Foreign takeover rules hurt economy: officials
Lack of clarity affects billions in investment
OT TAWA — A year after Prime Minister Stephen Harper introduced grittier foreign takeover rules and declared Canada “open for business,” Canadian premiers and business leaders say the changes have created a chilling effect that is scaring off desperately needed foreign investment and damaging the economy.
They’re calling for more clarity to the rules and for the federal government to do a better job convincing international investors that Canada is, indeed, open for business.
Billions of dollars of investments, especially in the oil and gas sector, have already been lost, some say, and with it potentially thousands of associated jobs.
Foreign companies and state-owned enterprises will continue to invest their capital elsewhere unless Canada changes its message and provides more clarity, cautions Jim Prentice, vice-chairman of CIBC and former senior Conservative cabinet minister in the Harper government.
“It’s largely about the tone we are setting as a country. We need to be abundantly clear that we’re open for business,” Prentice said in an interview.
“We’ve seen in 2013 a quantum reduction in the amount of (foreign investment), and I think that’s evident in the oilpatch and I think people are concerned about it.”
The Conservative government announced Dec. 7, 2012 changes to the Investment Canada Act and its “net benefit” test that effectively barred state-owned firms from acquiring majority stakes in Canadian oil and gas companies — particularly in the lucrative Alberta oilsands.
Going forward, takeovers of oilsands companies by state-owned enterprises (SOEs) will only be permitted on “an exceptional basis only,” Harper announced at the time.
But since that announcement, the amount of total investment in Canada’s oil and gas sector — from private firms and SOEs — has seen a precipitous decline, says Prentice, noting he supports the “net benefit” test because it provides needed flexibility, but would like more expeditious reviews.
“Canada has been paying a price for some of the perceived uncertainty surrounding clarity on the rules on foreign direct investment,” Prentice added.
However, Harper said last month it would be “foolish” for his government to make foreign investment rules crystal clear because Canada needs discretion to block takeover bids that aren’t in the best interests of the country.