Improving the national skill set is an important policy objective for both developed and developing countries. The level of skills in the local population is a key determinant of economic development and growth. At the same time, globalization has made human capital and skills development even more important. The reduction in trade barriers and the surge in international trade and foreign direct investment (FDI) by transnational corporations (TNCs) have resulted in the need for workers and businesses to be competitive on a global scale.

TNCs, being on average more productive and technology- intensive than domestic firms, tend to bring positive contributions to the local economy, including in the form of skills development. TNC activity and skills upgrading have a complementary relationship, as they tend to reinforce each other. While an enhanced skills base leads to a more attractive investment climate for TNCs, FDI can be exploited as a vehicle to promote human capital formation. However, the positive impact of FDI inflows on the local skills base is not automatic. This study examines the cases of Canada and Singapore to consider the types of policies that can be used to integrate FDI and skill development.