Recent FDI Trends and DFAIT’s FDI Results
Presented by:David Hartman, Director Investor Services Division (DFAIT)C-11 Meeting, October 4
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OBJECTIVES
Examine recent global FDI trends
Review FDI trends in Canada
Report on highlights of DFAIT’s results for FY2010-11
Present conclusions and discuss outlook
Despite a recent sharp drop in global investment flows,FDI remains the main engine of globalization
5.7%
8.4%
8.7%
12.9%
GDP
Export -goods
Export -services
FDI inflows
Average annual growth of global commerce activities, (%)
1990-2010
3
Source: BIA compilations based on data from UNCTAD
FDI Sources: Developed economies remain the main sources but emerging economies are becoming more important
Cumulative FDI Outflowsby region (%)
Asia and Oceania
Latin America
Europe
North America
Others
2006-20101996-2000
Cumulative FDI Outflows by countryTop 15 countries, 2006-2010
Top Sources
4Source: BIA compilations based on data from UNCTAD
5
FDI Destinations: The shift of FDI inflows toward emerging economies continue with the BRICs as key destinations
Cumulative FDI Inflowsby region (%)
Asia and Oceania
Latin America
Europe
North America
Others
2006-20101996-2000
Cumulative FDI Inflows by countryTop 15 countries, 2006-2010
Top Destinations
Source: BIA compilations based on data from UNCTAD
6
Over the last decades, there has been a significant shift toward FDI in services
Services(54.3%)
Manufacturing(41.2%)
Primary(4.5%)
Services(67.7%)
Manufacturing(22.1%)
Primary(10.3%)
Share of global inward FDI flowsby major economic sectors (%)
1990-1992
2007-2009
Source: BIA compilations based on data from UNCTAD
7
While FDI in Canada has grown in absolute terms, we have lost ground in relative terms over the last decades
Net FDI inflows in Canada
Bill
ion
$C
an
Canada’s share of global FDI inflows
5 years moving average
Actual flows
Source: BIA compilations based on data from UNCTAD and Statistics Canada
8
Strong inflows in Canada over the recent period stems from large investments in the natural resources sector
Distribution of cumulative FDI inflows in Canada by sectors
Energy and metallicminerals
All other sectors
- 37%
+ 37%
1381
793
598
458
418
348
302
266
261
256
207
206
200
172
165
162
159
152
135
133
120
United States
United Kingdom
China
Belgium
France
Hong Kong
Canada
Russia
Germany
Spain
Netherlands
Brazil
Australia
Virgin Islands
Singapore
India
Mexico
Saudi Arabia
Italy
Sweden
Canada
Canada - 7th, (total FDI)
Canada – 21st,
(Excluding FDI in Energy and
metallic minerals)
Top recipients of global FDI Inflows: Cumulative FDI inflows
2004-2010, US$ billion
Source: BIA compilations based on data from UNCTAD and Statistics Canada
While the U.S. and Europe still account for the majority of FDI stock in Canada, other countries are making important gains
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Share of Top 10 source countries of Canada’s Inward FDI stock in
2010
Total FDI Stock 2010: $561.6 billion
United States (54.5%)
Netherlands (9.2%)
Switzerland (3.6%)
UK (7.5%)
France (3.4%)
Japan (2.8%)
China (2.5%)
Brazil (2.4%)
Luxembourg (2.0%)
Germany (1.8%)
Others (10.2%)
Distribution of FDI stock, 2000 and 2010, by major regions, (%)
Others
Europe
United States
61% 55%
34%31%
6%15%
2000 2010
Source: BIA compilations based on data from Statistics Canada
1010
Trends in Foreign Investment
Projects
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Total number of foreign investment projects globally
Source: BIA compilations based on data from FDI Intelligence, Financial Times.Note: Estimated values on August 15, 2011, for all projects.
Total value of foreign investment projects globally (US$ Billion)*
Greenfield/expansion investment projects up globally but still below peak of 2008
• After a sharp decline in 2009, the number of investment projects worldwide increased by 2% in 2010.
• Conversely, investment projects globally fell 16% in value terms in 2010.
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Total number of foreign investment projects in Canada
Total value of foreign investment projects in Canada (US$ billion)
• Foreign investment projects in Canada rose by 20% in numerical terms and fell by 11% in value terms in 2010.
Number of foreign investment projects in Canada has increased over previous year
Source: BIA compilations based on data from FDI Intelligence, Financial Times.Note: Estimated values on August 15, 2011, for all projects.
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Source: BIA compilations based on data from FDI Intelligence, Financial TimesNote: Estimated values on August 15, 2011, for all projects.
Recently, Canada has gained ground in attracting foreign investment projects…
Canada’s share of foreign investment projects globally (number and value)
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DFAIT’s FDI Results
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Greenfield projects accounted for the majority of DFAIT-facilitated foreign investments
Source: DFAIT’s internal reporting system
= Companies identified by post as being potential investors, based in part on assessments in SIIS
= Targets who have confirmed their desire and capacity to invest abroad
Prospects
Targets
Leads
= Leads who have shortlisted Canada and whose investment decision is imminent
Investor Attraction Funel
FY2010-11
Outcome
= Greenfield Investments (104) + Expansions (41) + Acquisitions (22)
509
167
1260
1032
16
04/18/23
154
150
99 105
145
8364
489
22
FY2006-07 FY2007-08 FY2008-09 FY2009-10 FY2010-11
Greenfield/Expansions M&As
237
214
147
114
167
In FY2010-11:
DFAIT helped attract: 145 greenfield/expansions (focus of FDI
attraction program) 22 mergers and acquisitions
Impact on the Canadian economy (excluding acquisitions):
$7.1 billion investment (total for 52% of companies reporting to DFAIT or in public sources)
4,252 jobs (61% of companies reporting)
The DFAIT performance in FY2010-11 was up 38% and was relatively robust given only…
2% increase in number of greenfield/expansion projects globally in 2010
4.9% increase in worldwide FDI inflows in 2010 9.4% increase in overall inward FDI flows to
Canada in 2010
Greenfield/expansion investment projects facilitated by DFAIT have increased over last year
Number of foreign investment projects in Canada facilitated by DFAIT, by fiscal year
Source: DFAIT’s internal reporting system
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In the past five years:
Total number of investments facilitated by region:525 Europe (60%)196 Asia (22%)158 Americas (18%)
Foreign investment has risen in all regions in FY2010-11
Europe was the biggest source of investments facilitated for each of the last five years
Source: DFAIT’s internal reporting system*Brazil accounted for 1 investment in FY2010-11 Note: Non-priority markets accounted for 5 investments in FY2010-11: Mexico (2) , Ireland (2) and Portugal (1). Represents acquisitions
3120 14
2737
06-07 07-08 08-09 09-10 10-11
Americas
107
71
104
119124
1815
26
6770
42
28
17
28
43
*
Number of foreign investment projects in Canada facilitated by DFAIT, by region
All regions increased their number of DFAIT-facilitated foreign investment projects in FY2010-11
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39 Manufacturing: Machinery equipment (11)
Aerospace & Defence (16)
30
Automotive (12)
ICT Software (13)
Digital media (6)
Wireless communications (4)
Other (7)
24 Business, Financial & Professional Services
16 Clean Technology Renewable-energy technologies (15)
Environmental technologies (0)
Other (1)
7 Life Sciences Biopharmaceutical (4)
Medical devices (3)
7 Agrifood
6 Plastics & Chemicals
16 Non-priority sectors
145 TOTAL
In FY2010-11:
DFAIT helped attract 145 greenfield investments and expansions:
Foreign investment projects in Canada (excluding acquisitions)
facilitated by DFAIT, by sector
Source: DFAIT’s internal reporting system
All investments by sector increased over last year, except for Agrifood & Clean Technology
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Two largest provinces received the vast majority of investments in FY2010-11 (78%).
Ontario’s investments increased significantly by 148% over the previous year.
Number of foreign investments in Canada (excluding acquisitions) facilitated by DFAIT, by
destination
Source: DFAIT’s internal reporting systemNote: No Greenfield/Expansion investments were facilitated in Prince Edward Island, Nunavut, Yukon or the Northwest Territories.
DFAIT facilitated foreign investments were highest in Ontario and Quebec
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DFAIT’s results: key conclusions
It was a successful year for DFAIT facilitated investments, following the global economic downturn
Final results for FY2010-11 indicate 145 DFAIT facilitated greenfield and expansions investment projects - an increase of 38% from the previous fiscal year.
The investment projects had a value of $7.1 billion (52% of companies reporting), compared to $1.1 billion in the previous fiscal year – an increase of $6.0 billion.
One of those projects included a German company, K+S AG, which invested $2.5 billion in Saskatoon, SK.
These projects created an estimated 4,252 jobs (61% of companies reporting), compared to 3,082 jobs the previous year – an increase of 1,170 jobs.
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FDI Outlook
According to the UNCTAD World Investment Report 2011:
– Global FDI inflows rose a modest 4.9% to US $1.2 trillion in 2010, following a 32.1% decrease in 2009. However, FDI flows in 2010 were still 37% below their peak 2007 level of nearly US$ 2 trillion.
– Looking forward - under an optimistic scenario - global FDI inflows are projected to rise to $1.5 trillion in 2011, $1.7 trillion in 2012 and $1.9 trillion in 2013.
– Under the - increasingly probable - pessimistic scenario, global FDI inflows are projected to stagnate at around $1.2 trillion.
As indicated by FDI intelligence, FDI projects globally in 2010 increased by 2% and fell by 16% in terms of the number and value of investments, respectively. For the first half of 2011, greenfield/expansion projects were the same as the first half of last year, suggesting stagnating growth.
The economic outlook for Canada appears good, and bodes well for FDI:– The Economist Intelligence Unit continues to rank Canada as the best place to do business
in the G7 over the next five years (2011-2015)
– According to the IMF, Canada, along with Germany, are projected to have the fastest growth in the G7 in 2011 and 2012.