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Shifting Foreign Direct Investment (FDI) to High-growth sectors: Driving a Sustainable Economic Future for Canada

By 23 October 2018 No Comments

OTTAWA, October 4, 2018 — The Information and Communications Technology Council is pleased to announce the release of its report: Shifting Foreign Direct Investment (FDI) to High-Growth Sectors in Canada: The Role of Investment Climate in FDI Diversification. Underlining the importance of FDI as a revenue-generating agent for the Canadian economy, the paper showcases key considerations on Canada’s journey of to attracting and diversifying international capital to high-growth sectors of the economy, like ICT.

For some time, FDI has been recognized as a central driver of Canada’s economic and productivity growth. Though the influx of capital, and the exchange of ideas and knowledge, it is often seen as a significant factor to enabling job creation, and to develop new relationships and expertise that support not only growth but competitiveness in the global arena. While the International Trade Diversification portfolio and the launch of Invest in Canada are positive steps aimed at attracting investment to Canada, we must zero in on attracting it to high-growth sectors. With 20% of Canada’s current FDI centred in the mining, oil & gas sector – and conversely, only 2% in the ICT sector – additional steps must be taken to promote an effective framework that incentivizes investment to sectors like ICT. This is something that is key in not only realizing our potential for greater productivity and economic growth as a nation but is a central component to helping home-grown businesses scale and seize business opportunities in the global digital economy.

“Continuing to create a favourable investment climate with a net benefit to Canada is central to attracting and stimulating economic activities to support small business growth and job creation.” – Namir Anani, President & CEO of ICTC

Currently, Canada has the highest overall FDI regulatory restrictiveness among G7 countries. This is something that can make it challenging for non-domestic investors to break into the Canadian market. However, supporting strong and sustainable growth across the Canadian economy is not only the responsibility of domestic players. To attract and diversify FDI to high growth sectors like Fintech, 5G, smart manufacturing among others, investment climate plays an important role; and focusing on the creation of effective fiscal instruments and incentives that position Canada as a competitive destination for international investment is key.

This paper investigates the many levers and considerations surrounding foreign investment to Canada, from regulation to comparisons of FDI restrictiveness with other OECD countries. At the same time, the paper also takes into account considerations including national security in order to accurately depict the multi-faceted implications of international investment. Finally, the paper concludes with a series of recommendations for boosting FDI attraction to Canadian high-growth sectors. These including options like: developing streamlined and effective tax policies that enable growth of both investors and homegrown companies; revisiting existing FDI regulations that may not necessarily meet the needs of current-day realities for Canadian innovation sectors; and even the potential development of pull factors like repatriation tax breaks that can be effective in bringing capital back to the Canadian market.

“Canada is an export nation. Part of the fuel for export relies on a healthy mix of foreign direct investment with domestic entrepreneurs and deep programmatic focus on strategic markets. In Canada’s Capital City we focus on three target markets […] and we align the efforts of local businesses with multinationals to create a regional capability to compete in the world.” – Michael Tremblay, President & CEO of Invest Ottawa

Creating a favourable investment climate is central to attracting and diversifying FDI to high growth sectors, like ICT. With ICT being one of the fastest growing sectors in Canada, steering investment towards it and others like it is crucial. Shifting Foreign Direct Investment (FDI) to High-Growth Sectors in Canada: The Role of Investment Climate in FDI is the first of a two-part series of white papers outlining potential new approaches to developing a national FDI strategy for Canada. The second paper will focus on providing national strategies on establishing investment promotion agencies (IPAs) abroad, identifying Tier I and Tier II Canadian cities to attract horizontal FDI, and the development and provision of national FDI intelligence to facilitate investors’ decision-making process.

Please click here to access the full report. For questions or media inquiries, please contact Stephanie Wilson, Senior Director, Digital Transformation & Strategic Outreach at s.wilson@ictc-ctic.ca.

About ICTC

ICTC is a national centre of expertise for the digital economy. With over 25 years of experience in research and program development related to technology, ICTC has the vision of strengthening Canada’ s digital advantage in the global economy. Through forward-looking research, evidence-based policy advice, and creative capacity building programs, ICTC fosters innovative and globally competitive Canadian industries, empowered by a talented and diverse workforce.

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