Foreign investment

Definition

Foreign investment refers to the flow of capital from one country to another, where investors purchase assets or establish businesses in the foreign country. This influx of money can significantly impact the economy of the receiving nation by stimulating growth, creating jobs, and improving infrastructure. It plays a crucial role in shaping economic recovery, industrial development, and major infrastructure projects.

5 Must Know Facts For Your Next Test

1. Post-World War II, Canada saw a surge in foreign investment, which was crucial for rebuilding its economy and developing key industries.
2. The 1960s and 1970s marked significant foreign investment in Canadian manufacturing and natural resources, leading to industrial growth and prosperity.
3. Foreign investment played a vital role in financing the construction of the Canadian Pacific Railway, facilitating trade and connecting the country.
4. In the late 20th century, concerns arose about foreign ownership of Canadian companies, leading to discussions about national sovereignty and economic independence.
5. Policies were implemented to encourage foreign investment while also ensuring that Canadian interests were protected and promoted.

Review Questions

• How did foreign investment contribute to Canada's post-war economic recovery?
  • Foreign investment was a key driver in Canada's post-war economic recovery by providing necessary capital for rebuilding industries and infrastructure. With significant inflows of foreign capital, Canada was able to modernize its manufacturing sector and expand its resource-based industries. This influx of funds not only created jobs but also improved technological capabilities, leading to sustainable growth in the years following World War II.
• Evaluate the impact of foreign investment on industrial growth in Canada during the mid-20th century.
  • Foreign investment significantly boosted industrial growth in Canada during the mid-20th century by attracting multinational corporations that brought advanced technology and management practices. This led to increased productivity and efficiency in various sectors, including manufacturing and natural resources. Additionally, as these industries expanded due to foreign capital, they created numerous jobs, further stimulating the economy and enhancing Canada's global competitiveness.
• Assess how foreign investment influenced the construction and significance of the Canadian Pacific Railway.
  • Foreign investment was crucial for financing the ambitious project of building the Canadian Pacific Railway (CPR), which connected eastern and western Canada. This railway facilitated trade, movement of people, and access to resources across vast distances. By drawing on foreign capital, Canada was able to undertake this monumental infrastructure project that played a significant role in nation-building. The CPR not only helped establish economic ties between provinces but also solidified Canada's identity as a unified country.

Related terms

Foreign Direct Investment (FDI): A type of foreign investment where an individual or business from one country invests directly in a business located in another country, often involving ownership and control.

Portfolio Investment: Investment in financial assets, such as stocks and bonds, that does not provide the investor with direct control over the companies in which they invest.

Economic Growth: An increase in the production of goods and services in an economy over a period of time, often measured by the rise in Gross Domestic Product (GDP).