We should be setting it aside into what you can broadly call sovereign wealth funds, which we can then use to invest in long-term infrastructure to help broaden and stabilize the Canadian economy. We can support investments in research and development, we can invest in financial securities to provide a long-term income stream that will benefit future generations and take down the general expense of government. But to just take the asset, monetize it and throw it into the operating accounts of the government is not the way to go.
What impact does foreign investment have on that scenario, when we’re giving up a large portion of the revenues from our natural resources?
It’s not foreign investment, so much as our own uncontrolled and unrestrained development of our resources that is the problem. From a national interest point of view, you have to make sure you have the regulatory framework in place so that foreign investment is followed by corporate behaviour that is consistent with Canadian laws and fundamental objectives. And I think we’ve struggled with that in the past.
Source: Statistics Canada
There’s been confusion about takeovers in Canada, with talk of net benefits and strategic assets – you can take over Nexen, but you can’t take over MacDonald Dettwiler or Potash. Why the lack of clarity?
It’s a very messy area. Canadian taxpayers have made significant contributions to the development of certain technologies and companies, so there’s an automatic obligation to protect the interests of taxpayers. Another complicating factor is national security. We live in a world where the geopolitics of security have become much messier. There are a lot of things we can do with sensitive technologies with the United States, for example, that we cannot do with certain other countries. For instance, many of the aerospace technologies are dual-use – they can be used for peaceful purposes, and they can be used for military purposes. So who can come in and invest in those kinds of technologies and what is going to be done with them is another complicating factor. And to write it all in to regulation is almost guaranteed to leave room for difficult situations to arise.
So, really, it can only be on a case-by-case basis?
Generally speaking, I think that’s true, because there are threshold effects in natural resources. There are security issues that are mind-bendingly complicated and multidimensional. And so to try to apply one-size-fits-all to that kind of world would be, I think, stupid.
Are there countries that are taking a different approach to foreign investment that should be a model for us?
I think that in most countries, there’s a pretty significant zone of discretion reserved for the government, and I think some of the issues we’ve talked about – in terms of security and control over natural resources and so on – are equally prominent in most resource-rich countries.
So what should we be doing to encourage more foreign investment?