Foreign direct investment, 2012
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Canadian direct investment abroad increased 5.5% in 2012, led by growth in the investment position with the United States. The level of foreign direct investment in Canada grew at a similar rate of 5.8%, mainly on higher investment from Europe and the United States.
Canadian direct investment abroad expanded by $37.0 billion to $711.6 billion in 2012. At the same time, foreign direct investment in Canada advanced $34.6 billion to $633.9 billion. As a result, Canada's net direct investment asset position edged up to $77.7 billion in 2012.
Canadian direct investment abroad targets the United States and the United Kingdom
The United States remained the top destination for Canadian direct investment in 2012, as the asset position in that country increased by a further $15.3 billion to $289.4 billion at the end of the year. Canadian firms also added $6.7 billion to their investment position in the United Kingdom, which remained the second largest destination for Canadian investment with a total position of $86.8 billion at the end of 2012.
Canadian direct investment in all other countries was up $15.0 billion to $335.4 billion, led by increases in Norway, Chile, and Australia.
Europe and the United States lead the increase in foreign direct investment in Canada
A significant increase in investment from Europe accounted for almost half of the overall rise in foreign direct investment in Canada. Investment from the continent rose by $17.0 billion to $212.1 billion at the end of 2012, led by a $7.3 billion increase from the United Kingdom. The Netherlands remained the largest European investor in Canada at the end of 2012 with total investment of $61.4 billion, followed by the United Kingdom with $54.6 billion.
The other notable increase came from the United States, as that country's direct investment in Canada rose by $15.6 billion to $326.5 billion in 2012. While the United States remains by far the largest foreign direct investor in Canada, the past decade has seen a gradual decline in that country's share of direct investment in Canada from 64.9% in 2002 to 51.5% in 2012.
Canada's net direct investment position differs geographically
Canada continued to maintain a net direct investment liability position with the United States at the end of 2012, which has fluctuated over the last five years. This compared with an increasing net direct investment asset position with the rest of the world.
Finance and management are main sectors for investment both abroad and in Canada
In 2012, 52.9% of total Canadian direct investment abroad was in the finance, insurance and management industries, followed by the mining and oil and gas extraction sector with 18.8%. Meanwhile, the share of investment in manufacturing fell below 10% for the first time, continuing a decline which has seen that sector's share of Canadian investment abroad decline from a peak of 31.9% in 2000.
The finance, insurance and management industries also accounted for a significant share of foreign direct investment in Canada with 32.6% of total investment in 2012. The manufacturing sector remained a significant destination of foreign direct investment in 2012 with a 28.7% share, while the mining and oil and gas extraction industry accounting for a further 19.0%.
Note to readers
This is the annual release of detailed foreign direct investment data. This release contains country and industry details for direct investment that is drawn from the annual survey. This information is not available at the time of the quarterly International Investment Position release.
Direct investment is a component of the international investment position that refers to investment of a resident entity in one country obtaining a lasting interest in an enterprise resident in another country. The lasting interest implies the existence of a long-term relationship between the direct investor and the enterprise and a significant degree of influence by the investor on the management of the enterprise.
In practice, direct investment is deemed to occur when a company owns at least 10% of the voting equity in a foreign enterprise. This report presents the cumulative year-end positions for direct investment. In the Canadian statistics, direct investment is measured as the total value of equity, net long-term claims and net short-term claims held by the enterprise across the border.
Foreign direct investment by country and by industry: Following international standards, direct investment is based on the country of ownership of the immediate direct investor company for foreign direct investment in Canada, and to the country of the immediate investee company for Canadian direct investment abroad. This implies that direct investment is largely attributed to the first investor/investee country, rather than the ultimate investor/investee country. This occurs because direct investment is often channelled through intermediate holding companies or other legal entities in other countries before reaching its ultimate destination. Since these entities are generally in the financial sector, this sector accounts for a larger share of foreign direct investment on an immediate country basis than it would on an ultimate country basis
The value of direct investment abroad is denominated in foreign currency and converted to Canadian dollars at the end of each period for which a year-end position is calculated. When the Canadian dollar is depreciating in value, the restatement of the value of direct investment abroad in Canadian dollars increases the recorded value. The opposite is true when the dollar is appreciating. Foreign direct investment in Canada is directly recorded in Canadian dollars and the fluctuation of the Canadian dollar has no impact on the recorded value.
In 2012, the Canadian dollar appreciated by 2.2% against the US dollar, 0.6% against the euro and 15.1% against the Japanese yen. It depreciated by 2.3% against the British pound.
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