Canada. 13.7% Increase in Assets under Foreign Control

Foreign acquisitions of Canadian-controlled firms, particularly in mining, manufacturing, retail and accommodation and food services industries, drove the 13.7% increase in assets under foreign control in 2006, the fastest rate of growth since 1999. Canadian assets under Canadian control rose 8.2%.

At the same time, Canadian-controlled firms led the way in terms of economic performance in 2006, as measured by operating profits. This was especially the case for oil and gas, construction and depository credit intermediaries, as well as the "other financial industries" category, which includes securities and commodity contracts. Operating profits of firms under Canadian control increased 14.7% from 2006, four times the growth rate of 3.7% among those under foreign control.

As a result of these movements, foreign-controlled firms accounted for 20.9% of corporate assets in 2006, up from 20.1% the year before. But their share of operating profits declined from 28.7% to 26.6%.

In terms of operating revenues, foreign-controlled firms represented 29.8% of the total in 2006, virtually unchanged from the year before.

Acquisitions drive double-digit growth in foreign-controlled assets

The double-digit growth in foreign-controlled assets in 2006 was driven by acquisitions in non-financial industries, particularly in mining, accommodation and food services, manufacturing and retail, as well as by asset growth in the finance industries, especially in the insurance sector and depository credit intermediation sector, which includes institutions such as banks and trust companies.

In the mining industries, foreign-controlled firms accounted for 39.7% of total assets and 58.7% of total operating revenue in 2006, over three times their relative proportions of a year earlier. In addition, foreign-controlled mining firms accounted for more than double the operating profits they did in 2005, reaching 64.3% in 2006.

Meanwhile, foreign control of assets in the accommodation and food services sector rose from 13.9% to 24.8%, while in manufacturing, foreign control went from 43.8% to 47.3% and in retail from 21.3% to 22.4%.

Foreign-controlled assets predominantly under US control, but their share decreased

Of all assets under foreign control in Canada, the United States continued to be the dominant player, although its share slipped. In 2006, US control accounted for 55.2% of all assets under foreign control, down from 57.6% the year before. This was the largest decline among the major foreign nations operating in Canada.

The share of German-controlled firms declined 1.1 percentage points, while the share of firms controlled in the United Kingdom dropped 0.4 percentage points.

Countries showing an increase in their share of foreign-controlled assets included the Netherlands (+1.2 percentage points) and France (+0.3 percentage points), while "other foreign countries" accounted for the remainder.

American firms continued to earn the majority of operating revenue (59.2%) and profits (54.9%) under foreign control in 2006, but these shares were below the 60% mark for the first time since 1999. The declines largely reflected weakness in the manufacturing sector.

Oil and gas leads double-digit growth in Canadian-controlled profits

Operating profits in 2006 reached $285.6 billion, an 11.5% increase from 2005. While both foreign-controlled and Canadian-controlled firms contributed positively to this growth, Canadian-controlled firms led the way.

In the non-financial sector, profits for Canadian-controlled oil and gas firms increased 21.1% in 2006. However, this was a much slower rise than the year before.

Profits for oil and gas firms under foreign control fell 19.9% from 2005. This was largely as a result of declines for US-controlled enterprises, where higher expenses hurt profits as revenues stayed relatively flat.

On a proportional basis, foreign-controlled enterprises accounted for 51.4% of profits in manufacturing, which, along with mining, had the highest shares.

In the financial industries, much of the growth in profits was driven by Canadian-controlled "other financial industries," followed by banking and other depository credit intermediaries.

The Corporations Returns Act requires that an annual report be submitted to the Canadian Parliament summarizing the extent to which foreign control is prevalent in Canada. The document released by Statistics Canada is that report for the reference year 2006.

Source: Statistics Canada, March 3, 2009

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