CANADA'S ECONOMIC GROWTH WEAKENS AS ATTRACTIVENESS TO FOREIGN INVESTMENT DROPS

www.conferenceboard.ca

OTTAWA, April 14 /CNW/ - Canada is still attracting slightly more than its "fair" share of global foreign direct investment (FDI), but its share has dropped significantly in recent decades. Poor results in attracting inward FDI is one of the reasons for Canada's weak labour productivity growth and its slipping economic performance, according to the Conference Board's latest release (http://www.conferenceboard.ca/hcp/hot-topics/inwardFDI.aspx) of its How Canada Performs series.

"For some time now, the Conference Board has argued that one of the causes of Canada's slipping economic performance (http://www.conferenceboard.ca/hcp/hot-topics/econforecast.aspx) relative to both peers and emerging economies is insufficient inward FDI," said Louis Thériault, Director, International Trade and Investment Centre (http://www.conferenceboard.ca/ITIC/default.aspx). "Canada is caught in a paradox. It needs to attract more FDI as a means of improving labour productivity. Yet, the evidence suggests Canada's low labour productivity lessens its attractiveness as an FDI destination.

"The low Canadian dollar helped to maintain our international competitiveness, in spite of weak productivity growth. Now that the loonie is at par with the U.S. dollar, Canada needs investment to make its firms more productive. FDI benefits Canada by bringing investment, technology and innovative practices into the country."

The Conference Board's How Canada Performs
(http: href="http://www.conferenceboard.ca/hcp/default.aspx">//www.conferenceboard.ca/hcp/default.aspx) benchmarking analysis assesses whether Canada is attracting its "fair" share of inward FDI. Canada's inward FDI performance index - which compares Canada's share of global FDI relative to its share of global GDP - is still greater than one. This means that the country is still attracting more inward FDI than its economic size would warrant.

Canada's share of global inward FDI flows, however, dropped to three per cent in 2009, from 16 per cent in 1970. In comparison, the U.S. share rose from eight per cent in 1970 to 29 per cent in 1986, before falling to 12 per cent in 2009. China's share of global inward FDI flows grew from almost zero in 1970 to 11 per cent in 2009. India's share increased as well, but not nearly as spectacularly as did that of China.

The Conference Board's How Canada Performs analysis found a positive relationship between inward FDI stock as a share of GDP and labour productivity among 17 countries assessed. In 1980, Canada had the second-highest share of inward FDI stock relative to GDP. In 2009, however, Canada ranked 10th among the 17 countries on inward FDI stock as a share of GDP.

"The fact that Canada's ranking is slipping is an issue, because inward FDI boosts productivity by providing access to new technology, business and manufacturing processes and management know-how. As well, inward FDI helps to foster a more competitive and innovative business environment," said Thériault,

How Canada Performs is a multi-year research program at The Conference Board of Canada to help leaders identify relative strengths and weaknesses in Canada's socio-economic performance. The How Canada Performs website presents data and analysis on Canada's performance compared to 16 peer countries in six performance categories: Economy, Innovation, Environment, Education and Skills, Health, and Society. This year, the Conference Board is assessing Canada's performance on 10 Hot Topics (http://www.conferenceboard.ca/hcp/hot-topics/default.aspx).

SOURCE CONFERENCE BOARD OF CANADA

For further information:

Brent Dowdall, Media Relations, Tel.: 613- 526-3090 ext. 448
E-mail: corpcomm@conferenceboard.ca

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