Is Foreign Direct Investment (FDI) the panacea for Canada’s economic woes? Will foreign ownership of our assets help to positively shape our economic future? This is the strategic approach being followed by Bill Morneau, the minister of finance, from the stagnant advice from his finance committee. And this is part of the reason for Canada’s pursuit of an infrastructure bank.
Foreign direct investment can help an economy, if done correctly, by spurring on development and creating jobs, if this takes place in the manufacturing sector. New technologies and businesses built by foreign investment dollars can help drive Canada’s future economy. If not done correctly, however, it can hamstring Canada’s economic future, costing dollars from infrastructure investment that offer little hope for future prospects.
Pierre Trudeau warned of this in 1973, when he set up the Foreign Investment Review Agency. It was designed to protect assets of a national interest, but the Mulroney government took away its teeth when it restructured the agency under another guise, Investment Canada. This is not to say that the government has forgone on protecting Canadian interests, as the Harper government recently blocked BHP from buying Saskatchewan Potash at the request of Brad Wall to safeguard this national resource.
The problem with FDI taking place in primary industries – the resource sector – is that there is no interest for these investors to develop secondary industries. Instead, we have seen state-owned enterprises that, along with investment institutions, take both the raw product and the profit out of Canada, never re-investing into our economy. In essence, others benefit in the long run from this form of FDI, but not Canadians. To put this in perspective, three per cent of the U.S. GDP comes from FDI into other countries, including Canada. Just look at Alberta’s oil industry, which is 50 per cent foreign-owned and investments in the secondary industries have taken place in other countries.
If we are going to go down this path, however, then we need a plan that will look to secondary industries being developed across Canada. This may still require investment into infrastructure, but this will not be the traditional infrastructure of roads and bridges, though these are still needed. The investments will have to come into areas of education and technology, creating a stable economic environment for future generations, which foreign interests are willing to invest in. But this requires a strategy, a vision, which is currently lacking from the government’s backward-looking approach. Instead, if we follow the existing blueprint, we will just be burdened with debt to large investment firms, losing control of our country.
While provincial governments are looking to tighten the rules around foreigners buying property within Canada, the federal government is sprucing up our country to make it more enticing for foreign investors to buy our assets. One can only hope the government has chosen a reputable realtor.
John Kennair is an international consultant and doctor of laws who lives in St. Albert.
