Is Canada closed for business, or is it just doing the right thing and protecting its natural resources from ill-advised foreign takeovers? These are the questions the international financial world and Canadians asked themselves after the federal government’s rejection of the $6-billion takeover bid from a state-owned Malaysian company for the Alberta natural gas producer Progress Energy Resources Corp. After similar rejections in the past four years from an opaque foreign-investment regime, Canada’s reputation is under a bit of cloud.
We can dispense with the notion that there was anything iffy about the way Christian Paradis, the Minister of Industry, announced the bid’s rejection. We know now that his hand was forced by Petronas’s refusal to accept a last-minute request from Ottawa for more time to examine the deal, and that he had to make his announcement before an existing deadline of Friday at midnight.
The feeling has grown that it is quite difficult for a foreign company to take over a Canadian one under the Harper government. Since 2008, Ottawa has used the Investment Canada Act to block deals worth billions of dollars (MacDonald Detwiler in 2008, Potash Corp. in 2010) on the grounds they wouldn’t provide an ill-defined “net benefit” to Canada. These decisions should be examined on their own merits, but when combined with the delayed decision on CNOOC’s $15.1-billion bid for Nexen Inc. and the abandoned bid for the Rona hardware chain by an American company this year, the cumulative effect has been to confuse foreign-investment policy to the point that the New Democratic Party, no great friend to business, has begun to make sense when it calls for clarity on the rules.
Prime Minister Harper has been blessed with a sound banking industry, a resource boom and a relatively stable economy. He needs to strengthen these assets by letting the world know that Canada is still open for business. He has now undertaken to issue a new policy framework around the same time that the Nexen decision – better late than never. The only way for Mr. Harper to reassure the world’s markets is to clarify the rules in a transparent manner as quickly as possible.