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Foreign direct investment (FDI) in Canada

FDI in Figures

According to UNCTAD's 2021 World Investment Report, Canada attracted USD 24 billion of FDI in 2020, a 50% decrease from 2019, where FDI inflows reached USD 48 billion. The inflows of FDI collapsed in the mining and quarrying sector (from USD 20 billion to USD -10 billion) and dropped by 70% in the manufacturing sector. US multinationals - the biggest investors in the country - halved their investments. The stock of FDI rose to USD 1,099 billion. Canada was the 13th largest FDI destination in the world in 2020, losing three positions compared to 2019. The U.S. and the EU are the main investing partners in Canada: half of the stock is held by the United States, followed by the UK, Japan and Germany. Switzerland, China, the Netherlands and Brazil are other major investing countries. Investments are mainly oriented towards management, manufacturing, mining and hydrocarbons, finance and insurance, wholesale and retail trade. According to the latest data from OECD, FDI inflows to Canada increased in the first half of 2021, reaching USD 26.1 billion, compared to 16.4 in the same period one year earlier.

In 2020, the USMCA (Canada-United States-Mexico Agreement, an updated version of NAFTA) came into force, with a potentially decisive impact on the inflows and outflows of investments in Canada, just as the Comprehensive Economic and Trade Agreement (CETA) signed with the EU and currently applied on a provisional basis, as the ratification by the individual EU Member States is still pending. At the same time, Canada enhanced scrutiny of certain foreign investments under the Investment Canada Act (ICA) in sectors related to public health or involved in the supply of critical goods and services. Nevertheless, in 2021 the thresholds above which foreign investors in Canadian businesses have to obtain federal government approval under the Investment Canada Act have been lowered (from USD 1.075 billion to USD 1.043 billion for investors from countries that are members of the WTO). Canada has a very favourable business climate: the country ranks 23rd out of 190 countries in the World Bank's latest Doing Business report, losing one position compared to the previous edition. Some of the strengths of the country are the ease of starting a business and getting credit, a well-educated workforce and good infrastructures, abundant and diversified energy and mineral resources, and a strong banking sector. However, Canada remains heavily dependent on the U.S. (holding half of FDI stock and accounting for around two-thirds of the country’s export) and on the fluctuations in international commodity prices, as well as having a high level of household debt.

Foreign Direct Investment 201920202021
FDI Inward Flow (million USD) 50,14923,17659,676
FDI Stock (million USD) 1,156,0621,235,5851,437,837
Number of Greenfield Investments* 395320373
Value of Greenfield Investments (million USD) 11,53416,53318,567

Source: UNCTAD, Latest available data

Note: * Greenfield Investments are a form of Foreign Direct Investment where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up.

Country Comparison For the Protection of Investors Canada OECD United States Germany
Index of Transaction Transparency* 8.0 6.5 7.0 5.0
Index of Manager’s Responsibility** 9.0 5.3 9.0 5.0
Index of Shareholders’ Power*** 9.0 7.3 9.0 5.0

Source: Doing Business, Latest available data

Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action.

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What to consider if you invest in Canada

Strong Points

Advantages for FDI in Canada:

  • A qualified workforce
  • A welcoming business environment
  • Large reserves of gas, oil and ore
  • A solid banking sector
  • Unparalleled market access (USMCA) and a strong anchor in international trade
  • A dynamic economy, with a market of 38 million consumers
  • Sophisticated infrastructure, as well as a very modern transportation network.
Weak Points

Disadvantages for FDI in Canada:

  • Strong exposure to the United States' economy, namely to exports to the US
  • Sensitivity to international commodity prices and to the government revenues that depend on oil
  • High household debt (186.2% of disposable income)
  • A drop in productivity in manufacturing industry
  • A decrease of the active population due to ageing.
Government Measures to Motivate or Restrict FDI
Canada offers low business taxes for companies and a very good business climate. Total business tax costs are by far the lowest among the G7 countries.
Companies investing in Canada can benefit from a range of incentives and tax credit programmes:

  • Scientific Research & Experimental Development
  • Accelerated Investment Incentive
  • Strategic Innovation Fund
  • Global Skills Strategy
  • Canada’s Pan-Canadian Artificial Intelligence Strategy
  • Innovation Superclusters Initiative

For more information, please visit Invest in Canada, which is Canada’s global investment attraction and promotion agency.
Each Canadian province and territory has agencies dedicated to the promotion of investment which list existing measures.

Bilateral investment conventions signed by Canada
Canada has signed 45 bilateral investment treaties (BITs) with several countries.
To see the conventions, click here.

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Latest Update: January 2023