Contributed by Invest in Canada. Invest in Canada offers tailored and confidential services that make it easier to choose Canada for your next business expansion.
Canada is an increasingly attractive place for foreign direct investment (FDI). With FDI inflows of $82.3 billion in 2021 and $64.3 billion in 2022, the last two years represent the strongest consecutive-year results in more than a decade. This trend has continued into 2023, with the first quarter registering net FDI inflows of $25.7 billion.
Why Canada for FDI?
Canada’s attractiveness to global companies is built on numerous reasons – which include the world’s most highly educated workforce, strategic geographical advantages, comprehensive trade agreements, progressive immigration policies, and favourable economic and political conditions. These attributes collectively establish Canada as an ideal destination for FDI and a catalyst for business success.
Canada has consistently ranked among the most stable political and economic systems in the world. According to U.S News and World Report, Canada ranks in the top three countries worldwide in economic stability. And, according to The Economist Intelligence Unit, Canada is the best place to do business in the G20.
In addition to a stable environment for business, investors benefit from an exceptional and diverse talent pool, with 62% of Canadians aged 25 to 64 having completed post-secondary education. In 2019, more than 206,000 students graduated in the Science, Technology, Engineering and Math (STEM) and healthcare fields alone, a 15% increase over the preceding five years.
Foreign companies establishing a presence in Canada can leverage this highly educated workforce and complement it with international workers through the Global Skills Strategy, which streamlines the process of bringing global employees into Canada and attracting talent from around the world. This Government of Canada program gives companies access to a fast and predictable immigration application process. The Global Skills Strategy features expedited application processing times, work permit exemptions and enhanced customer service.
Canada’s prime geographic location offers unparalleled access to major markets, including Europe, the United States, South America and Asia. This geographic advantage is further bolstered by tariff-free access to most of the world’s largest markets. Canada has entered into 15 free trade agreements with 51 countries. These agreements position Canada as a hub for global commerce and grant businesses the ability to engage seamlessly in international trade.
Promising sectors for investment in Canada
Thriving sectors for FDI include life sciences, agrifood, cleantech, and advanced manufacturing.
In life sciences, Canada exhibits strengths in medical technologies – or medtech – which encompass medical and diagnostic imaging, cardiovascular devices, and assistive and rehabilitative devices. Canada also has proven research strengths in genomics, bioinformatics, immunotherapy, regenerative medicine and neuroscience. Canada’s leading universities, renowned for their extensive research networks and abundant partnership opportunities, foster an innovative environment for global life sciences companies.
Agribusiness
Canada is already one of the world’s largest food producers and exporters, and it is an ideal destination for foreign investors looking to help feed a planet of eight billion people.
Industry subsectors contribute significantly throughout the agricultural supply chain. For example, precision agriculture uses technologies and data analytics to optimize agriculture practices, creating more efficient production. Food and beverage processing, one of Canada’s largest agribusiness industries, plays a vital role in transforming raw agricultural products into a wide range of consumable goods. With alternatives to animal-based products increasingly in demand, plant-based proteins are gaining traction. And functional foods and nutraceuticals focus on developing food products with added health benefits beyond basic nutrition.
Cleantech
As the world recognizes the urgency of addressing climate change, Canada’s cleantech sector stands poised to make significant contributions to a greener future in both resources and innovation.
Canada has firmly established itself as a leader in the cleantech industry, with representation of 12 companies in the top 100 of the Cleantech Group’s 2023 Global Cleantech 100. This recognition highlights Canada’s commitment to sustainable solutions and its dynamic sub-sectors, including: renewable energy; hydrogen and fuel cells; carbon capture, utilization and storage; and small modular reactors. As the world’s third-largest producer of hydroelectricity, the country has harnessed its abundant natural resources to generate clean and renewable power on a massive scale.
To further support the growth of the cleantech sector, Canada offers a range of programs and incentives. The Clean Growth Hub is a notable initiative that brings together various stakeholders to accelerate the development and adoption of clean technologies. The Canada Growth Fund also plays a crucial role in attracting investment and fostering the growth of cleantech startups.
Advanced manufacturing
Canada’s advanced manufacturing sector encompasses a wide range of sectors, from automotive to aerospace, and from chemicals to plastics and rubber manufacturing. Leadership in manufacturing can be attributed to a commitment to innovation, embracing cutting-edge technologies such as robotics, 3D printing and artificial intelligence.
Since 2022, crucial investments in Canada’s advanced manufacturing industries include Umicore, a Belgium-based company investing $1.5 billion in an electric vehicle (EV) battery materials plant in Loyalist, Ontario, and Germany-based Volkswagen, which early in 2023 announced that its subsidiary PowerCo will establish an EV battery manufacturing facility in St. Thomas, Ontario – estimated to create about 3,000 direct jobs. Both investments are the result of a coordinated approach involving federal, provincial and local governments.
Supportive government policy
Canada’s appeal to investors is supported by its government policies and its ability to cultivate a dynamic and inclusive environment for global companies. The Scientific Research and Experimental Development (SR&ED) tax incentive program represents Canada’s largest research and development initiative, offering $3 billion in incentives annually. In addition to tax advantages, the government extends financial incentives such as the Strategic Innovation Fund (SIF), which offers funding for large-scale innovation projects and more. And the Accelerated Investment Incentive allows companies to swiftly deduct a substantial portion of the costs associated with newly acquired capital assets, such as equipment, in the year of purchase or when the assets become available for use.
Widely recognized as a low-risk destination, Canada prioritizes effective risk management, making it an attractive choice for investors. Canada is committed to rules-based global trade and investment, ensuring a predictable and trustworthy investment landscape. Canada’s strength lies in its well-diversified economy, stable political environment, excellent banking system and welcoming attitude toward foreign investment.
Finally, Canada’s commitment to transparency, fairness and long-term sustainability further solidifies its status as an ideal low-risk choice for investors.
FDI builds strength
To sum up, FDI plays a vital role in driving Canada’s economic prosperity. The country’s ability to secure global companies through FDI attraction efforts is a testament to its business appeal. By welcoming these investments, Canada gains benefits such as job creation, increased wages and enhanced innovation that directly leads to a better quality of life for Canadians.
