STUDY: Improving Business Investment Climate in Canada Should be a Priority for New Government in Ottawa - Fraser Institute - Canadian Energy News, Top Headlines, Commentaries, Features & Events

Foreign Direct Investment Inflows to Canada: 1990-2024

Foreign direct investment (FDI) is a specific form of cross-border capital flow in which an investor in one country has ownership or management control of an enterprise located in another country.
Inward FDI has significant economic benefits for the host economy. In Canada’s case, the federal government actively encourages foreign-owned companies to invest in Canada.
However, earlier studies have shown that Canada has become less attractive for inward FDI relative to the United States after 2010, and particularly from 2015 to 2017, which also corresponds to periods of weakness in domestic investment.
This study finds that Canada became modestly more attractive to foreign direct investors after 2020 compared to the US and Australia. The improvement might be due in large part to substantial federal and provincial government subsidies to foreign companies involved in the electronic vehicle (EV) value chain and in the creation, production, and distribution of clean energy.
Government financial subsidies to specific foreign investors are arguably not sustainable or efficient initiatives to improve Canada’s business investment environment in the long run. Tax and regulatory reforms should be the main focus of policies to promote business investment by both foreign and domestically owned businesses.