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Digital Twins can Help With Canadian FDI but Need to Clear This Hurdle First

Twins have the potential to bring in more foreign direct investment in sectors Canada is already performing well in

Canada has catching up to do with other countries before any ambitions of using digital twins to secure foreign direct investment (FDI) can become a reality, says one local academic.

“It still seems to me that the understanding and usage of digital twins is very localized and the data that is a big component of [digital twins] is still closely guarded,” said Tessa Hebb, a Distinguished Research Fellow with Carleton University and a co-applicant of the Imagining Canada’s Digital Twin project. “Those two things mean that we haven’t seen the expansion of what a digital twin can do for us on a broader scale,” she added.

Tessa Hebb is a distinguished research fellow with the Carleton Centre for Community Innovation at Carleton University and a co-applicant for the Imagining Canada's Digital Twin project. (Photo Credit: Submitted)

That broader scale includes the use of digital twins to bring in investment into the country. In Canada, FDI is when a company outside its borders or a non-residential investor purchases interest in a company. Statistics Canada considers 10 per cent voting equity in a company the threshold for whether an investment is direct vs. your average portfolio investment.

Simply put, a high level of FDI flowing into Canada (compared to its economy) signals how attractive its economic prospects are. Other perks include the adoption of new technology, know-how, and bringing upgraded skills to local workers. It also means better odds of multinational entities setting up shop in Canada and creating jobs.

Collectively, these entities represent less than one per cent of companies in Canada, yet account for 12 per cent of all employment and 15 per cent of the nation’s GDP, according to the government of Canada’s own estimates.

Foreign Direct Investment can take the form of a non-resident or foreign country buying a 10 per cent stake or larger. (Photo Credit: Sigmund/ Unsplash)

SPACE TO PLAY

There’s room for digital twins to help in Canada’s recovery, considering the beating FDI flow took due to the COVID-19 pandemic after  contracting by 49 per cent (about $31B), roughly on par with what other countries saw around the world. As Canada looks to bounce back from its economic rut, growth and job creation will be leading the charge, according to Canada’s international trade minister.

“Canada’s [2021] State of Trade makes two things clear: Canadians and businesses made significant sacrifices during COVID-19, and in our recovery, trade and investment will be critical to generating inclusive, sustainable growth, creating jobs, and building a stronger, more resilient future,” wrote minister Mary Ng in her foreword

A closer look at inbound FDI 2020 numbers reveal Canada’s largest three sectors for attracting foreign investment were the “Management of Companies and Enterprises” valued at $255B, “Manufacturing” valued at $199B, as well as “Mining and Oil and Gas Extraction” valued at $187B all sectors where digital twins have tangible applications at reducing costs and boosting efficiencies by providing real-time visualization and predictive analysis.

FDI inbound for Canada between 2005 to 2018. Manufacturing (pink), mining and oil and gas extraction (purple) and management of companies and enterprises (red) had huge impacts. (Photo Credit: CIDP)

The real estate and rental and leasing sector, while pulling in just $22B, was also called out for its “exceptional resilience” during the first year of the pandemic. Also noteworthy is the sector’s growth in the last decade, jumping from $3.1B in 2010 to $22B in 2020.

Digital twins lend themselves naturally to Canada’s housing industry with multiple applications in the architecture, construction, and engineering fields. From a housing development perspective, digital twins have been potent in the planning and proposal stage, construction as well as sales and marketing stage.


‘ONE BIG STUMBLING BLOCK’


But while the potential for digital twins to grow FDI is clear, so too is a hurdle Canadian creators need to overcome when it comes to accessing data to build digital twins.

“One of the big stumbling blocks is what governance model would you use that brings a level of comfort to data sharing,” said Hebb. Governance, as Hebb puts it, is part of the big three factors of environmental, social, and corporate governance (ESG) investors now look at when deciding where to park their money.

It’s something Ian McKay, CEO of Invest Canada, also predicts will be a major shaping force for FDI in Canada going forward.

“The more I hear from investors, the more it becomes clear that a focus on ESG principles are guiding their decisions. It is more than a secondary component of business deals; it is quite rightly fundamental to the investment decision,” McKay wrote in a blog post. “Capital will flow to sectors, jurisdictions and individual companies that respect ESG. Shareholders, customers and corporate boards alike will insist that goods and services are produced in sustainable ways and in sustainable jurisdictions.”

Inbound FDI in Canada's housing and rental sector has seen remarkable growth in the last eight years. (Photo Credit: Canadian International Development Platform)

Canadian digital twin makers looking to gain access to private data might want to pay attention to their U.K. counterparts, according to Hebb, who highlighted the Centre for Digital Built Britain (CDBB) for their focus on use cases of digital twins to win over skeptics.

THE STORY ACROSS THE POND

The group got its start through a 2017 government policy document called “Data for the Public Good,” Peter El Hajj, the National Digital Twin Programme Lead at CDBB told 3D CityScapes. The paper recommended the creation of a national digital twin, leading to the creation of the Nation Digital Twin Program, a partnership through the U.K.’s Department for Business, Energy & Industrial Strategy (BEIS) and the University of Cambridge.

That buy-in from government and academics made swaying industry stakeholders easier, said El Hajj.

“We do a lot of collaboration. In the U.K., you have something called the ‘catapults’, which are government-backed organizations that help advance innovation and specific technologies and we work a lot with those,” he said. “I think what made the program successful is a mindset of collaboration between academia, industry and government from the early days. I think this collaboration is key.”

Peter El Hajj is the National Digital Twin Programme lead at Centre for Digital Built Britain. (Photo Credit: Submitted)

El Hajj points to the Digital Framework Task Group, a group of about 30 groups spread across the three categories, that takes the approach of discussing “everything out loud and in the open” when it comes to and to try to resolve disagreements among the group.

That transparency, in turn, sends the message that digital twins in the U.K. are a safe bet.

“I think that would give confidence to investors in that collaboration. This is basically the starting point and the initial ingredients on the project,” said El Hajj.

Watch: How Digital Twins Add Value To Seaports 

And while the attraction of FDI remains a benefit from digit twins in the U.K., it’s mostly tangential and doesn’t influence what CDBB intends on using digital twins for.

“I think what is driving it, the outspoken strategy for it is to enable better outcomes for people and nature through better decisions, through a better infrastructure system,” said El Hajj. “There would be lots of indirect benefits, which is FDI and export growth, but the main mission is to improve the infrastructure for decision making.

3D CityScapes is a Toronto startup specializing in building digital twins and 3D visualizations. Interested in building a digital twin? Get in touch with us here or give us a shout at +1 416-477-6846

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