault responds to reporters during a news conference on the COVID-19 pandemic, Thursday, April 2, 2020 at the legislature in Quebec City. Mr. Legault’s government on Monday announced a $100-million program that companies can tap to pay workers being trained as well as those training them as they prepare for a return of economic activity.

Jacques Boissinot/The Canadian Press

Quebec is hatching plans to bolster the resiliency of its economy as it eyes a postpandemic world where countries are expected to become more protectionist and the province will need to be more self-sufficient.

Premier François Legault’s government on Monday announced a $100-million program that companies can tap to pay workers being trained as well as those training them as they prepare for a return of economic activity. Companies are eligible to apply for the program until September 30.

“This is the ideal time to do training,” Mr. Legault told reporters in Quebec City, adding many business need to be ready for a significant reorganization of work. “Things will change a lot over coming months.”

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Labour Minister Jean Boulet said companies could develop employee skills while being subsidized for their wages, which would “increase their competitiveness. We want companies to be able to prepare to relaunch and avoid any job losses as much as possible.”

As much of the rest of Canada has focused on immediate responses, Quebec has in recent days been talking more about its future once the health crisis subsides. Mr. Legault’s government says it has begun working on plans to increase the province’s self-sufficiency in health care and food, to make sure it has enough locally made medical equipment, medication and other supplies needed to weather a future crisis.

More broadly, Quebec has begun a detailed analysis of its trade balance in an attempt to prepare for a new economic reality once the peak of the global coronavirus pandemic has passed. The Premier is even evoking the possibility of using the province’s plentiful hydro power to warm indoor greenhouses in the winter and grow fruit and vegetables all year round instead of importing them.

“We want to be able to produce more locally,” Mr. Legault said Friday. “We’ll need to think about the entire food chain to ensure that if there were another crisis that we’d be autonomous.”

Quebec’s determination to cement its defences and boost its future economic prospects has already been likened by some commentators to a similar nationalism effort in the 1960s that ushered in the Quiet Revolution.

Not since that time has former Premier Jean Lesage’s campaign slogan “Maître chez nous” (Masters in our own house) become as pertinent as a societal objective, Quebecor media columnist Michel Girard said.

The government is also thinking about the demand side of the equation, trying to stimulate Quebeckers’ appetite for locally-made products in order to cut their reliance on goods made outside its borders.

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On Sunday Quebec announced a new non-profit project called Le Panier Bleu (blue basket), which is at the moment a website-accessed inventory of thousands of Quebec companies that provide locally-made products and services. The project is being led by several retail-sector veterans, including former Lowe’s Canada chief executive officer Sylvain Prud’homme.

With three million visits in less than 24 since the website went live and 1,170 businesses listed, the initiative is proving the propensity of Quebeckers to support their own, said Charles de Brabant, executive director of McGill University’s Bensadoun School of Retail Management. He compared the effort to the online marketplace created by China’s Alibaba Group, which has proven to be a major employment generator in that country since its launch in 1999.

For weeks, Quebec has led the country in the number of confirmed COVID-19 cases, with 533 people hospitalized and 121 deaths as of Monday. It has also put in place among the continent’s strictest social-distancing measures, extending a shutdown of non-essential businesses to May 4.

About 80 Quebec companies have expressed an ability and willingness to manufacture protective equipment and at least one will be tapped to make masks permanently, said Quebec Economy Minister Pierre Fitzgibbon. The government is also working with pharmaceutical companies in the provinces to make sure Quebeckers’ medication needs can also be met by local producers, he said.

Quebec currently has a $20-billion annual trade deficit, meaning it imports more goods than it exports. The Premier says the gap will probably grow, accelerated by current events, meaning the province has to realign its economy internally.

Quebec’s chief exports by dollar value are aircraft and aircraft engines, aluminum and iron ores. Among its biggest imports are crude oil, light trucks and sport utility vehicles. The United States is by far its biggest trading partner.

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“You can imagine that some of our exports will face a bit more protectionism in coming years,” Mr. Legault said. “We’re going to need to figure out how we can help our local entrepreneurs make products that we are currently importing in order to keep our trade balance as even as we can.”

Quebec estimates it has spent $18-billion to fight the pandemic, which includes financial aide for business and the cost of buying medical equipment. The number represents between 4 and 5 per cent of its gross domestic product.

Sign up for the Coronavirus Update newsletter to read the day’s essential coronavirus news, features and explainers written by Globe reporters.

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New technology is transforming Vietnam's economy – CNN



Since then, its economy has been transformed — largely thanks to a package of economic and political reforms, designed to engineer growth, that was launched by the government in 1986.
More than 45 million people were lifted out of poverty between 2002 and 2018 as the country developed industries that span textiles, agriculture, furniture, plastics, paper, tourism and telecommunications.
Vietnam is now undergoing another transformation — thanks to technology.
Smartphones are changing the way of life in Vietnam.
New infrastructure has given Vietnamese citizens easy access to the internet — and propelled their country across the digital divide.
A 2018 report by Google and Singaporean investment company Temasek described Vietnam’s digital economy — which is growing at more than 40% a year — as “a dragon being unleashed.”
It’s not all plain sailing. Vietnam’s government has been widely criticized for its surveillance of citizens and restrictions on freedom of speech. And like the rest of the world, it’s impossible to predict how the coronavirus will impact the country’s economy.
What’s clear, though, is that technology is reshaping the way people in Vietnam do business, manufacture goods, entertain themselves, shop, organize their finances and communicate. CNN spoke to three business leaders — to take the pulse of a changing nation.

The startup pioneer

Nguyen Thuy Lien, head of corporate development for Appota
Nguyen Thuy Lien.Nguyen Thuy Lien.
One of the country’s most dynamic startups, Appota has hitched its wagon to the growth of Vietnam’s smartphone market.
Appota, which launched in 2011, has around 40 million users on its “digital ecosystem,” says head of corporate development, Nguyen Thuy Lien. The company publishes games licensed from developers in China (martial arts themes are especially popular) and has developed an e-wallet for gaming purchases. Its apps include a wifi password-sharing facility, a book reader, news, movies, comics and other forms of entertainment.
“Vietnamese of all ages love their smartphones” says Nguyen. “Everything Appota does is through mobile.”
A 2019 report by Google and the Mobile Marketing Association identified Vietnam as a “mobile-first market” with “over 51 million smartphones, representing over 80% of the population aged 15-years and older.”
Network coverage is extensive. “People get access to 3G and 4G even in rural and mountainous areas,” says Nguyen, adding that handsets and tariffs are competitively-priced.
Vietnamese beauty brand Skinlosophy fuses tradition with technologyVietnamese beauty brand Skinlosophy fuses tradition with technology
The company also operates a business-to-business advertising arm and is looking to expand its mobile payments operations.
Nguyen is responsible for securing funding for Appota — which has raised $17 million to date. She says that attracting investment is easier now than it was in the past, with the majority of funds coming in from overseas, especially Japan and South Korea. Vietnamese investors, however, tend to lack confidence in tech, she says. “They are more conservative and prefer putting money into real estate.”
Appota’s next foray will be into physical products — which function via smartphones. The company recently launched a “smart lock,” operated by an app, that secures everything from front doors to suitcases. Nguyen says her company’s vision is to fully integrate smartphones into the workplace and the home. “It’s the next step in digital transformation.”

The sustainability trailblazer

Hans Barkell-Schmitz, assistant to the chairman, Royal Spirit Group
Hans Barkell-Schmitz at the DBW factory. Hans Barkell-Schmitz at the DBW factory.
A manufacturing powerhouse, Vietnam is the world’s third largest exporter of textiles and garments (after China and Bangladesh).
But the global textile industry is highly polluting, churning through more than 90 billion cubic meters of water a year, and contributing around 10 percent of global carbon emissions.
Hong Kong-based garment manufacturer Royal Spirit Group opened the Deutsche BekleidungsWerke factory (its name reflects the company’s German heritage) on the outskirts of Ho Chi Minh City, in 2016. “We decided to position ourselves at the forefront of sustainability,” says Hans Barkell-Schmitz, who conceived and led the project.
DBW from the air. The roof is fitted out with solar panels and a garden, and is painted with light-reflecting paint. DBW from the air. The roof is fitted out with solar panels and a garden, and is painted with light-reflecting paint.
Known as DBW, the $20-million facility is designed to sustain both the environment and the 1,000-strong workforce. The chairs were designed locally to fit the average Vietnamese body size, says Barkell-Schmitz. Throughout the factory, LED lights glow at the optimal level to reduce eye strain and headaches, and complex calculations were used to set the ventilation and air conditioning systems at the right temperatures. “Our ethos is — if we have a happy workforce, we’ll have more efficiency and it’s a win-win” says Barkell-Schmitz.
Cutting energy consumption was key. The factory runs on renewable energy sources, including hydroelectric power, biofuel and solar, says Barkell-Schmitz. His team chose equipment with “great care,” he says, comparing the energy use of different options. They selected German sewing machines that automatically switch off when not stitching, and machines that make and apply pockets with minimal waste and electricity consumption.
DBW's ironing and sewing machines use much less electricity than conventional machines. DBW's ironing and sewing machines use much less electricity than conventional machines.
The factory is equipped with “highly technical dyeing machines that use less dye and water,” says Barkell-Schmitz. The building itself acts as a giant funnel, channeling rainwater into tanks — which is then filtered and used to wash textiles. The factory also incorporates a “gray water system” in which handwashing and dishwashing water is filtered and re-used to nourish a rooftop garden that produces fruit and vegetables for the factory cafeteria.
According to Barkell-Schmitz, the single biggest challenge was the paperwork. By planning and documenting all aspects of the project according to stringent requirements, DBW earned top level awards from both LEED, the US green building certification system, and Lotus, its counterpart in Vietnam.
Barkell-Schmitz hopes that DBW will inspire other manufacturers. “It’s a win for the planet, for the companies which invest, and for the consumers.”

The e-commerce entrepreneur

Tran Ngoc Thai Son, founder and CEO, Tiki
Tran Ngoc Thai Son.Tran Ngoc Thai Son.
In 2010 Tran Ngoc Thai Son launched his company, Tiki, in his bedroom at his parents’ house in Ho Chi Minh City. An online bookseller specializing in English-language titles, he used the family garage as a warehouse. “It was a tiny store, but my dream was very big,” says Tran.
Ten years later, Tiki is the one of the top e-commerce platforms in Vietnam, says Tran. It sells a vast array of consumer goods with an average of 17 million customer visits, and around 4.5 million items shipped, per month.
Tiki’s expansion has tracked explosive growth in Vietnam’s e-commerce market, which was worth $6.2 billion in 2019.
Why the world is waking up to Vietnamese coffee Why the world is waking up to Vietnamese coffee
This boom reflects, in part, the youthfulness and increasing affluence of Vietnam’s population, says Tran. The Vietnamese embrace new technology and feel optimistic about the future, “which drives them to go online and buy stuff,” he says.
Additionally, smartphones and internet access are extremely affordable, says Tran, while fierce competition between international conglomerates and local startups “drives innovation and consumer benefits.”
Tiki’s top-sellers are consumer electronics, although sales in lifestyle products and fashion have grown tremendously over the last year, he says.
Tiki's top sellers are consumer electronics. Tiki's top sellers are consumer electronics.
Efficient logistics are key to the company’s success. Tiki has 33 warehouses in 13 cities and prides itself on a two-hour delivery option, says Tran. However, although Vietnam is urbanizing, almost two-thirds of its population still live in rural areas. Delivery to remote areas typically takes longer and costs more.
Tran says that over half of purchases are still paid for with cash on delivery. He is keen to see digital payments become more widely adopted. “Sellers get paid earlier, and it speeds up the whole process,” he says. With use of e-wallets expanding at 28 percent a year in Vietnam, the number of digital transactions will only grow.

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