CRD Research Paper Canadian Benefits Scorecard 2016 EDC EDC Economics Abstract: EDC s Canadian Benefits Policy sets out the criteria that must be met by transactions contemplated by the organization. A product of that policy is a set of aggregate measures of EDC's mandate performance, collectively called the Canadian Benefits Scorecard.
Contents Canadian Benefits Scorecard 2016 Highlights... 3 1.0 EDC s Role in Facilitating Trade and Foreign Direct Investment... 4 2.0 Boosting Canadian Diversification into Emerging Markets... 5 3.0 Contributing to the Canadian Economy... 6 4.0 EDC s Investments Program... 6 2
Canadian Benefits Scorecard 2016 Highlights The exports, CDIA, and domestic business facilitated by EDC in 2016 supported 65.4 billion in Canadian GDP and 521,867 jobs. This represents 3.9% of total Canadian GDP and 2.9% of national employment. The volume of international and domestic transactions carried out by EDC on behalf of Canadian companies reached $102 billion in 2016. While this represents a 2.1% decline from 2015 figures, Canadian exports benefited from continued growth in emerging markets and continued assistance to small businesses. EDC-backed CDIA was virtually unchanged at $12.4 billion despite a greater than 18% decline economy-wide. EDC facilitated $30.6 billion in emerging markets transactions in 2016, an increase of 4.8% over the previous year. This represented an estimated 32% of all Canadian exports and direct investment to emerging markets in 2016, in contrast in 36% in 2015 when CDIA in emerging markets was lower. In the early 1990s, EDC facilitated 7%-8% of Canada s exports and direct investment outflows. In 2016, this figure was 14%, virtually unchanged from 2015. EDC s partnership transactions increased by 7.1% to 3,961 from 3,697 in 2015. These transactions represent risk-sharing arrangements with other financial institutions to better serve Canadian companies. EDC recorded 3,188 small business transactions in 2016, an increase of 8.8% over the previous year. The total number of customers declined by 2.6% in 2016, partly explaining the lower EDC volume. Table 1: Canadian Benefits Scorecard Summary 2015 2016 % Change 2016/2015 (1) 1. Total EDC Volume (billions C$) 104.2 102.0-2.1 -- Volume in Emerging Markets (bn C$) 29.2 30.6 4.8 -- CDIA supported by EDC (bn C$) 12.4 12.4 0 2. Canadian GDP facilitated by Total EDC Volume (bn C$) 66.8 65.4-2.1 -- Share of Total Canadian GDP (%) 4.06 3.90-3.9 3. Number of jobs facilitated by Total EDC Volume 530,839 521,867-1.7 -- Share of Total Canadian Employment (%) 2.96 2.88-2.7 4. Number of Customers 7,343 7,150-2.6 5. Number of Partnership Transactions 3,697 3,961 7.1 6. Small Business Transactions 2,930 3,188 8.8 7. Canadian Trade and Investment Data -- Total Canadian Exports of Goods and Services (bn C$) (2) 627.2 628.5 0.2 -- Total Canadian Exports to Emerging Markets (bn C$) (3) 74.2 76.1 2.6 -- Canadian Direct Investment Abroad (CDIA) all countries (bn C$) (4) 104.3 85.1-18.4 -- CDIA to Emerging Markets (bn C$) (5) 6.1 18.7 206.6 Source: EDC. 1. Percentages for 2016 have been adjusted to reflect more recent StatsCan Trade and Investment data. 2. Total exports are the sum of merchandise exports (customs basis) and service exports (balance of payments). 3. Includes goods and services. 2016 figures adjusted based on StatsCan data as opposed to Innovation Canada data (Trade Data Online) used in the past. 4. CDIA is derived from StatsCan Financial Account (balance of payments). 5. CRD estimates based on Statistics Canada balance of payments data. 2016 figure updated from initial estimate and includes spike in Q4. 3
1.0 EDC s Role in Facilitating Trade and Foreign Direct Investment Canadian exports of goods and services were relatively flat in 2016, at $628.5 billion compared to $627.2 billion in 2015. EDC transactions carried out on behalf of Canadian companies decreased by approximately $2.2 billion in 2016 to $102 billion, or a 2.1% decline from 2015. Though there was a slight increase in exports of goods and services from Canada (by $1.3 billion, or a 0.2% rise), the economy experienced a considerable $19.2 billion decline in CDIA, equivalent to a decline of more than 18% from 2015. Against these trends, EDC increased its support for exports to emerging markets by 2.6%, and kept its support for CDIA constant. CDIA (including the role of foreign affiliates) continues to be a driver for EDC business volumes. These firms continue to improve their integrative trade competitiveness, as reflected in growing overall trade volumes in emerging markets. Emerging markets are still a relatively small share of total exports (12% of total). However, investment in these markets picked up in 2016, and accounted for nearly 22% of total. EDC entered into 3,961 partnership transactions in 2016. This represents an increase of 7.1% from 2015. These transactions represent financial services delivered to Canadian companies in conjunction with other financial institutions. Such risk-sharing allows EDC to leverage its capital and financing beyond what could be provided if EDC was the sole provider of loan funding or insurance. As such, the overall contribution to Canada s economy of the business facilitated by EDC is greater than estimated in this report. EDC s total number of customers decreased by 2.6% in 2016 to 7,150, continuing the decline from the previous year. EDC continues to support Canadian trade and investment, including SMEs that may find it more difficult or costly to obtain bank financing or commercial credit insurance. Although EDC s total number of customers decreased in 2016, EDC continues to support an increasing number of small businesses. In 2016, the number of small business transactions supported by EDC increased by 8.8% to 3,188.This figure is crucial given that SMEs comprise the bulk of EDC clients. This is also important in terms of EDC s mandate, as EDC is strongly and explicitly committed to supporting SMEs as one of its key policy objectives. 20.0% Chart 1: Share of Total Canadian Exports and CDIA Facilitated by EDC 15.0% 10.0% 5.0% 0.0% 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 Source: EDC. 4
2.0 Boosting Canadian Diversification into Emerging Markets Over the past decade, Canadian exports and direct investment into emerging markets have shown growth. In 2016, combined exports and CDIA to emerging markets reached an estimated $94.8 billion, 1 up from $80.3 billion in 2015. Exports to emerging markets increased by 2.6% to $76.1 billion in 2016, while CDIA to emerging markets increased by $12.6 billion. This marks a rebound from last year, when CDIA to emerging markets declined by more than $10 billion. However, total economy-wide CDIA decreased more than 18% in 2016, entirely associated with CDIA to developed markets. Canadian firms are competing more strongly in emerging markets when compared to a decade ago, as reflected in the relative share of trade and investment in emerging markets as a share of total. In the early 2000s, combined flows of Canadian exports and CDIA to emerging markets represented only about 6% of flows to all countries. In 2016, these combined flows of Canadian exports and CDIA to emerging markets approximated 13% of Canada s total export and investment flows (up from 11% in 2015). Thus, the new normal indicates a doubling in overall share of emerging markets in Canadian trade and investment. The twofold growth in the share of emerging markets in Canadian exports is also evident in the share of EDC s total volume stemming from emerging markets. In 2016, the volume of EDC s business in emerging markets increased by 4.8% to $30.6 billion. Given EDC s total business volume of $102 billion in 2016, this meant that business in emerging markets comprised an even 30% of EDC s total business for the year, up from 28% in 2015. Noteworthy is the facilitating role EDC plays in helping Canadian exporters and investors diversify into these economies. In 2016, EDC facilitated 32% of all Canadian exports and CDIA to emerging markets, with particular strength in CDIA. 50.0% 45.0% 40.0% 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% Chart 2: Share of Total Canadian Exports and CDIA in Emerging Markets Facilitated by EDC 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Source: EDC. 1 Emerging markets for EDC-facilitated business are defined as states that are not members of the OECD. 5
3.0 Contributing to the Canadian Economy The exports, CDIA, and domestic business facilitated by EDC in 2016 are estimated to have sustained $65.4 billion in Canadian GDP, a decline of 2.1% from the previous year. 2 The contribution to the Canadian economy in 2016 represented 3.9% of Canada s total GDP, a slight decline from 4.1% in 2015. This means that for every $1 in income earned in Canada during 2016, nearly 4 cents were attributable to EDC s trade and investment facilitation. The employment associated with the business EDC facilitated in 2016 is estimated at 521,867 full-time equivalent jobs, about 2.9% of national employment. 4.0 EDC s Investments Program EDC s investment program is showing rising contribution to GDP and head count. The companies in EDC s direct and indirect investment portfolio generated export sales of more than $5.1 billion in 2015 2016 and more than 96,000 jobs. 3 Therefore, EDC investment supported $3.7 billion in Canadian GDP 4 and 29,580 jobs in the past year. 5 In 2014-2015, companies in EDC s investment portfolio reported export sales of about $4.6 billion, which supported an estimated $3.3 billion in GDP and an estimated 26,680 jobs. Therefore, the Investments Program showed growth in both key metrics. 2 The GDP impact will be less than total EDC business volumes. This is because the exports facilitated by EDC have a significant imported input content, which is netted out from the GDP calculation. 3 Reporting requirements have changed to Trailing Twelve Month Q2, so this $5.1 billion spans 3-4Q 2015 and 1-2Q 2016. As last year s figures (2014-2015) cover 2014 Q4 and 2015 Q1-3, there is a one quarter overlap. However, the change in reporting does not usefully allow us to extract specific periods of data reliably. Final 2016 figures will be available in Q3 2017. 4 GDP impact calculated by applying Canadian content (GDP I-O ratio) of 0.72 to get GDP = $3.672 billion 5 Jobs Impact estimated as: ($5.1 billion in export sales) / ($1 million) x 5.8 = 29,580 jobs 6