My math grade was always the lowest on my report cards. It was always fine, but it was always the lowest. I remember one year my mom suggested, astutely, that maybe I just didn’t want to excel at math.
The latest economic report card from the Conference Board of Canada makes me wish my mom could sit down and have a cup of camomile tea with the prime minister. Is there a reason, she might ask gently, why you don’t want to do better with foreign investment?
The report compares Canada with 15 “peer” countries. This year, we get a “B” overall, and we show improvement from last year. But there’s a glaring “D” grade in the “inward FDI [foreign direct investment] performance index” category.
This isn’t a new problem. The report says Canada has been a “chronic laggard” in attracting foreign direct investment, and in productivity growth.
The two problems are related, since foreign investment can mean importing expertise and technology, and increased competition, which forces firms to be more productive. When we close ourselves off, we stagnate.
Officially, Canada is open for business, as the politicians like to say. Foreign investment? Bring it on.
Except we get nervous when it’s about natural resources. Or telecom. Or hardware-store chains. Or anything big. We like the idea of foreign enterprise in Canada, so long as it doesn’t compete with or displace any Canadian-owned businesses.
Gee, I wonder why this is such a hard problem for Canada to solve. Maybe we’re not a laggard because we’re dumb or unattractive. Maybe we’re a laggard because we’re conflicted about what we want.
I don’t know if there’s a secret to becoming an “A” performer in foreign investment, but I know where I’d start looking for one.
“Belgium is the runaway leader on this indicator, with eight times more inward FDI than its share of the global economy,” says the Conference Board’s statement. “Belgium’s performance effectively lowers the grades of the other 15 countries.”
Belgium is consistently one of the top countries for attracting investment — not just in Europe, but in the world.
Its geographic position allows it to act as a service hub for Europe, but that’s not the only reason it does so well. Since the 1960s, the Belgian government has actively sought and welcomed foreign investment. It has created an attractive environment for business generally. It has also carefully created infrastructure and regulations to support certain sectors, such as the pharmaceutical industry.
“Despite a lack of natural resources and a small domestic market, Belgium is one of the most prosperous and competitive countries in the world,” says a 2011 report from the Institute for Strategy and Competitiveness at Harvard Business School.
Canada, in contrast, is blessed with natural resources. Perhaps that’s why we’ve been complacent when it comes to foreign investment. I’m not suggesting for a moment that Canada in 2013 try to emulate Belgium in the 1960s. This is a different country and a different time.
But we could emulate the strategic approach. Belgium used its geographic location to its advantage. What do we have that we could turn to our advantage? Our natural resources — our water, our oil — aren’t just goodies that foreigners might want to extract.
We don’t need to emulate Belgium’s policies, but we could emulate its commitment to make sure its policies are friendly for investors. For a start, requiring a takeover to pass a nebulous “net benefit test” is not the way a country acts if it truly wants to attract foreign investment.
It begins by deciding that foreign investment really is something Canada wants.
