IN CANADA, we have seen the issue become the focus of a broader public debate under both the previous Conservative government of Stephen Harper and the current Liberal government of Justin Trudeau. For Harper, the issue was Chinese state-owned CNOOC Ltd.’s acquisition of Nexen; for the Trudeau government, it was the sale of Canadian satellite technology firm Norsat International to Hytera, a Chinese communications firm.

Public debate typically raises concerns about national security, sovereignty, environmental standards and labour laws. Public trust is also undermined by approval processes that take place behind closed doors at the federal cabinet table.

However, the debate often misses the point that Canada needs foreign investment and always has. In fact, Canada has been built by foreign investment, in many ways. Canada is a large country with a relatively small population; we simply don’t have the domestic financial resources to fully tap our immense potential.

The public assumes that foreign direct investment is an issue mainly in the resource extraction sector, but this is not the case. In 2016, the manufacturing sector in Canada led all other industries in foreign direct investment at 28 per cent. Overall growth last year in this type of investment occurred across most industries, led by wholesale and retail trade (10.1 per cent growth), manufacturing (5 per cent) and mining and oil and gas extraction (3.2 per cent), according to tradingeconomics.com.

Foreign direct investment is a practical necessity for continued growth

At a time when world powers like the U.S. and China are looking inward economically, there is opportunity for Canada. U.S. President Donald Trump’s “America first” approach and China’s new regulations restricting “irrational” overseas investment by Chinese interests may seem threatening in the near term. However, the slowing of foreign capital investment may focus Canada’s approach to global trade.

The rest of the world is looking to Canada not only for the opportunities we offer, but also because of our relationship with these two global powers and our access to their markets. Additionally, the new global dynamic may mean new opportunities for bilateral trade agreements that can establish clearer rules for foreign direct investment, and can lead to new sources of capital for Canadian industries to access. One only has to look to such things as the Canada-EU trade agreement, Brexit, continued dialogue with China and India, and the renegotiation of NAFTA to see where that potential may come.

That doesn’t mean that Canada should abandon its values. Some things cannot be compromised, including national security, environmental and labour protections and other things that benefit Canadians.

However, rather than playing politics with approvals or allowing the perception of clandestine decision-making processes to prevail, governments should focus on developing and enforcing protections that Canadians can have confidence in.

Despite the public discourse that has occurred with recent transactions, foreign direct investment does not mean the sale of Canada’s natural resources or state secrets to foreign countries. The federal government must be proactive and transparent about the laws and regulations that will be applied to protect Canadian interests.

To fully develop its economic potential, Canada should seize the opportunity to be a place in which the world wants to invest.

Canada’s soft power is peaking in an age of hard choices

“PEACE, ORDER & GOOD GOVERNMENT.” 

These are the words that frame Canada’s Constitution. They are also the very essence of the Canadian “brand.”

Canada’s brand has been in the spotlight throughout 2017 as the country celebrates its 150th year. Many characteristics of Canada that have historically been regarded as domestic challenges have been recast as aspirational virtues—especially by outsiders.

These include Canada’s commitment to collaboration and consultation, respect for cultural and linguistic diversity, reliance on trade relationships, history as effective peacekeepers, and, more recently, reputation as prudent regulators of financial services.

None of these qualities may be individually compelling, but in a world full of turbulence and uncertainty, their combined effect is powerful.

This matters because brand generates the cachet that allows a country, company or individual to fully leverage political, economic or personal capital. Specifically, a reputation for stability and inclusion enhances Canada’s “soft power” and its ability to punch above its weight internationally. It provides leverage during multilateral trade negotiations and helps attract and retain talent—something that matters more than ever when global companies are looking for new places to invest or transfer their human resources.

It helps that our brand is consistent. Prime Minister Justin Trudeau, a young, compassionate, media-savvy leader, is seen as personifying Canadian values. That perception is reinforced when he is placed in stark contrast to U.S. President Donald Trump.

Clear differentiation in a crowded and competitive global market is precisely what branding is all about.

Canada has gained recognition in areas beyond economics and business. It is widely seen as a champion of human rights, just when those rights are being challenged in many other places. LGBTQ Canadians have been able to marry for almost 15 years. Canada is also acknowledged for its immigrant and refugee policies, including the recent welcoming of Syrian refugees. Canada’s tolerance for other cultures, religions and languages is deeply engrained, if occasionally imperfect.

However, there are internal issues that could jeopardize Canada’s brand over the long term.

Although the collapse of world energy prices has muted the international uproar for now, opponents of oil sands and pipeline development have attacked Canada’s reputation for environmental stewardship. When the energy sector rebounds and energy mega-projects fire up again, environmentalists will be poised to resume their attacks on Canada’s brand.

While Canada’s record for embracing immigrants may be positive when measured against many other countries, its relationship with its First Nations communities—despite the lip service paid to improvements—is a significant blot on the country’s human rights record.

Jurisdictional quarrels between the federal government and the provinces, and stubborn interprovincial barriers also mar Canada’s brand.

Also, a brand shines when things are going well, as they are in Canada right now. However, if something were to jar the economy—a breakdown in free trade with the U.S. that triggers a recession, for example—Canadians’ good will toward newcomers and toward each other could also become more tenuous.

These days, as Great Britain and the United States focus more inward and seem more divided than ever, we have cause to be grateful that Canada’s brand is shining. Will the things that unite us at this moment in history continue to do so in the future? We can hope that’s the case. But we should remember that it is far from a given.

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From Wood & Water to Bits & Bytes

Canada is better known for its natural beauty and natural resource exports than for its innovative technology.

To be fair, the (mis)fortunes of companies like BlackBerry and Nortel have dulled any lustre on our brand in that sector.

Never mind. Joseph Lavoie, head of Navigator’s digital practice, Pinpoint, has identified some up-and-coming companies.

FARHAAN LADHANI  |  Founder at Better Place (formerly Udara)
This company aims to use our free time to change the world. Its app transforms virtuous real-world acts, such as feeding the hungry, fighting for human rights, and helping prevent suicide, into a game. Still in alpha mode, it’s already getting traction with progressive causes in the United States, and with human rights efforts in places like Syria. Better Place is reinforcing Canada’s international brand as an engaged global citizen.

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TOBIAS LÜTKE  |  Founder & CEO at Shopify
A darling of Canada’s burgeoning tech scene, Shopify empowers retail businesses of all sizes. It connects entrepreneurs to their customers with back-office and front-office technology that was once only accessible to large enterprise companies. Shopify’s technology breaks down traditional barriers, allowing small companies better access to global markets. A very Canadian way to do business.

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STEWART BUTTERFIELD  |  Co-founder at Slack
Companies of all sizes are discovering the power of this enterprise-grade instant messenger that gives people a way to better manage their email traffic. Used by the likes of Airbnb to scale global growth, Slack is reducing dependence on traditional email and allowing employees to collaborate and consult across continents and cubicles in new ways.

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STEPHEN LAKE, MATTHEW BAILEY & AARON GRANT  |  Co-founders at Thalmic Labs
This Kitchener-based company is hoping to change the way we interact with computers by inventing wearable technology that connects the real-world to the digital world. Its first armband gives amputees the power to control a prosthetic hand, lets DJs control the lights and stage effects of their shows, and is being used by researchers to translate American Sign Language.

Toronto is a serious contender as cities vie to replace London as a global financial hub

MONEY IS A SKITTISH SORT OF THING. For all the elaborate stone structures built to contain it, for all the clever, pin-striped advisers and regulators who prudently plan its future, money always has its bag packed and one foot out the door. At the first whiff of uncertainty, it bolts.

It comes as no surprise, then, that a vote in favour of “Brexit”— and the United Kingdom’s messy departure from the European Union—has made money especially jumpy, compromising London’s long-standing role as a global financial centre.

The Bank of England has asked U.K. banks, insurers and other financial institutions to draw up comprehensive strategies for dealing with Brexit, and it will scrutinize them closely. But as it was with the handover of Hong Kong to China in 1997, no amount of public reassurance or display of contingency planning is capable of forestalling the inevitable.

As a result, pundits have been predicting which European city will provide the requisite reassurance that attracts money, and, however briefly, holds it. Will it be Paris, Amsterdam, Frankfurt or Luxembourg?

Canadian banks—all of them have significant presence in London—are already softly repositioning themselves for change. The level of engagement ranges from a staff of 20 for National Bank to more than 5,000 for RBC. TD Bank recently announced plans to expand its presence in Dublin, while RBC has already trimmed back its investment banking ranks ostensibly to reflect diminished deal flow. They’ve all admitted at various times that they have a close eye on their operations there.

WHEN MONEY IS ON THE MOVE, IT CREATES NEW OPPORTUNITIES.

In the face of such upheaval, there is only one certainty: When money is on the move, it creates new opportunities. Among the international cities well-positioned to benefit from a shift away from London is Toronto.

Think about it. The world’s largest banks already have footholds in Toronto. The city’s financial sector has a deep bench of educated workers with expertise in both traditional banking and fintech. The Toronto Stock Exchange is already the eighth largest in the world, with market capitalization of around $2.5 trillion—significantly larger than Frankfurt’s DAX.

The city is consistently ranked one of the top places in which to live. In August, The Economist magazine’s annual survey cities placed Toronto fourth of 140 international cities reviewed. Toronto boasts good schools, cultural activities galore, top sports teams and urban infrastructure. It even has an easily accessible downtown airport that provides connection to New York City and Washington, D.C.

Although English is the dominant language—considered a plus in financial markets—Toronto is exceptionally multicultural. This is a draw for firms that must relocate top talent and for understanding the subtle nuance of dealing with other international markets.

Furthermore, Canada is a leader in the standards for and enforcement of financial regulations, something for which it received accolades during the 2008 global financial crisis. Our legal system is based on British jurisprudence. The political system is stable and transparent. We stand for law, order and good government.

It’s true that London has been a point of commercial intersection since Roman times, but Toronto is also exceptionally well-placed to attract nervous money and talent from another financial hub under siege—New York.

U.S. President Donald Trump is openly preparing to put his political imprint on management of the U.S. Federal Reserve (Janet Yellin’s term as chair of the board of governors expires in February 2017) and a Republican-controlled Congress has begun the push for greater deregulation and an easing of capital requirements for big banks, just a decade after the last global financial crisis.

That’s not the only concern of nervous money: Much of the post-election stock market surge in the U.S. was predicated on Trump pushing through tax reform and infrastructure spending, both of which look increasingly unlikely. Even the prospect of political failure is likely to send money scuttling for cover at the same time as the impact of Brexit becomes clearer.

In fact, it’s a safe bet it’s already called a cab to the airport.

Canada’s culture of inclusion is increasingly extended to foreign capital

CANADIANS value openness, something that is confirmed by hard numbers.

We are more welcoming of refugees than most other countries, according to Amnesty International’s Refugees Welcome Index. As well, Canada has the highest proportion of foreign-born residents in the G8 group of industrialized nations and a higher rate of population growth than any other G7 country, largely due to our immigration policies, Statistics Canada reports.

But does that openness extend to the direct ownership of Canadian companies and resources by “foreigners?” It has long been a touchy issue in a country that has historically relied on vast infusions of foreign capital to develop its natural resources and the infrastructure required to transform and transport them to market.

Almost every time there is a large transaction involving a foreign enterprise, Canadians express alarm about the erosion of national sovereignty through such investment. However, while the government of Stephen Harper blocked or restructured a number of deals in a bid to balance net benefit and national security, Justin Trudeau’s government has had a more open approach, maintaining higher review thresholds and re-examining previously blocked investments.

The extent to which Canadians understand this issue is significant at a time when the need for foreign capital is greater than ever. Navigator’s research team recently tried to assess how perception and reality align in this critical area.

In the Navigator survey, respondents were first given a brief definition of foreign direct investment (FDI) and then asked how familiar they were with the topic. Initially, 70 per cent said they were not familiar with the term. However, once they were provided with the definition, 79 per cent said they were not opposed to it, although 42 per cent expressed ambivalence about what they perceived as a loss of sovereign control.

When the economic impact of FDI was described to them, their responses changed.

Informed that on an annual basis FDI has contributed approximately 35 per cent to Canada’s gross domestic product (GDP) in recent years, more than one quarter of respondents (27 per cent) indicated stronger support.

Respondents continued, however, to express concern about the values and standards of companies investing in Canada and the effectiveness of government regulation in protecting the interests of the Canadian public. Although a majority agreed that foreign direct investment positively impacts economic growth (56 per cent) and creates jobs (59 per cent), 67 per cent also believe that the government must review its policies and practices to protect the country. A full 51 per cent expressed concern that values and standards in the areas of safety, labour practices, the environment and corporate social responsibility could be inferior to those of Canadian-controlled businesses.

More specifically, the issue of Chinese investment demonstrates the gap between perception and reality.

The media attention given to Chinese investors, especially in the real estate market, has reinforced a popular perception that China is a massive investor in the overall Canadian economy. In reality, China ranks eighth among Canada’s FDI contributors, accounting for only 2.59 per cent of total FDI in Canada.

When respondents in our study were asked to indicate which countries they believed were among the top five FDI contributors to Canada, 89 per cent stated incorrectly that China fell within the top five. To place this into context, the top five FDI contributors to Canada are the United States (47 per cent), Netherlands (11 per cent), Luxembourg (7 per cent), Switzerland (7 per cent) and the United Kingdom (5 per cent).

Taken together, these research findings show how important it is that policy-makers ensure facts are accurately represented and fears based on misperceptions are addressed. In the case of FDI, support increased when people knew the facts.

Further survey information available at: www.navltd.com/fdi 

Navigator surveyed 1,000 Canadian residents. To ensure accurate representation of the Canadian population, the survey sample was designed to represent the population with respect to provincial and territorial distributions, age, gender and education. Data for this study were collected from September 7 to September 11, 2017.

When it comes to Canada, necessity is the mother of nationhood

FROM THE VERY START, Canada has been defined physically and emotionally by large infrastructure projects. Often the subject of heated public debate, their disruptive impact on people and places has, at various points, forced us to examine our social, environmental and economic values and priorities. But whether funded by the private or public sector, railways, roads, runways and pipelines remain integral to our national and cultural identity.

The Trudeau government has committed to improving and expanding key infrastructure across the country. Cue the scrapping.

• THE WELLAND CANAL 1829
  The first Welland Canal connects lakes Ontario and Erie.
• THE RIDEAU CANAL 1832
  The Rideau Canal opens connecting Ottawa to Lake Ontario and the St. Lawrence River. The canal is now a UNESCO World Heritage Site.
• BELL 1880
  The Bell Telephone Company of Canada is incorporated by an Act of Parliament and authorized to construct a cross-country network of telephone lines.
• CANADIAN PACIFIC RAILWAY 1885
  The last spike was driven into the Canadian Pacific Railway at Craigellachie, B.C., linking Canada physically from coast to coast.
• YONGE SUBWAY 1954
  The Yonge Subway is put into operation by the Toronto Transit Commission. The line is Canada’s oldest and busiest underground passenger rail line.
• WESTCOAST PIPELINE 1957
  The Westcoast Pipeline begins delivering natural gas from north-eastern B.C. to Vancouver and beyond.
• TRANSCANADA PIPELINE 1958
  The TransCanada Pipeline begins delivering natural gas from Alberta to Ontario. For many years, it was the longest pipeline in the world.
• TORONTO INTERNATIONAL AIRPORT 1958
  Toronto International Airport begins operating in Malton, just outside Toronto. Renamed Lester B. Pearson International Airport in 1984, it is now the largest airport in Canada and 32nd largest in the world.
• ST. LAWRENCE SEAWAY 1959
  The St. Lawrence Seaway, a series of locks and canals connecting the Atlantic Ocean to the Great Lakes, is completed.
• TRANS-CANADA HIGHWAY 1962
  The Trans-Canada Highway officially opens, spanning over 8,000 kilometres from Victoria, B.C. to St. John’s, NL. It is one of the longest routes of its type in the world.
• MONTREAL MÉTRO 1966
  The Société de transport de Montréal unveils Canada’s first rubber-wheeled underground rapid transit system, the Montreal Métro. The project was completed for Expo 67.
• RED RIVER FLOODWAY 1969
  The Red River Floodway goes into operation in Manitoba. The amount of earth excavated for the project was second only to that of the Panama Canal.
• CN TOWER 1976
  The CN Tower is completed in Toronto. It held the record as the world’s tallest free-standing structure from 1975 to 2007.
• OLYMPIC STADIUM 1976
  Olympic Stadium opens in Montreal. The stadium is the largest by seating capacity in Canada and was once the home of the now-defunct Montreal Expos baseball team.
• VIA RAIL 1977
  Inspired by the 1971 creation of Amtrak in the United States, Pierre Elliott Trudeau’s government set up a new Crown corporation, VIA Rail Canada. Its mission was to provide an intercity passenger train service for Canadians at a lower cost with quality service.
• JAMES BAY HYDROELECTRIC 1986
  The first phase of the James Bay Hydroelectric Project in northern Quebec begins producing power.
• THE SKYDOME 1989
  The SkyDome (now called the Rogers Centre) is completed in Toronto. The venue was noted for being the first stadium to have a fully retractable motorized roof.
• CONFEDERATION BRIDGE 1997
  Construction concludes on the Confederation Bridge spanning Northumberland Strait between New Brunswick and Prince Edward Island. Almost 60 per cent of Islanders voted “Yes” to having this fixed link to the mainland.
• THE CANADA LINE 2009
  The Canada Line is completed on Vancouver’s SkyTrain expansion in time for the Vancouver 2010 Olympics. The SkyTrain is now the longest rapid transit system in Canada.
• HYDROELECTRIC ONGOING
  The hydroelectric development of Lower Churchill Falls at Muskrat Falls and Gull Island continues.