Editor's note: This article has been updated from its original version
Prime Minister Stephen Harper has vowed to outline a road map for foreign takeovers when his government completes its review of CNOOC Ltd.’s $15.1-billion takeover of Nexen Inc. this fall, as he continues to court investment from China and other emerging market countries.
Speaking in Vancouver, the Prime Minister acknowledged that Canadians are skeptical on whether Chinese companies operating here will play by western rules, and that China needs to do more to open its market to Canadian investment. He said Ottawa will take a broad, long-term view in determining whether CNOOC’s Nexen acquisition satisifies the test of creating a net benefit for Canada.
While Mr. Harper said the CNOOC decision should not be viewed as a “litmus test” for Canada’s foreign investment policy, he also promised more clarity around the opaque rules by which Ottawa decides whether to approve or turn down a foreign takeover.
“Because of the size of the takeover, because of the size and nature of the proposal, in making a decision the government has to put in place a pretty clear policy framework that indicates why it would or would not accept this decision or subsequent such decisions,” said Mr. Harper, speaking at the Bloomberg Canada-Asia Dialogue.
Ottawa now bases its decisions on Investment Canada’s “net benefit test,” which includes quantifiable issues such as job creation and planned increased investment.
The “net benefit” also includes subjective questions such as whether the takeover is consistent with government policy. State-owned enterprises such as China’s CNOOC face an added test in which they must demonstrate they will act as a commercial entity and not as a policy arm of a foreign government.
But Mr. Harper has been vague on whether his government would approve the sale of domestic companies that play a major role in their industry – companies such as Suncor Energy Inc. – or the degree to which Ottawa would allow foreign, state-owned companies to dominate sensitive sectors. And he has not addressed whether Canada will approve takeovers from state-owned companies that do not allow reciprocal acquisitions in their home country.
The Prime Minister left Thursday for a meeting of the Asia-Pacific Economic Co-operation forum in Vladivostok, Russia, where he expected to have a one-on-one meeting with Chinese President Hu Jintao. He said he will press the Chinese leader, who relinquishes power this fall, to follow through on bilateral plans to expand the Canadian-Chinese commercial relationship in a way that benefits both countries.
“We want to see this economic relationship continue to expand, but we want to see it expand in a way that is a clear two-way flow and clear benefits for both sides,” he said.
Critics have complained that the Chinese government is looking to secure access to natural resources through an aggressive global investment program by its state-owned enterprises, but is less willing to allow western countries to invest in its country. The Bank of Nova Scotia, for example, has been waiting for months for approval to close its purchase of Bank of Guangzhou, a matter Mr. Harper raised when he visited Beijing last February.
The Prime Minister also acknowledged that a takeover of a Canadian company by Chinese state-owned enterprises is not supported by a majority of Canadians. According to a recent survey by the Asia-Pacific Foundation of Canada, just 16 per cent of Canadians are in favour of Chinese state firms buying Canadian companies.
“There is some distrust on that side. I think it is incumbent upon the Chinese to demonstrate their willingness to play by the same rules,” he said.
Mr. Harper also reiterated his government’s goal of strengthening Canada’s trade with China while accepting the differences between the economies. “We can’t make it a prerequisite of doing business that they’ve got to become just like us. We do have to factor in our differences and factor in those differences in pursuing ultimately what our best interests are within a relationship that has to be mutually beneficial.”
Former Conservative industry minister Jim Prentice – who gave the keynote address at the same conference Thursday evening – said Canada is lagging other trading partners, notably Australia, in accessing the growing markets in Asia and has to improve its game. Attracting Asian investment is a key tactic in pursuing that strategy, he said.
“It’s hard to imagine a full strategic partnership with China which did not welcome Chinese investment to Canada and similarly welcome Canadian investment to China,” Mr. Prentice said, arguing the CNOOC deal should be judged on its merits, while broader trade and investment issues are dealt with separately.