Canada needs discretion in foreign takeovers: PM
Absolute clarity would be ‘foolish’
OTTAWA — Prime Minister Stephen Harper says it would be “foolish” for his government to make foreign investment rules too clear because Canada needs enough discretion to block takeover bids that aren’t good for the country.
Harper made the comments Friday at a question-and-answer session in Toronto at the Ivey School of Business.
Since Harper’s government set strict limits a year ago on how foreign state-owned enterprises can invest in the energy sector, some international investors have complained there isn’t enough certainty for them on whether to make bids to acquire Canadian companies.
But the prime minister said he isn’t about to change his approach.
“In my opinion, when you are dealing with large state investors, foreign governments as the investor, I think it would be foolish for the Canadian government to provide absolute clarity,” said Harper.
The prime minister appeared to acknowledge that there is a lack of “clarity,” but he suggested there is a need for a “margin for the government to exercise its judgment.”
“It is absolutely necessary when the investor is a foreign government for the government of Canada to be able to exercise its discretion and have direct conversations with those foreign investors.”
Last month, former Conservative cabinet minister Jim Prentice — now a CIBC executive — told an audience in London, England that the Harper government’s rules on foreign takeovers by state-owned companies are curbing investment, threatening the oilpatch and harming the economy.
Under the plan announced in December 2012, the government will only approve takeovers by foreign state-owned enterprises in the Canadian oilsands on an “exceptional basis.” Moreover, proposed takeovers by state-owned enterprises, known as SOEs, for all industries will be judged using strict criteria.
The policy was announced at the same time Harper revealed his government approved the takeover of two Canadian energy firms by state-owned firms — Nexen, from China, and Petronas, from Malaysia.
Prentice said he supports the policy but warned that foreign investment had dropped to $2 billion in 2013, from $27 billion during the same period the previous year. “Not everyone is getting the message that Canada remains open to the world,” said Prentice, viewed as a possible leadership contender when Harper leaves his job.
“In fact, some are coming to believe the opposite.”
For his part, Harper said Friday that his government is “struggling” with the issue but believes it has found the right balance.
“We want the Canadian economy to remain open for foreign direct investment,” said the prime minister.
“We welcome foreign investment and direct investments of all kinds, including we have significant state-owned investors in Canada. But I don’t think as Canadians we would want to see entire sectors of the Canadian economy become predominantly state owned by a foreign country.”