Prime Minister Mark Carney's newly announced "Canada Strong Fund" (CSF) with $25 billion in funding is unlikely to make Canada more appealing to investors, according to a commentary published this week by the Fraser Institute. The fund, which Carney pitched as part of a plan to revive a moribund economy after a decade of alarmingly weak business capital spending, a shrinking private-sector capital stock, and historically feeble productivity growth, represents yet another government-led attempt to solve Canada's persistent investment deficit. Author Jock Finlayson argues the fund misses the mark entirely.

Because Ottawa doesn't have a spare $25 billion lying around, all the money initially allocated to the CSF will be borrowed, adding to federal debt at a time when governments worldwide face pressure to cap borrowing. The federal government already directs billions annually to similar initiatives that have failed to fix the problem. These include the significant venture capital and other business growth funds managed by the Business Development Bank of Canada, the $15 billion "Canada Growth Fund" launched in 2023, the $29 billion allocated to support clean tech and clean energy development since 2016, and the Canada Infrastructure Bank, created in 2017 with a $35 billion Parliament-approved appropriation over 11 years. Whatever their merits, these and other initiatives cooked up in Ottawa over the last decade or so have failed to fix Canada's "investment deficit," the report notes.

The commentary highlights fundamental differences between Canada's proposed fund and the Norwegian sovereign wealth fund Carney cited as a model. Sovereign wealth funds typically are funded with revenue streams derived from the development and sale of non-renewable natural resources (most often, oil and natural gas), which is true in Norway but not in Canada, where the federal government doesn't collect natural resource royalties—these belong and flow to the provinces. Additionally, Norway and other countries with sizable SWFs direct most of their investments to external rather than domestic markets—that is, they mainly invest abroad, while the proposed CSF will take a different approach—apparently, all of its investments will be made at home.

The report argues that adding to the existing alphabet soup of government programs, funding pots and institutional delivery mechanisms does nothing to improve Canada's tax competitiveness. It won't reduce the cost of an ever-increasing regulatory burden that, according to Statistics Canada, has significantly dampened economic and productivity growth since the mid-2000s. Finlayson contends that Prime Minister Carney—if not his full cabinet—is seized with the problem of low levels of private-sector capital spending in Canada, including insufficient investment in asset categories that drive productivity growth—machinery and equipment, intellectual property products, and digital and other advanced technologies. But what his government has not done is commit to the kind of policy reforms that would make Canada a more attractive location for private-sector investment, entrepreneurial wealth creation, business growth and innovation.

The Fraser Institute commentary concludes that the principal challenge for federal policymakers is not to find new ways to use borrowed money to spark greater business investment and faster economic growth. Instead, it's to make Canada worth investing in again—not as seen by politicians and media commentators, but rather in the eyes of Canadian firms, foreign investors, pension funds and other institutions with risk capital to deploy. The bottom line: another multibillion-dollar government fund won't solve Canada's competitiveness crisis without addressing the underlying tax and regulatory problems driving investors away.