Foreign direct investment (FDI) involves a company or investor from one country making a long-term investment in a business located in another. This can include establishing new operations, expanding existing ones or acquiring and partnering with domestic firms.
It could mean a U.S. company building a manufacturing plant in Canada, a foreign firm acquiring a Canadian company, or an international corporation opening offices in Canada and hiring locally.
Why does FDI matter?
FDI is a crucial aspect of a growing economy because it:
- Brings capital into the economy. FDI injects money that can be used to expand businesses, build infrastructure, and fund new projects without relying on domestic savings.
- Creates jobs and economic activity. Foreign companies operating in a domestic country means they need to hire workers, pay wages and contribute to local economies.
- Knowledge and innovation transfer. Global firms bring new technologies, management practices and expertise, improving productivity.
High levels of FDI typically signal global confidence, suggesting a country is a stable, attractive place to do business.
Is Canada a good investment destination?
Canada is generally seen as a competitive economy to support FDI. Among G20 countries, Canada had the second-largest FDI stock to GDP ratio in 2024. It has been ranked fourth when it comes to lack of business complexity, and third for ease of starting a business.
As of 2025 and early 2026, FDI has been most concentrated in manufacturing and energy because of Canada’s many natural resources, as well as its high-tech workforce and environmental initiatives. There’s also a focus on EV supply chain development and manufacturing, which has led to investments from companies such as Stellantis.
Overall, Canada is a good investment destination because the country has a stable economy and a strong R&D culture. It’s also seen as a leader in tech talent, has sound financial institutions and a competitive tax rate structure.
