Canadian investment in Asia Pacific on the decline . . .
According to the Asia Pacific Foundation of Canada’s (APF Canada) latest Investment Monitor report, foreign direct investment (FDI) in research and development (R&D) from 2003 to 2021 made up less than five per cent of investment flows between Canada and the Asia Pacific. Asia Pacific FDI in Canadian R&D accounted for only two per cent of total FDI flows between 2003 and 2021, while Canadian investment in Asia Pacific R&D projects accounted for one per cent of total FDI over the same period. The report also shows that Canadian investment in Asia Pacific R&D has declined since the mid-2010s, while Asia Pacific R&D investment in Canada has increased since the mid-2010s.
Software and computer services sector increasingly popular . . .
Between 2003 and 2021, R&D FDI between Canada and the Asia Pacific has become increasingly concentrated in the software and computer services sector. From 2017 to 2021, the sector has been the largest recipient of both inward and outward FDI R&D flows, making up 28 per cent of Canadian R&D investment in the Asia Pacific and 65 per cent of Asia Pacific investment in Canada. Prior to 2017, the biotechnology and pharmaceuticals sector made up most of the Asia Pacific’s R&D investment in Canada, with 72 per cent of R&D investments made in this sector, while the technology hardware and equipment sector dominated Canadian R&D investment in the Asia Pacific, accounting for 32 per cent of Canadian R&D FDI in the region.
Is an R&D FDI resurgence on the horizon?
Despite the historical trend of low investment in R&D between Canada and the Asia Pacific, inward and outward investment in R&D rebounded in 2020 and 2021. Between 2019 and 2021, Canadian investment in Asia Pacific R&D increased by 77 per cent, and Asia Pacific investment in Canadian R&D grew by 68 per cent over the same period. Furthermore, the data for 2022 indicates that Canadians have invested more in Asia Pacific R&D than vice-versa, with C$583M invested in Asia Pacific R&D projects in the first two quarters, which suggests a renewed interest in R&D activities among Canadians. This report highlights opportunities for investors interested in expanding R&D linkages between Canada and the Asia Pacific.
- APF Canada: Investment monitor 2022: Lagging foreign direct investment in research and development
- OECD: Foreign direct investment flows in the time of COVID-19
- World Intellectual Property Organization: Global innovation index 2022: Tracking innovation through the COVID-19 crisis