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Oil and gas helps fuel foreign direct investment in 2010

05/13/2011 by John Clinkard

Spurred in part by a steady appreciation of the Canadian dollar over most foreign currencies, direct foreign investment in Canada increased by 2.6% to $561 billion in 2010.

Foreign direct investment is deemed to occur when a foreign company owns at least 10% of the voting equity in a domestic company.

The recent gain in foreign direct investment was largely due to a 5% rise of investment from the United States which accounted for 54.5% of total foreign investment during the year. It is worth noting that although the share of US investment in Canada increased from 53.2% to 54.5% in 2010, it has been trending steadily lower over the past ten years and is well below the peak of 69.7% it reached in 1999.

According to Statistics Canada, the Netherlands held onto its position as the second largest direct foreign investor in Canada in 2010, and the source of 9.2% of total investment. The Netherlands assumed second place from the United Kingdom, our third largest foreign investor in 2004.

In 2010, China spent $16 billion in Canada making it the seventh largest source of foreign direct investment. While it accounted for just 2.5% of the total, its share has increased from less than 0.5% in just four years.

Across major industries, a 7% increase in the finance and insurance sector accounted for approximately one third of the gain in total direct foreign investment. Next, driven in large part by a 15% rise in crude oil prices, spending on oil and gas extraction increased by 5.2%, accounting for just over 25% of the annual increase.

Foreign direct investment in information and cultural industries rose by 20.5% in 2010 accounting for just over 15% of the annual increase while investment in the retail industry was up by 9.4% and accounted for close to 10% of the annual gain.

Although manufacturing continues to attract the largest share of direct foreign investment, a 1.5% drop in investment in the industry caused its share to shrink from 36.2% to 34.8% during the year.

Looking forward, sustained upward pressure on commodity prices, a relatively strong fiscal position, credible monetary policy, a strong currency, declining corporate tax rates and a generally open approach toward foreign ownership should contribute to sustained moderate growth of foreign direct investment over the near term.

Foreign direct investment in manufacturing and mining, oil and gas
Foreign direct investment in manufacturing and mining, oil and gas
Data Source: Statistics Canada/Chart: Reed Construction Data, CanaData.


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