Foreign Direct Investment Opportunities in Canada

According to UNCTAD, the foreign direct investment in Canada amounted to 50 billion in 2019, a 16 percent increase compared to 2018. As a result, the Canadian FDI stock rose to US$1,037 billion, making the country the 11th destination for FDI worldwide.

Canada presents several foreign direct investment opportunities, making it the number one investment destination for global investors. The European Union and the United States are the main investing partners in Canada, with the US holding half the stocks.

In this guide, we look at the various foreign direct investment opportunities in Canada. You’ll also learn the factors to consider to invest in Canada. Finally, you’ll get to know the key things that make Canada the best country to invest in as a foreigner.

What is Foreign Direct Investment (FDI) in Canada?

Foreign direct investment occurs when a business or individual in one country invests in another to establish a lasting interest. FDI is different from foreign portfolio investments that allow investors to hold a foreign country’s securities passively.

You can make a foreign direct investment by acquiring a lasting interest or expanding your business into foreign countries. For example, if a company from the US opens a branch in Canada to expand its network, the investment becomes an FDI in Canada.

Types of Foreign Direct Investment (FDI) in Canada

There are three main types of FDI: vertical FDI, horizontal FDI, and conglomerate FDI.

• Vertical FDI: A business expands its network into a foreign country by investing in a different level of the supply chain. The business performs different activities in foreign countries, which contributes significantly to its primary activity.

• Horizontal FDI: A business expands its domestic activities to a foreign country. In other words, it conducts the same operations but in another country. For example, KFC opening restaurants in Canada would be a horizontal FDI.

• Conglomerate FDI: A business starts an unrelated business in another country. It is uncommon since it requires the investor to overcome two barriers: entering a new market or industry and venturing the business in a foreign country.

Foreign Direct Investment Opportunities in Canada

Canada has several things to offer to foreign investors, making it a popular investment destination globally. Thankfully, Canada has stakeholders promoting and facilitating FDI investments in the country at the federal, territorial, provincial, and municipal levels.

The government stakeholders make contact with potential foreign investors and give them information about Canada’s business environment. Also, they put the investors in contact with people who can help them make investment decisions in Canada.

The stakeholders directly involved in FDI attraction activities at the federal level include:

• Agriculture and Agri-Food Canada (AAFC)
• Canadian Trade Commissioner Service – Part of Global Affairs Canada 
• Innovation, Science and Economic Development Canada
• Invest in Canada
• Natural Resources Canada (NRCan)

Now, let’s shift our attention back to foreign direct investment opportunities in Canada.

As a foreign investor, you can consider investing in the following FDI opportunities.

High Potential Sectors

These are the sectors with promising performance and profitability. They include:

• Environmental protection technologies and renewable energies
• Information and communication technologies: AI, cybersecurity, big data, and IoT
• Chemical industry and tourism
• Telecommunications
• Biotechnologies
• Health

Key Sectors of Canada’s Economy

These are the sectors that dominate the Canadian economy, and they include:

• Technology
• Agribusiness
• Natural resources
• Advanced manufacturing
• Entertainment and media
• Cleantech and life sciences

Privatization Programmes

These are efforts the government makes to boost the country’s economic performance.

• Healthcare privatization in the health sector
• Privatization of Canada’s public universities
• Public-Private Partnership in the road infrastructure sector
• Privatization in the transportation sector (air, rail, truck, and shipping)

Factors to Consider to Invest in FDI Opportunities in Canada

It’s imperative to weigh the advantages and disadvantages of FDI in Canada before making an investment decision. Another factor that will affect your investment in Canada is the government measures to restrict or motivate FDI in the country.

• Pros of FDI in Canada

To make a wise investment decision, you need to consider these advantages of FDI:

• Efficient banking sector
• Welcoming business environment
• The qualified workforce in the country
• Large reserves of oil, gas, and ore
• Unparallel market access (USMCA)
• Strong anchor in the international trade
• Sophisticated infrastructure, including modern transportation
• A dynamic economy, with a market of over 37 million consumers

• Cons of FDI in Canada

While FDI in Canada is promising, it is also essential to consider these drawbacks.

• Substantial exposure to the US economy
• A decline of the active population due to aging
• A drop in productivity of the manufacturing industry
• High household debt – 170 percent of disposable income
• Sensitivity to global commodity prices and the government revenues

• Government Measures to Restrict or Motivate FDI 

Are the government measures favourable or restrictive? The good news is that Canada offers low business taxes to foreign companies and a conducive business environment. Also, foreign businesses can benefit from many incentives and tax credit programs like:

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

What Makes Canada the Best Country to Invest in as a Foreigner

Canada boasts a solid economic foundation that makes it the number one destination for foreign investors from different countries. As a result, the government has selected stakeholders who market the factors that make the country favourable for business.

Here are the reasons Canada is an attractive investment destination worldwide.

• High-quality of life 
• Strong overall reputation
• Robust, stable, and resilient economy
• Workforce with exceptional managerial skills
• Highly skilled, educated, and diverse labor force
• The conducive business environment for foreign investments
• Well-established innovation ecosystem that fosters collaboration
• Provides easy and extensive access to international markets

Final Words

Canada has many investment opportunities that foreign investors can take advantage of to make profits. Thankfully, the Canadian government has developed measures to foster foreign direct investment in the country, including incentives. Also, the country has one of the most stable financial sectors that encourage foreign direct investment in Canada. We at Knightsbridge also offer the best currency exchange rates in Bowmanville.