In the last edition of the A.T. Kearney Foreign Direct Investment Confidence Index, Canada jumped 16 spots and now ranks 4th in the world, just behind the United States, China and Brazil.
The FDI Confidence Index ranks countries on how political, economic and regulatory changes will affect FDI. To do so, the authors collected information from 302 participating companies representing 28 countries and all industry sectors.
The fast recovery of the Canadian economy, the oil and gas boom and the strength of the manufacturing sector explain why Canada moved up in the ranking. According to this study, “Canada is the only G7 country to recoup all of its output and employment losses since the recession”. Also, “Canada is the first G20 country to offer a tariff-free zone for manufacturers, and by 2015 all industrial tariffs have been eliminated across the country”. This strategy seems to have paid since the manufacturing sector account for one-third of all FDI directed toward Canada.
Such good results are promising, especially when you consider the impressive record of the previous editions of FDI Confidence Index when it comes to predicting where FDI will flow in the next year. As the authors write: “since the inception of the FDI Confidence Index in 1998, the 10 most attractive FDI destinations have consistently received 50 percent or more of global FDI inflows roughly one year after the survey. Over the same period, on average, the top five countries captured 35 percent of global FDI inflows.”
Follow-up on the Post: Rebirth of Manufacturing Sector in the United States…and Greater Montréal?
As my colleague, Mathieu Lefort did in a previous post, the study also underlines the emergent phenomenon of reshoring in the US:
“Some companies, most notably General Electric and Ford, have begun to bring some production back to American shores as they consider costs and decreased time to market, better protection of intellectual property, and benefits of having designers, salespeople, and engineers at the same facility rather than oceans apart.”
Francis Langlois, Analyst, Economic Research Division