Why Canada saw a 60% increase in foreign direct investment last year

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Why Canada saw a 60% increase in foreign direct investment last year

May 23, 2019 | 06:57 1 Opinion
Why Canada saw a 60% increase in foreign direct investment last year
IAN McKAY
Contributed to The Globe and Mail
Published 14 hours ago
Updated May 22, 2019
46 Comments

Chief executive officer at Invest in Canada

Defying global patterns, Canada’s attraction of foreign direct investment in 2018 increased by an impressive 60 per cent.

Yes, a year-over-year increase of 60 per cent for global investment into Canada that eclipsed the 10-year average by 11 per cent. Remarkably, this happened in a year when global capital flows into developed economies dropped by 40 per cent, and capital outflows from China into Canada dropped by more than 20 per cent.

Let’s take a look at why this is happening – in both the context of significant geopolitical shifts and how Canada is being perceived by global investors.

In 2017, foreign direct investment (FDI) into Canada totalled $32.2-billion. But in 2018, it was $51.3-billion. Where did this extra $19-billion come from?

Historically, the United States has been the dominant force behind investment into Canada. But last year, non-U.S. FDI in Canada increased by more than 300 per cent, reducing our dependence on U.S. capital investment, which at 42 per cent of the total is well below its 10-year average of 53 per cent. And while investments into the energy and mining sector showed an uptick from 2017 levels, energy was far from being the dominant investment driver it has been many other years in which Canadian FDI rose above historical averages.

The quick takeaway here is that not only are we now less reliant on the United States and the energy and mining sectors to fuel growth, but we’re also doing a better job attracting investment from global companies in a greater variety of sectors.

For example, investments in manufacturing increased by 450 per cent since 2016 and Canada’s technology sector has captured unprecedented global attention. This growth builds on long-running successes such as the Scientific Research and Experimental Development (SR&ED) program, as well as aggressive new tax measures. For new investment projects, Canada’s marginal effective tax rate is now at 13.8 per cent, almost five full points below the U.S. and lowest in the Group of Seven. More than just being competitive, we lead the way with the tax measure that is the single most determinant factor in attracting the next investment dollar.

Yet what’s even more important to global capital flows is talent – the new currency attracting more and more investors. Again, Canada is leading the way. Our universities, colleges and vocational institutions continue to produce top-tier talent that fuels this country’s growth.

Plus, the decades-long brain drain from Canada has shifted to a brain gain. In the past five years, Toronto and Vancouver have recruited more technology workers than San Francisco and Seattle combined.

What’s more, in 2018 a record high 572,415 international students came to Canada. These students can now fast-track to permanent residency and continue building Canada’s status as the world’s most educated work force.

And, yes, investors are taking notice. Our success in talent attraction and retention stands in stark contrast to what’s happening elsewhere in the world. Advantage: Canada.

Canada is showcasing its global leadership in other sectors that will not only shape the 21st century but also attract more FDI along the way. These sectors – framed by the federal government’s Supercluster Initiative – include digital technology, protein industries, advanced manufacturing, AI and ocean sciences. Hundreds of Canadian and multinational companies are collaborating in clusters across the country to create innovative products, services and solutions for the global economy.

As we move forward into a future that reflects a more sustainable world economy, the $40-billion LNG Canada project – the largest-ever private sector investment in Canada – is under way: five countries in a partnership to source and send Canadian liquefied natural gas to Asian economies, accelerating their shift away from coal-fired plants.

So does this 60-per-cent increase mean Canada is out of the woods in terms of long-term, sustainable FDI flows? Far from it.

To encourage global investment, we need to recognize and articulate Canada’s significant competitive advantages – including talent, corporate tax measures and an abundance of natural resources – while we address policies that impede capital flow.

That’s what it will take to attract foreign capital. In 2018, we had a formidable start. Let’s ensure the trend continues. Reply With Quote
May 23, 2019 | 07:06 2 Well we are catching up on the $500B that Trudeau cut out of the economy. Should be back on the even about the same time as the budget is balanced. Reply With Quote
ajl
May 23, 2019 | 07:14 3 What are they really investing in-money laundering schemes and cannabis? Governments here have increased the amounts they will throw at stuff and that attracts foreign investment. What is the technology sector in canuckistan working on other than video games and green energy scams. Video games for kids are basically crack coccaine. Once addicted they can do nothing else. Non US foreign investment, we don't want it. Me thinks this is a propaganda piece written for the lieberal party of canuckistan. Reply With Quote
May 23, 2019 | 07:20 4 This is a joke article. Canada is nowhere near competetive in the world. Only our resources keep us going.

Any innovation comes out of the US and any manufacturing is conquered by china. Reply With Quote
May 23, 2019 | 07:28 5 http://www.oecd.org/economy/canada-economic-snapshot/

Economic Survey of Canada

Well-being is high in Canada, and the economy has regained momentum, supported by a rebound in exports and strengthening business investment. Macroeconomic policies are gradually becoming less stimulatory, and budget policies are sustainable in the long term, although difficulties remain at the provincial level. House price appreciation has slowed and even reversed in some locations, partly in response to macro-prudential and tax measures, reducing wealth gains and the associated boost to private consumption, but prices and household debt remain high and affordability poor. The major risks to the economic outlook are greater trade restrictions, notably in the United States, and a housing market correction. Progress is being made in improving workforce inclusion, but challenges remain, notably in the areas of increasing female labour force participation, improving labour market information to reduce qualifications mismatches and supporting later retirement through more lifelong learning and flexibility in working hours. Canada has a well-run immigration system. Immigrants are generally well integrated, although their earnings are considerably lower than those of the comparable native-born. Selection of economic immigrants has been refined and integration programmes developed to close this gap, but these measures need to be taken further. Meeting Canada’s climate-change commitments will also be challenging. Reply With Quote
May 23, 2019 | 07:34 6 Most of the comments are politically motivated rhetoric. The facts tell a different story.

Parts of the energy sector and agriculture sector are struggling but the overall economy continues to grow and unemployment is low.

Its a big diverse country with a diverse economy.

But the naysayers on this site will always find a reason to complain. Reply With Quote
May 23, 2019 | 07:35 7 chucky is just trying keep his income level up, everyone knows the Liberal Party of Canada pays people to post crap like that, as well as post in the comments at CBC, Global and CTV, at Twitter and Facefuck.
He gets a fews cents here, a couple bucks there, but over the month it'll add up, especially now that chucky has figured out that you get paid more if the article is longer, hence all the long cut 'n pastesties!
get a life dude, you can't even believe all the crap you post here, cos who in their right mind would waste so much of their own time to read it. Reply With Quote
blackpowder's Avatar May 23, 2019 | 13:18 8 Well alright then. Patiently awaiting my first transfer payment check from Vancouver and Toronto. Reply With Quote
May 23, 2019 | 13:28 9 Again any economic indicator like a huge jobs report or tons of cash investing here would be matched by an increase in gdp and increase in the TSX. Neither have happened there fore doesnt exist. Reply With Quote
May 23, 2019 | 14:50 10 Don’t know why you guys respond to this guy. He is a wheat board man and just picks out what he wants to hear. He only believes scientists and liberals are telling the truth. Reply With Quote