Tuesday, November 16, 2004

SPOTLIGHT: Foreign control

Fifth of assets in foreign hands

FOREIGN control in the Canadian economy – as measured by share of assets for all corporations – remained virtually unchanged for the second straight year in 2002.

Foreign-controlled firms held just over one-fifth (21.7%) of assets, which was similar to levels recorded in the mid-1990s. This proportion was up only slightly from those of the early 1990s.

Growth in assets of Canadian-controlled enterprises kept pace with those of foreign-controlled enterprises in 2002, both rising by just over 4% from the year before.

Canadian-controlled enterprises reported just over $3.4 trillion in assets, while foreign-controlled assets rose to just over $950 billion.

The value of corporate assets almost doubled during the 10-year period between 1992 and 2002. Gains were marginally higher for foreign-controlled corporations than Canadian-controlled.

While foreign-controlled corporations doubled their assets to just under $1 trillion in 2002, Canadian-controlled corporations reported a 93% gain to $3.4 trillion.

Operating revenues

A second measure, the share of operating revenues earned by foreign-controlled firms, paints a slightly different picture. Using this measure, foreign control has stabilized around the 30% mark since 1999 after increasing steadily through much of the 1990s.

In the case of operating revenues, corporations under domestic control recorded the larger gain in 2002. Their revenues reached just over $1.7 trillion, while those for foreign-controlled corporations dipped to $704 billion.

Foreign control peaked in 1971 after a period of record growth that also saw the introduction of the Canada-US Auto Pact. It declined steadily until the mid-1980s. During this period, the Canadian economy suffered through a recession and a major oil crisis.

By the late 1980s, foreign control was on the rise again with a surge in mergers and acquisitions activity. It rose steadily throughout the 1990s as "globalization" picked up steam and international trading partnerships, such as NAFTA, the European Union and the Association of South-East Nations, were formed.

By 2000, foreign control had levelled out at 31.1% of operating revenue, well below the peak of 37.6% in 1971.

Non-financial sector

Foreign control remains more prevalent in the non-financial sector of the economy where foreign interests held 28.0% of assets and generated 29.5% of operating revenues in 2002.

In contrast, foreign-controlled firms accounted for only 14.9% of assets and 23.7% of operating revenues in the finance and insurance industries. This reflected tighter regulatory controls in this sector.

Foreign control remains most prevalent in manufacturing and oil and gas. Foreign-controlled and Canadian-controlled firms share roughly equally in the operating revenue held by manufacturing firms.

In 2002, foreign interests generated 51.8% of manufacturing revenue, down from 52.8% the year before. Similarly, 49.9% of operating revenues in oil and gas came from corporations under foreign control in 2002.

For more information, contact David Sabourin (613-951-3735), Industrial Organization and Finance Division.

  Print article

© 2004, Statistics Canada.