Canadian companies see value in investing in foreign markets

Investing in foreign markets continues to be an important part of the growth plans of Canadian companies despite the ongoing recovery period, according to a survey released today by Export Development Canada (EDC). More than 60 per cent of Canadian companies with direct investments abroad (CDIA) expect their sales to increase in the next six months. More than 30 per cent plan to increase their investments abroad.

"The data shows that sales from the foreign affiliates of Canadian companies are growing at twice the rate as direct exports from Canada," said Peter Hall, Chief Economist for EDC.

"Canadian companies clearly understand that foreign investment is a boon to their bottom lines, and especially so as the developed economies continue to struggle. This is an important advantage to Canada's trade performance in an intensely competitive global marketplace."

EDC's Trade Confidence Index (TCI), a semi-annual survey of Canadian exporters and investors, asks Canadian companies about their current and future levels of CDIA, and how and why they use the strategy.

The survey showed consistency with previous years with 40 per cent of large companies having investments abroad. However, 16 per cent of those indicated that they plan to be more aggressive with their foreign investment strategies moving forward.

Similarly consistent with previous surveys, 11 per cent of medium-sized companies and 10 per cent of small companies are planning to invest abroad through the first half of 2012.

"In this sideways economy, one could forgive Canadian companies for retrenching their plans for foreign investment, but, fortunately, they are seeing the bigger picture and continuing to diversify their sales markets and production," added Hall.

The main reasons for planning CDIA activities are to grow sales and revenues, and expansion into new markets.

The most common form of CDIA, at 71 per cent of those undertaking the strategy, is to establish a plant, warehouse, sales office or branch office. The second most common form, at 31 per cent, is to acquire or merge with a foreign company, including subsidiaries and associates.

The most cited reason among a broadly dispersed set of responses for the role of the foreign entity is to sell goods and services in the foreign market, and onward from there into new markets.

The number one market for Canadian CDIA is the U.S., at 67 per cent of those employing CDIA, and the number two market is China, at 20 per cent.  The U.K., France, Germany and the BRICM nations are also steadily-rising CDIA destinations.

For more information about EDC and the Trade Confidence Index, visit www.edc.ca/english/docs/ereports/tradeconfidence/country_information_index_e.htm.

EDC is Canada's export credit agency, offering innovative commercial solutions to help Canadian exporters and investors expand their international business. EDC's knowledge and partnerships are used by more than 8,200 Canadian companies and their global customers in up to 200 markets worldwide each year. EDC is financially self-sustaining and a recognized leader in financial reporting and economic analysis.