Last week, Prime Minister Mark Carney presented to investors and business leaders in New York City.
His mission: to pitch Canada as “a premier destination” for new foreign investment.
“We are catalysing one trillion dollars in investments in Canada over the next five years — in energy, transportation, data and defence,” Carney said in his May 28 address at the Economic Club of New York.
“Foreign investment [in Canada] is running at twice the rate of our nearest G7 peer,” he added. “And Canada now ranks as the most attractive country in the world for infrastructure investment.”
But some economists argue there is another side to the story: that headline foreign direct investment (FDI) numbers can distract from the more critical question of the net benefit to Canada.
“It’s not just about asking how do we attract more FDI,” said Kaylie Tiessen, chief economist at the Canadian SHIELD Institute for Public Policy think tank.
“We should be asking, ‘What kinds of FDI will help capture more value? And how do we ensure that domestic firms benefit?’”
Different kinds of investment
Foreign direct investment occurs where a company or individual in one country invests in a business or asset in another country, with the key feature being that they gain significant influence or control over it.
FDI can be deployed to “greenfield investments,” where foreign capital is used to build entirely new facilities or operations. Foreign companies and governments are the principal investors in all of Canada’s major new LNG export facilities, for example.
But FDI also includes mergers and acquisitions (M&A), where foreign firms purchase existing Canadian companies or assets.
Tiessen argues the distinction matters.
“[M&A] is just purchasing activity that’s already going on,” she said. “That’s not creating any new activity.”
Policymakers have historically treated FDI “as an unalloyed good,” Tiessen says. But more recent research suggests some forms of investment can be extractive.
M&A can reduce Canadian economic capacity over time if corporate leadership, research functions or intellectual property are relocated abroad.
Randall Morck, an economist at the University of Alberta’s School of Business, says multinational firms often concentrate their highest-value activities in their home countries.
“Multinationals tend to keep decision-making, research facilities, and other high-value-added functions in their home countries,” Morck told Canadian Affairs in an email.
This can have knock-on effects.
[E]xisting research activity attracts more research facilities to set up, because the experts they need are already there,” he said, adding that corporate headquarters also generate work for lawyers, accountants, consultants and restaurants.
FDI into Canada reached $96.8 billion in 2025, the highest annual inflow since 2007, according to Statistics Canada. M&A activity accounted for about half this total, at $43.6 billion.
And more than half of inward direct investment in 2025 came from the United States.
The Carney government wants to accelerate these trends.
The federal government is co-hosting Canada’s first-ever Canada Investment Summit in Toronto this September. The summit is focused on attracting new investment to advance Canada’s nation-building projects, a government press release says.
Tiessen worries there is not enough emphasis placed on attracting the right kind of FDI.
“Where’s the framework?” she said. “No matter where the investment comes from, what’s the framework to make sure that the investments are leading to value creation and value-add that stays in Canada?”
“[H]ow FDI is structured is just as important as whether we have it at all,” she added.
Statistics Canada tracks foreign investment flows and acquisitions of Canadian firms. However, the agency’s headline FDI figures do not make clear how much of this investment leads to new productive capacity in Canada.
Sovereignty and security
The federal government says the Investment Canada Act — the law governing large foreign investments — is designed to ensure major investments provide a “net benefit” to Canada while also allowing reviews for national security concerns.
Recent legislative reforms strengthen the government’s ability to review investments involving sensitive sectors such as critical minerals, critical infrastructure and economic security, a spokesperson for Innovation, Science and Economic Development Canada told Canadian Affairs in an emailed statement.
The department also noted that updated national security guidelines now require the federal government to consider whether investments could undermine Canada’s economic security or affect the supply of critical goods and services.
Tiessen argues policymakers could go further by incorporating broader “value capture” measures into investment reviews — giving weight to considerations such as where profits go, who gains intellectual property rights and whether jobs are created.
The Canadian SHIELD Institute recently developed a “sovereignty score” assessment tool to measure how much economic value and strategic control remain inside Canada under various policies and investments.
“We need to start incorporating more intangible assets into the reviews that are done,” said Tiessen, pointing to intellectual property, data ownership and skills development as areas Canada has historically undervalued.
“Those are the outcomes that we’re looking for when we celebrate FDI,” she said.
Greener pastures
Morck says the government should also focus more of its energies on making Canada an attractive place for domestic companies to invest.
“Canadians with capital have been investing abroad because investing in Canada is too hard,” he said.
Jock Finlayson, an economist at the Fraser Institute, agrees. Finlayson previously told Canadian Affairs that Canadian funds may be avoiding investing in major Canadian LNG projects because they see it as too risky.
“One is tempted to say that maybe Canadian companies know too much to bother taking the risk,” Finlayson said. “They’d rather take the capital and deploy it in the U.S. or somewhere else.”
In 2025, Canadian firms invested nearly $80 billion abroad.
“Canadians with capital have been investing abroad because investing in Canada is too hard,” said Morck. Regulatory delays, environmental review processes and Indigenous consultation requirements all discourage investment, he says.
“If those regulations can be revised to do what they were supposed to do, instead of diverting investment abroad, I suspect domestic and international capital will both spill forth.”
“The ‘catalysing’ [that Ottawa is trying to achieve] is going to require exceptionally good government, not just peace and order,” said Morck.
“The prime minister is, I think, right that the government needs to get things moving, but a better wording might be ‘let things move’,” said Morck. “I worry that cutting through decades of accumulated red tape, and improving government services all the while, might be too hard.
“I hope I’m wrong. I wish him the best.”
