Recent FDI Trends and DFAIT’s FDI Results Presented by: David Hartman, Director Investor Services Division (DFAIT) C-11 Meeting, October 4

OBJECTIVES Examine recent global FDI trends Review FDI trends in Canada Report on highlights of DFAIT’s results for FY2010-11 Present conclusions and discuss outlook

Average annual growth of global commerce activities, (%) Despite a recent sharp drop in global investment flows, FDI remains the main engine of globalization Average annual growth of global commerce activities, (%) 1990-2010 Source: BIA compilations based on data from UNCTAD

Cumulative FDI Outflows Cumulative FDI Outflows by country FDI Sources: Developed economies remain the main sources but emerging economies are becoming more important Cumulative FDI Outflows by region (%) Cumulative FDI Outflows by country Top 15 countries, 2006-2010 Others Latin America Asia and Oceania North America Top Sources Europe 1996-2000 2006-2010 Source: BIA compilations based on data from UNCTAD

Cumulative FDI Inflows Cumulative FDI Inflows by country FDI Destinations: The shift of FDI inflows toward emerging economies continue with the BRICs as key destinations Cumulative FDI Inflows by region (%) Cumulative FDI Inflows by country Top 15 countries, 2006-2010 Others Latin America Asia and Oceania Top Destinations North America Europe 1996-2000 2006-2010 Source: BIA compilations based on data from UNCTAD

Over the last decades, there has been a significant shift toward FDI in services Share of global inward FDI flows by major economic sectors (%) 2007-2009 1990-1992 Services (54.3%) Primary (4.5%) Services (67.7%) Primary (10.3%) Manufacturing (41.2%) Manufacturing (22.1%) Source: BIA compilations based on data from UNCTAD

Net FDI inflows in Canada While FDI in Canada has grown in absolute terms, we have lost ground in relative terms over the last decades Canada’s share of global FDI inflows Net FDI inflows in Canada Billion $Can 5 years moving average Actual flows Source: BIA compilations based on data from UNCTAD and Statistics Canada

Strong inflows in Canada over the recent period stems from large investments in the natural resources sector Top recipients of global FDI Inflows: Cumulative FDI inflows 2004-2010, US$ billion Distribution of cumulative FDI inflows in Canada by sectors Canada - 7th, (total FDI) All other sectors - 37% + 37% Energy and metallic minerals Canada – 21st, (Excluding FDI in Energy and metallic minerals) Source: BIA compilations based on data from UNCTAD and Statistics Canada

While the U.S. and Europe still account for the majority of FDI stock in Canada, other countries are making important gains Share of Top 10 source countries of Canada’s Inward FDI stock in 2010 Distribution of FDI stock, 2000 and 2010, by major regions, (%) Netherlands (9.2%) Others UK (7.5%) Switzerland (3.6%) Europe France (3.4%) Japan (2.8%) China (2.5%) Brazil (2.4%) United States (54.5%) Luxembourg (2.0%) Germany (1.8%) United States Others (10.2%) Total FDI Stock 2010: $561.6 billion Source: BIA compilations based on data from Statistics Canada

Trends in Foreign Investment Projects

Greenfield/expansion investment projects up globally but still below peak of 2008 Total number of foreign investment projects globally Total value of foreign investment projects globally (US$ Billion)* After a sharp decline in 2009, the number of investment projects worldwide increased by 2% in 2010. Conversely, investment projects globally fell 16% in value terms in 2010. Source: BIA compilations based on data from FDI Intelligence, Financial Times. Note: Estimated values on August 15, 2011, for all projects.

Number of foreign investment projects in Canada has increased over previous year Total number of foreign investment projects in Canada Total value of foreign investment projects in Canada (US$ billion) Foreign investment projects in Canada rose by 20% in numerical terms and fell by 11% in value terms in 2010. Source: BIA compilations based on data from FDI Intelligence, Financial Times. Note: Estimated values on August 15, 2011, for all projects.

Recently, Canada has gained ground in attracting foreign investment projects… Canada’s share of foreign investment projects globally (number and value) Source: BIA compilations based on data from FDI Intelligence, Financial Times Note: Estimated values on August 15, 2011, for all projects.

DFAIT’s FDI Results

Investor Attraction Funel Greenfield projects accounted for the majority of DFAIT-facilitated foreign investments = Companies identified by post as being potential investors, based in part on assessments in SIIS = Targets who have confirmed their desire and capacity to invest abroad Prospects Targets Leads = Leads who have shortlisted Canada and whose investment decision is imminent Investor Attraction Funel FY2010-11 1260 1032 509 167 Outcome = Greenfield Investments (104) + Expansions (41) + Acquisitions (22) Source: DFAIT’s internal reporting system

Greenfield/expansion investment projects 4/16/2017 Greenfield/expansion investment projects facilitated by DFAIT have increased over last year In FY2010-11: DFAIT helped attract: 145 greenfield/expansions (focus of FDI attraction program) 22 mergers and acquisitions Impact on the Canadian economy (excluding acquisitions): $7.1 billion investment (total for 52% of companies reporting to DFAIT or in public sources) 4,252 jobs (61% of companies reporting) The DFAIT performance in FY2010-11 was up 38% and was relatively robust given only… 2% increase in number of greenfield/expansion projects globally in 2010 4.9% increase in worldwide FDI inflows in 2010 9.4% increase in overall inward FDI flows to Canada in 2010 Number of foreign investment projects in Canada facilitated by DFAIT, by fiscal year Source: DFAIT’s internal reporting system 16

All regions increased their number of DFAIT- facilitated foreign investment projects in FY2010-11 In the past five years: Total number of investments facilitated by region: 525 Europe (60%) 196 Asia (22%) 158 Americas (18%) Foreign investment has risen in all regions in FY2010-11 Europe was the biggest source of investments facilitated for each of the last five years Number of foreign investment projects in Canada facilitated by DFAIT, by region 124 119 107 104 70 67 71 43 42 28 28 26 17 18 15 * Source: DFAIT’s internal reporting system *Brazil accounted for 1 investment in FY2010-11 Note: Non-priority markets accounted for 5 investments in FY2010-11: Mexico (2) , Ireland (2) and Portugal (1). Represents acquisitions

All investments by sector increased over last year, except for Agrifood & Clean Technology In FY2010-11: DFAIT helped attract 145 greenfield investments and expansions: Foreign investment projects in Canada (excluding acquisitions) facilitated by DFAIT, by sector 39 Manufacturing: Machinery equipment (11) Aerospace & Defence (16) 30 Automotive (12) ICT Software (13) Digital media (6) Wireless communications (4) Other (7) 24 Business, Financial & Professional Services 16 Clean Technology Renewable-energy technologies (15) Environmental technologies (0) Other (1) 7 Life Sciences Biopharmaceutical (4) Medical devices (3) Agrifood 6 Plastics & Chemicals Non-priority sectors 145 TOTAL Source: DFAIT’s internal reporting system

DFAIT facilitated foreign investments were highest in Ontario and Quebec Number of foreign investments in Canada (excluding acquisitions) facilitated by DFAIT, by destination Two largest provinces received the vast majority of investments in FY2010-11 (78%). Ontario’s investments increased significantly by 148% over the previous year. Source: DFAIT’s internal reporting system Note: No Greenfield/Expansion investments were facilitated in Prince Edward Island, Nunavut, Yukon or the Northwest Territories.

DFAIT’s results: key conclusions It was a successful year for DFAIT facilitated investments, following the global economic downturn Final results for FY2010-11 indicate 145 DFAIT facilitated greenfield and expansions investment projects - an increase of 38% from the previous fiscal year. The investment projects had a value of $7.1 billion (52% of companies reporting), compared to $1.1 billion in the previous fiscal year – an increase of $6.0 billion. One of those projects included a German company, K+S AG, which invested $2.5 billion in Saskatoon, SK. These projects created an estimated 4,252 jobs (61% of companies reporting), compared to 3,082 jobs the previous year – an increase of 1,170 jobs.

FDI Outlook According to the UNCTAD World Investment Report 2011: Global FDI inflows rose a modest 4.9% to US $1.2 trillion in 2010, following a 32.1% decrease in 2009. However, FDI flows in 2010 were still 37% below their peak 2007 level of nearly US$ 2 trillion. Looking forward - under an optimistic scenario - global FDI inflows are projected to rise to $1.5 trillion in 2011, $1.7 trillion in 2012 and $1.9 trillion in 2013. Under the - increasingly probable - pessimistic scenario, global FDI inflows are projected to stagnate at around $1.2 trillion. As indicated by FDI intelligence, FDI projects globally in 2010 increased by 2% and fell by 16% in terms of the number and value of investments, respectively. For the first half of 2011, greenfield/expansion projects were the same as the first half of last year, suggesting stagnating growth. The economic outlook for Canada appears good, and bodes well for FDI: The Economist Intelligence Unit continues to rank Canada as the best place to do business in the G7 over the next five years (2011-2015) According to the IMF, Canada, along with Germany, are projected to have the fastest growth in the G7 in 2011 and 2012.