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Direct Investment

In the midst of a global economic crisis that left many nations in debt and doubt, attracting foreign capital inflow to Canada will strengthen infrastructure and maintain global competitiveness.

By: Himani Ediriweera

In 2011 a concrete slab fell on a major downtown expressway, and although no one was injured, five people were killed in 2006 when a highway overpass collapsed in Laval.

Investing in infrastructure and global competitiveness can be an intangible concept for most Canadians; it often takes a physical manifestation of the consequences of weak investment to realize its urgency and need.

“Bridges get your attention when they [fall],” says Anne Golden, CEO of The Conference Board of Canada. “And the water scandal in Walkerton – that was an infrastructure failure.”

Driving funds into Canada’s infrastructure with international flow could further our positioning as a fierce competitor in the global trading market. As a trade portal to the U.S, Mexico and the rest of Canada with the North American Free Trade Agreement (NAFTA), foreign companies have access to a deeply integrated market and 453 million consumers with a combined GDP of $17.1 trillion (USD).

According to the Organisation for Economic Co-operation and Development (OECD), despite the recent economic downturn, Canada continues to be a  leader among OECD countries for international investment, attracting $217 billion (US) in foreign direct investment (FDI) between 2007 and 2010.

“This isn’t happening gradually,” says Dr. Sherry Cooper, Chief Economist at BMO Financial Group. “This is a major force.”

“Anything that adds people, especially affluent people, to the economy is beneficial and provides opportunity in terms of customer or sales,” Cooper continues. “All businesses feed off one another so it is a meaningful factor. It adds directly to economic activity, increases jobs, improves productivity, increases competition, imports ideas into the nation, [and provides] technology.”

“We are not a high-risk environment compared to rest of the world,” says Cooper, when asked what makes Canada an attractive destination for FDI. “The [United States] has political tension and a huge budget deficit that they are going to have to deal with. Europe is in the midst of a debt crisis. The developing world is slowing, so all of these things certainly make [other countries] less attractive vis-à-vis Canada.”

“Just think about all the American retailers that have come [here] — Walmart is expanding its Canadian footprint by 40 per cent,” Cooper adds.

Carol Wilding, President & CEO of the Toronto Board of Trade, points out that Canada’s many successful industry sectors are well positioned for growth.

“The Toronto region’s financial services, food-and-beverage and biopharma- biomedical sectors are North American leaders,” she says. “Calgary, obviously, is a global energy sector leader, and Vancouver, with one of North America’s most important ports, is a leading hub for transportation and logistics.”

Public and private partnerships is the obvious way to go,” says Golden. “The Vancouver Olympics, the $1.9 billion Canada Line in Vancouver and the$600 million dollar upgrade of the Sea-to-Sky in Whistler are examples of partnerships developed through foreign partnerships.”

Other examples of FDI include the recent takeover of Canada’s Viterra Inc., which attracted Switzerland’s Glencore International, the world’s biggest commodities trader, at $6.1-billion.

Asked why Canada is in a great position to attract FDI, Wilding says there are many reasons. “[We have] a strong natural resource sector, [our] regional centres are anchored by strong industry sectors, and importantly these centres have diverse population bases.”

These regional centres, Wilding adds, “are supported by a quality of life that, according to the Board’s annual benchmarking report, rank highly compared to other global centres.”

Attracting foreign investors to Canada leads to higher productivity and enhanced global competitiveness. It can also translate into increased exports and employment. All this contributes to a growing Canadian economy.

“New capital investment supports the growth of start-up companies, and helps existing companies to flourish [creating] jobs and opportunities for Canadians,” says Wilding. “Investment also supports research and development, providing Canadian firms with new opportunities to innovate.”

Golden agrees. “As a country, for the longest time we were skittish in terms of foreign investment. In the past decade, however, we have seen that foreign investment brings many benefits to Canada.”

These benefits are being seen across the board, especially in terms of trade. “As a working professional in the financial industry, and having had the opportunity to travel often, I believe that foreign investment in Canada is a step in the right direction,” says Constance Lo, an international trader at W.D Latimer Co. Ltd. in Toronto. “If we want Canada to continue being a prosperous country we need to develop our domestic industries and remain self-sufficient.”

“The idea that we should be favouring or wanting only domestic companies,” says Golden, “that’s now changing.”

“It is an interesting paradox,” Lo adds, “because while you want investment so that industries such as the mining and energy sector flourish, you don’t want them being controlled by foreign interests.”

Fostered by what she calls a “business-friendly government,” Cooper is impressed with the growing foreign entrepreneurial spirit.

“It’s been accelerating and we know that Canada is a safe haven. We have a very strong government sector [and] a very strong banking sector,” she says.

Encouraging more foreigners to invest in our infrastructure, resources and businesses will only increase our strength and our global competitive advantage.

“All these things are very positive,” Cooper continues. “If anything, I would urge the programs we have to allow [FDI] into the country, and eliminate the bottleneck to step up the processing.”