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Worrying disinterest in private sector investment

Worrying disinterest in private sector investment

Fed’s show worrying disinterest in private-sector investment and entrepreneurship

Source: The Fraser Institute
Authors: Jason ClemensMilagros Palacios

Evidence continues to mount that confidence in Canada as a destination for business investment and entrepreneurship is in steep decline. Given the importance of business investment and entrepreneurshipto economic growth and prosperity, one would assume the federal government, and in particular the minister of finance, would be concerned. And yet, by all accounts including the contents of last week’s federal budget, the government is disinterested.

According to Statistics Canada, every category of business investment has declined (except residential housing) since peaking in the final quarter of 2014. Total business investment excluding residential structures (adjusted for inflation) is down 16.8 per cent, which includes declines in non-residential structures (-23.3 per cent), machinery and equipment (-6.6 per cent), and intellectual property (-13.8 per cent). And StatCan’s survey of the investment intentions of private businesses shows further declines in 2018 are expected—the fourth straight year of decline.

Private-sector investment by foreigners has also collapsed. Foreign direct investment (FDI) in Canada has dropped 56.0 per cent since 2013—$31.5 billion compared to $71.5 billion. And for the first time since data has been collected, foreigners sold more Canadians assets than they bought in 2017.

Canada’s results are not typical among industrialized countries. A 2017 analysis by StatCan’s former chief analyst found that Canada ranked second last among 17 industrialized countries—including the United States—for business investment over the 2015 to 2017 period. This is a substantial decline from the 2009 to 2014 period, when Canada ranked eighth amongst the same 17 countries.

Read the full article here.

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