If no one wants to invest here, what does that say about our country?

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Investors appear to be losing more and more confidence in Canada and are taking their money elsewhere.

When it comes to money, there is no heart, no conscience, no homeland: money flows down the path of least resistance in search of the greatest possible benefit.

Investors can't be blamed for wanting a fair return on the money they invest.

At Magna, the company I founded, we returned a large portion of our annual profits to our shareholders. Dividends were quarterly cash payments that were indexed to all shares owned by investors and were about 20%. Some might argue that we were giving too much of our profits back to our investors, but at the end of the day, they were bearing the majority of the risk, even though we were a well-managed company with a good track record of generating annual profits.

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Magna's investors provided the capital we needed to build new factories, buy new equipment and fund product research. We wouldn't have been as successful without them. A business is driven by three forces: smart management, motivated employees and confident investors. Magna had all three.

But investors today are increasingly wary of putting money into Canada, whether it's foreign companies looking to buy Canadian companies or mutual funds investing in the Canadian stock market.

The most recent World Bank data for Canada shows that the net outflow of foreign direct investment is nearly twice as much as the amount coming into the country. That's not a good thing.

Other worrying reports have emerged in recent months, including news that foreign investors have sold nearly $50 billion in Canadian stocks in 2023, the largest portfolio outflow in Canadian history.

Meanwhile, Canadians are on a buying spree, buying record amounts of foreign stocks and bonds, according to BNN Bloomberg. The common thread in all these reports is a shocking lack of investor confidence and trust in Canada's economic fundamentals.

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Canada's investment climate has never been ideal, but it has deteriorated significantly over the past decade or so. To make matters worse, the capital gains tax hike introduced in last month's federal budget is likely to encourage even more money to leave Canada in search of higher returns and less government interference elsewhere.

Dan Davio, president and CEO of Canaccord Genuity, Canada's largest independent investment bank, has publicly criticized the government's plans to increase capital gains taxes, saying the plan will “discourage private investment in growing businesses.” In an op-ed for The Globe and Mail, Davio said the result would be “a permanent loss of job creation and tax revenue contributions from these businesses and their employees.”

After all, there must be a strong correlation between risk and reward. Without the huge financial rewards that come with starting a business, no one in their right mind would risk their hard-earned savings and the sheer amount of time and effort required to grow a business from the ground up.

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And if we cannot sustain the businesses and individuals that produce the products and services that employ Canadian workers, our standard of living will inevitably decline. That's why we see so few factories being built, good-paying jobs drying up and investment capital fleeing our country.

The reality is that in today's borderless world, it's hard to lock away capital: investors simply move to jurisdictions with fewer regulations, lower taxes and less hassle.

So how do we create an environment that allows Canada to retain the brainpower and investment capital it needs to start new businesses and create new jobs, while also attracting foreign investment?

First, we need to dismantle and restructure our tax system so that it is completely simple, black and white, with no loopholes, no deductions, no exemptions, and we need to stop treating some income differently and treat all income the same when it comes to taxation.

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But the problem is that cash-starved governments are constantly looking for additional revenue sources to pay interest on the national debt and cover the rising overhead costs associated with a bloated bureaucracy.

We must also remove regulations that kill small businesses, cut government spending, and give entrepreneurs the breathing space they need to expand.

All of these policies are part of the Charter of Economic Rights that I have been promoting as a way to stave off further decline in Canada's economy and jumpstart business growth.

If no one – not even Canadians – wants to invest in Canada, what does that say about the true state of our country and economy?

To learn more about how the Economic Charter can restore investor confidence and drive new economic growth, contact us at info@economiccharter.ca

National Post

Frank Stronach is the founder of Magna International, one of Canada's largest global companies, and the Stronach Foundation for Economic Rights.

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