INVESTMENT

Asset control figure same as in 1988: study

By SIMON TUCK
Friday, August 13, 2004 - Page B4

OTTAWA -- Foreigners control about the same percentage of Canadian assets as they did more than 15 years ago, suggesting that the hollowing out of Corporate Canada is a myth, a report says.

The report, by the C.D. Howe Institute, says Canadians have in fact bought more foreign assets during most of that period since 1988 than has been sold abroad. Some of that record reflects that Canada has lost some of its appeal as a prime destination for foreign exporters, particularly in comparison with the United States.

"The foreign takeover of Corporate Canada is a myth," write the study's authors, Jack Mintz, the institute's chief executive officer, and Yvan Guillemette, a policy analyst at the economic think tank. "Canada's relative attractiveness as a location for new investments is waning."

Since 1988, the report says, Canadians were net importers of corporate assets in only 1999 and 2000, during the height of the technology sector and stock market booms. The figures were also unusual during those two years, the report says, because of a handful of record-setting corporate deals, not a broad takeover of Canadian assets.

While foreign control of Corporate Canada has remained at about 20 per cent since 1988, the report says, American ownership within Canada has also changed little during that period.

But the institute's economists also argue that foreign direct investment -- in Canada and by Canadians abroad -- is good for trade and the economy, not something to be concerned about.

"Evidence-based Canadian and international research shows that foreign-owned companies provide substantial economic benefits to a host country like Canada," the report says.

"In fact, Canadians should worry that the country accounts for an ever-decreasing share of the stock of foreign investment located in North America, or in developed countries altogether."

The C.D. Howe report also argues that Canadian governments can best address this problem of waning investment by lowering corporate taxes, which would make domestic companies more competitive.

Stephen Poloz, chief economist with Export Development Canada, said he agrees that cross-border investments in both directions are healthy for the Canadian economy. "Investment is a platform for productivity growth."

Mr. Poloz also said that Canada is by no means the only country where its citizens often debate the merits of foreign investment.