Open Minds, Open Hearts, Open Wallets

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Posted on November 30, 2017

Canada’s culture of inclusion is increasingly extended to foreign capital

CANADIANS value openness, something that is confirmed by hard numbers.

We are more welcoming of refugees than most other countries, according to Amnesty International’s Refugees Welcome Index. As well, Canada has the highest proportion of foreign-born residents in the G8 group of industrialized nations and a higher rate of population growth than any other G7 country, largely due to our immigration policies, Statistics Canada reports.

But does that openness extend to the direct ownership of Canadian companies and resources by “foreigners?” It has long been a touchy issue in a country that has historically relied on vast infusions of foreign capital to develop its natural resources and the infrastructure required to transform and transport them to market.

Almost every time there is a large transaction involving a foreign enterprise, Canadians express alarm about the erosion of national sovereignty through such investment. However, while the government of Stephen Harper blocked or restructured a number of deals in a bid to balance net benefit and national security, Justin Trudeau’s government has had a more open approach, maintaining higher review thresholds and re-examining previously blocked investments.

The extent to which Canadians understand this issue is significant at a time when the need for foreign capital is greater than ever. Navigator’s research team recently tried to assess how perception and reality align in this critical area.

In the Navigator survey, respondents were first given a brief definition of foreign direct investment (FDI) and then asked how familiar they were with the topic. Initially, 70 per cent said they were not familiar with the term. However, once they were provided with the definition, 79 per cent said they were not opposed to it, although 42 per cent expressed ambivalence about what they perceived as a loss of sovereign control.

When the economic impact of FDI was described to them, their responses changed.

Informed that on an annual basis FDI has contributed approximately 35 per cent to Canada’s gross domestic product (GDP) in recent years, more than one quarter of respondents (27 per cent) indicated stronger support.

Respondents continued, however, to express concern about the values and standards of companies investing in Canada and the effectiveness of government regulation in protecting the interests of the Canadian public. Although a majority agreed that foreign direct investment positively impacts economic growth (56 per cent) and creates jobs (59 per cent), 67 per cent also believe that the government must review its policies and practices to protect the country. A full 51 per cent expressed concern that values and standards in the areas of safety, labour practices, the environment and corporate social responsibility could be inferior to those of Canadian-controlled businesses.

More specifically, the issue of Chinese investment demonstrates the gap between perception and reality.

The media attention given to Chinese investors, especially in the real estate market, has reinforced a popular perception that China is a massive investor in the overall Canadian economy. In reality, China ranks eighth among Canada’s FDI contributors, accounting for only 2.59 per cent of total FDI in Canada.

When respondents in our study were asked to indicate which countries they believed were among the top five FDI contributors to Canada, 89 per cent stated incorrectly that China fell within the top five. To place this into context, the top five FDI contributors to Canada are the United States (47 per cent), Netherlands (11 per cent), Luxembourg (7 per cent), Switzerland (7 per cent) and the United Kingdom (5 per cent).

Taken together, these research findings show how important it is that policy-makers ensure facts are accurately represented and fears based on misperceptions are addressed. In the case of FDI, support increased when people knew the facts.

Further survey information available at: www.navltd.com/fdi 

Navigator surveyed 1,000 Canadian residents. To ensure accurate representation of the Canadian population, the survey sample was designed to represent the population with respect to provincial and territorial distributions, age, gender and education. Data for this study were collected from September 7 to September 11, 2017.

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