investment climate

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Business Investment in Canada Falls Far Behind Other Industrialized Countries

Summary

  • This bulletin provides an overview of business investment in Canada: why investment is important, its recent performance, and how it compares with other industrialized countries.
  • Business investment is central to long-term economic growth and rising living standards. Investment is also an important determinant of the structure of industry growth in future years, since it provides the capital for firms to grow. Investment embodies new technological developments and innovations, committing firms to expand in a specific direction while providing the tools for employees to work more productively.
  • There is a tendency to assume that the weakness in business investment in Canada is simply part of slow growth throughout the OECD following the financial crisis that began in 2008. However, despite strength in the energy sector before 2015, business investment in Canada has lagged behind that in almost all other advanced market economies for which there is comparable data.
  • Indeed, business investment in Canada has been relatively low compared to other countries at least since 2000. It improved somewhat between 2009 and 2014 when strength in our energy sector boosted our relative performance. However, the underlying weakness of investment in Canada became apparent again after oil prices slumped, ending the boom in energy investment.
  • The persistent weakness of business investment in Canada has been aggravated by several recent government policies including increased tax rates on capital and mounting budget deficits and debt, both of which add to the uncertainty that entrepreneurs and investors feel about the future.

Carbon tax another major blow to Alberta’s investment climate

For many years, Alberta has maintained a strong investment climate vis-à-vis other provinces and other energy-producing jurisdictions.

Is there any wonder why Ontario is in the state it's in?

As Ontario continues to undermine its economic future with growing debt, the province does not receive near the critical scrutiny it should from the media and financial markets. In reading CIBC World Markets’ latest Economic Insight, it’s not hard to understand why.

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This study is the fifth installment in an ongoing project aimed at understanding and, more importantly, documenting the public policies that contribute to, and sustain, positive investment climates. The study assesses empirically and then ranks the investment climates of the Canadian provinces based on a number of public policies that were identified by investment managers as contributing to a positive investment climate. The Fraser Institute surveyed senior investment managers in Canada on a variety of issues from 1998 to 2004 and these surveys were used to assess and rank the investment climate of the Canadian provinces. Canadian Provincial Investment Climate: 2010 Report uses the results from those surveys to create a quantifiable index of provincial investment climates.Business investment is a powerful driver of economic growth, providing the necessary resources to acquire new machinery and equipment, introduce new technologies, create new job opportunities, and improve productivity. Citizens, politicians, and bureaucrats are becoming more aware of the importance of business investment as a critical determinant of current and future economic prosperity.

Jurisdictions are constantly in competition with one another to provide a positive investment climate, one that is conducive to business investment. Investors respond to differing investment climates by allocating investment resources in a way that maximizes the rate of return on investment. Attracting and sustaining high levels of investment requires an ongoing commitment to policies that contribute to a positive investment climate.

This study is the fifth installment in an ongoing project aimed at understanding and, more importantly, documenting the public policies that contribute to, and sustain, positive investment climates. The study assesses empirically and then ranks the investment climates of the Canadian provinces based on a number of public policies that were identified by investment managers as contributing to a positive investment climate. The Fraser Institute surveyed senior investment managers in Canada on a variety of issues from 1998 to 2004 and these surveys were used to assess and rank the investment climate of the Canadian provinces. Canadian Provincial Investment Climate: 2010 Report uses the results from those surveys to create a quantifiable index of provincial investment climates.

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The allocation of investment capital, both internationally and domestically, is increasingly acknowledged as a leading contributor to a jurisdiction's economic success or failure.