Manitoba Telecom Services chief executive Pierre Blouin is downright bewildered over Ottawa’s decision to block the sale of his firm’s Allstream division to a company backed by the Egyptian telecom tycoon Naguib Sawiris. He is not the only one.
The government’s decision to scuttle the $520-million deal is opaque. Citing “security concerns” without explaining what risk Accelero Capital Holdings poses to Canada’s national security sows uncertainty about the degree to which this country is open to foreign investment.
Canada, in fact, does not fare well compared with most of its peers on this front. The OECD rates Canada above-average in terms of its restrictions. Rather than having a transparent, rules-based test to determine the value of a particular foreign investment, Canada has opted for a highly subjective approval process.
The “net benefit to Canada” test weighs a potential investment’s impact on Canadian employment, exports and productivity. The Investment Canada Act also allows the government to block any bid based on national security concerns.
In Accelero’s case, the government has hinted that security concerns trumped any net benefit. A memo sent to Conservative MPs about the ruling highlights the fact that Mr. Sawiris is Egyptian, implicitly linking his nationality to apparent security concerns.
Mr. Sawiris is one of Egypt’s most prominent liberals and serves as an adviser to numerous boards, including the New York Stock Exchange. Ottawa went to great lengths five years ago to allow him to bankroll Wind Mobile. Why the sudden change of heart?
Without further explanation from Industry Minister James Moore, Mr. Sawiris and his company are left under a cloud of suspicion.
Ottawa should better communicate its reasons for blocking this deal. All we are left with is the impression that Canada is open only to investors from certain countries. If the government continues to blindside those are interested, there may be fewer and fewer to choose from.