Vancouver Illusions: Locked Out of The Gate

Hong Kong, China; As he steps up to the podium to address the eager lunchtime crowd, Gordon Campbell is clearly among friends. The B.C. premier cuts a striking yet businesslike figure in a dark suit and ice-blue tie. Studded with inside jokes and dropped names, Campbell’s speech is vintage B.C. boosterism.

Hong Kong, China; As he steps up to the podium to address the eager lunchtime crowd, Gordon Campbell is clearly among friends. The B.C. premier cuts a striking yet businesslike figure in a dark suit and ice-blue tie.

Studded with inside jokes and dropped names, Campbell’s speech is vintage B.C. boosterism.

The formula: reel off a few bullish economic stats, talk up recent climate-change goals, add a dash of Olympic excitement and champion the Pacific province as Asia’s gateway to North America. “Today our total investment, public and private, in the gateway concept in B.C. is $13 billion, and we will be investing billions more,” he tells the capacity crowd.

Campbell is preaching to the converted at today’s event, which could easily be a Vancouver Board of Trade luncheon. The uniformed servers in the downtown hotel ballroom are pouring B.C. wines, and the premier finishes to roaring applause.

But this shindig was organized by the Canadian Chamber of Commerce’s Hong Kong branch, and the setting is the Grand Hyatt Hotel in the Asian city’s Central District. If only the room were packed with Chinese businesspeople rather than networking B.C. expats, Campbell’s words might carry more weight.

According to a recent poll conducted for BCBusiness, our province’s gateway scenario is wishful thinking. Vancouver has barely made it onto the radar in China, at least compared to several U.S. cities. Last October Vancouver-based IE Market Research (IEMR) conducted an online survey of 400 executives in three major Chinese cities – Beijing, Shanghai and Guangzhou – on how Vancouver measures up as a North American gateway city. One key finding: there’s a big difference between offering a gateway and building a gateway economy.

The survey outlined six key attributes the Chinese executives might look for in a gateway city: distance to market, HQs of potential suppliers or customers, physical infrastructure, human capital, a favourable business environment and a cosmopolitan culture.

The 400 respondents rated these qualities by importance and compared Vancouver with Los Angeles, New York, San Francisco and Seattle. The result is a Gateway Index that captures the performance of each city.

The survey found that Vancouver lags well behind its American competitors. (See “Gateway Wannabe,” right.) With an overall score of 76, it ranked fifth out of the five cities, 14 per cent below fourth-place Seattle. The Chinese execs said physical infrastructure – ports, roads, rail links and air links with the rest of North America – was the most important quality in a gateway city. Vancouver scored lowest in this area too.

Vancouver also finished significantly below the other cities in the Presence of Headquarters index. Clearly, Chinese executives don’t have any illusions that Vancouver is the place to look for HQs of would-be clients.

One surprise was the Cosmopolitan Culture Index, which reflects how many people of Chinese ancestry a city has and how much Chinese culture is appreciated there. With its large ethnic Chinese population, San Francisco scored the highest at 121, while Vancouver finished fourth with 74 points. Of the five cities, Vancouver has the highest proportion of Chinese, but this low score is probably due to its smaller overall population.

What does this all mean? Should we scrap our gateway dreams altogether?

David Armitage of North Vancouver, who runs an IT company in Hong Kong, argues that B.C. has a long way to go. “There’s a difference between a real gateway versus a wannabe gateway,” he says. Yuen Pau Woo is co-CEO of the Asia Pacific Foundation of Canada, a Vancouver-based think-tank. He says Campbell has gone “further and deeper” with his trade plan than any other B.C. leader. But there is more to be done.

“Twelve months ago in Asia, all of this rhetoric about a B.C. Asia-Pacific initiative would have been met with arms folded, eyes narrowed and a quizzical, show-me attitude,” Woo says. “Today our Asian friends are still listening with genuine interest, but they’re looking for proof that B.C. is committed to being a serious player in Asia Pacific.”

Woo adds that B.C.’s challenge is to follow Hong Kong’s lead and build a gateway economy, focusing on the secondary industries that rise around viable ports and airports, such as business and professional services, law firms and accounting and management consultants.

“Hong Kong sees itself as a hub of economic activity and services facilitated by excellent transportation infrastructure,” he says. “It doesn’t just think of itself as a big port, whereas the conversation here is all about how many TEUs we can now put through Prince Rupert.”

Nizar Assanie, IEMR’s VP of research, says most wholesalers and warehousing companies have established operations in San Francisco and L.A. because those centres are closer to major markets.

Still, there are signs Campbell’s efforts may be paying off, if increased air service is an indicator of Vancouver’s reputation as a transportation hub.

During his trip to China and India in December, the premier announced New Delhi-based Kingfisher Airlines would soon offer a non-stop Delhi-Vancouver flight. He also said an agreement had been signed between Vancouver International Airport and China Southern Airlines to offer the first direct flights between Vancouver and Guangzhou by July 2009, and that Cathay Pacific Airways would add four new flights a week between Vancouver and Hong Kong. If these four carriers get the nod, upstart Oasis Hong Kong Airlines Ltd. won’t be cheering. Oasis lifted off in 2006 with one route from Hong Kong to London. In June 2007 it added a second route from Hong Kong to Vancouver and filled 92 per cent of the summer seats.

“Vancouver was a natural for us – there’s a sort of umbilical cord between Vancouver and Hong Kong,” says Oasis founder and CEO Steve Miller. Besides catering to passengers with family ties, the airline targets a class of business traveller Miller says has so far been ignored – entrepreneurs with a tight budget who need to get to Hong Kong and start working the day they arrive. Miller, who also founded Hong Kong Dragon Airlines Ltd. (Dragonair) and has been in Hong Kong since he arrived with the British Army 44 years ago, got the idea for Oasis while he was consulting for European airlines on their Asian routes. One of his jobs was to monitor air traffic between Hong Kong and Europe and Hong Kong and North America.

“Third-party carriers started coming into Hong Kong, taking passengers from their destination to their hubs and then on to Hong Kong,” he explains. “These third-party carriers were taking our passengers, giving them third-rate service and building up their hubs at the expense of Hong Kong.”

Miller met Raymond Lee, a real estate investor and pastor, who invested immediately and brought in two other partners, Allen Wong, chair and CEO of VTech Holdings Ltd; and Gordon Chow, president of Vtech Telecommunications Canda Ltd. Vancouver is the airline’s North American headquarters.

Oasis, which has four planes and plans to add another one this year, might raise money for further expansion through an IPO in 2009 or 2010. By that time, maybe Campbell’s gateway plan will have found its wings too.

Methodology:Survey participants were executives of companies that curren­tly trade with or have investment partnerships with North American firms, or that plan to do so in the next two years. The maximum margin of error for the overall sample is plus or minus 4.9 per cent 19 times out of 20. The response rate for the survey was 35.3 per cent. Respondents were predominantly aged 30 to 59, representing companies from a broad range of sectors with over $1 billion in revenues.

Return to Asian Persuasion by Tracy Tjaden.

Shown the Gate (slideshow)