A new report by Statistics Canada shows that half of foreign direct investment in Canada comes from the United States.
The same study found that the stock of direct investment in Canada held by investors in Europe is much lower than originally thought, according to a news release issued by Statistics Canada.
“One of the main conclusions of the study is that the United States, which is the dominant direct investor in Canada on an immediate investor basis, further increases its share of overall investment when the data are presented on an ultimate investor basis,” concluded the report.
Other countries found to have higher than expected foreign direct investment in Canada include the United Kingdom, Brazil, China and Japan. The Statistics Canada report measured foreign direct investment on an ultimate investor basis, where the ultimate investor is identified by proceeding up the ownership chain of the immediate investor until an enterprise is reached that is not controlled by another enterprise. The location of the ultimate investor is referred to as the ultimate investing country.
Presenting foreign direct investment estimates on a ultimate investing country basis enables the identification of the countries around the world that ultimately control the stock of inward foreign direct investment. These data are useful because they represent the location where multinational enterprises often make decisions and also show which countries ultimately bear the risks associated with foreign direct investment.
Understanding the difference between the location of the ultimate and immediate investor is also important as it provides an indication of the extent to which foreign companies are channeling their investments before they reach the Canadian economy. Measuring foreign direct investment on an ultimate investing country basis also results in a substantial reallocation of direct investment out of countries such as Luxembourg, the Netherlands and Switzerland.
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