Foreign and domestic investment in Canada

Domestic firms have increased their capital investment in machinery and equipment in Canada at more than twice the pace of foreign-controlled firms since the turn of the millennium.

As a result, foreign companies represented a slightly lower share of total capital investment in Canada in 2004, according to new data.

Foreign-controlled companies invested $39.5 billion in the country in 2004, up 5.8% from nearly $37.3 billion in 2000.

However, during the same period, investment by Canadian companies rose 12.9% to more than $121.4 billion.

Consequently, foreign investment accounted for 24.5% of total investment in 2004, down from 25.8% four years earlier.

These figures refer to investment in physical properties, specifically machinery, equipment and non-residential structures. They do not pertain to investment in equities, bonds or money markets.

The mining and oil and gas extraction sector has been a traditional recipient of heavy investment by foreign-controlled companies. However, in recent years their share of investment has fallen dramatically.

Between 2000 and 2004, investment by domestic-controlled establishments in mining rose by $4.2 billion. This was far more than the gain of only about $300 million among foreign-controlled establishments.

Investment by foreign-controlled establishments also used to be significant in retail trade. However, during this four-year period, investment by foreign firms in retail trade actually edged down, compared with a gain of nearly one-third in investment by domestic firms.

In two other sectors (finance and insurance, and real estate and leasing) investment by foreign establishments has increased sharply, while domestic-controlled investment has retreated.

In the finance and insurance sector, investment by domestic-controlled establishments fell by almost half. This boosted the share of foreign control in the sector from 58% to 73%.

The share of foreign controlled establishments in total investment has changed little in many provinces during the four-year period.

However, in the Northwest Territories, Newfoundland and Labrador and British Columbia, the share of foreign-controlled investment increased. The Northwest Territories was the only region in which foreign-controlled establishments made up the bulk of investments.

Elsewhere, the share of foreign investment declined in both Saskatchewan and Alberta between 2000 and 2004.

In Saskatchewan, this coincided with a sharp declined in total investment activity. In Alberta, total investment rose sharply despite a drop in investment by foreign-controlled firms.

This study was conducted on behalf of International Trade Canada (Investment Partnerships Branch).

The new issue of Foreign and Domestic Investment in Canada, 2005 (61-232-XIB, free) will soon be available online.

For more information, contact Irfan Hashmi (1-800-571-0494; 613-951-0087; irfan.hashmi@statcan.gc.ca), Investment and Capital Stock Division.