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foreign investment

State-owned enterprises have been active participants in the global economy for decades. In fact, they drive 70 per cent of activity in the global energy sector.

Canada knows a thing or two about so-called SOEs. Not so very long ago we had Petro-Canada, Canadian National and Air Canada. We still have Canada Post, which acquired Purolator Courier to compete with UPS and FedEx. We own "Crown corporations," such as Ridley Terminals (for which I used to be chairman), which fulfills no discernible public policy purpose other than to generate profits for their owners, the taxpayer.

The apparent indigestion being caused by the CNOOC-Nexen and Petronas-Progress deals has nothing to do with their size or even the "strategic" nature of their industries. There is nothing strategic to Canada in either Nexen or Progress. The real issue is who the investors are and where they come from.

Foreign SOEs are not new to Canada. For example, Statoil, the Norwegian state-owned energy giant, has been a significant developer of Alberta's oil sands for decades. The question is not whether governments should be in these or any other commercial business is. The point is they are. They function as commercial enterprises as a way in which to generate profits for their governments. Many of them are very patient capital, as opposed to the narrow focus on short-term shareholder returns.

If Ottawa has had no policy on SOEs, it's a safe bet to assume they have none on sovereign wealth funds. These are colossal state-controlled actors in the world of global finance. Like SOEs, they are direct investors – notably in infrastructure and natural resource assets. The Sovereign Wealth Fund Institute pegs the current total of these assets at $5.1-trillion. State-backed companies and sovereign wealth funds now exist in many countries, from Norway, Kuwait, Russia and Bahrain to Singapore, China, and Malaysia, among others.

Canada is already on their radar screen, and they introduce new questions of political and economic power. As state-financed investment becomes a more important part of global finance, countries that traditionally have been open to outside capital, like Canada, must ensure that their policy and regulatory regimes governing foreign investment take account of this key trend.

In many cases, they are also trusted partners. For example, in 2009, China Investment Corp (CIC), a sovereign wealth fund, acquired 17 per cent of Teck Resources Ltd. for $1.8-billion. It did that when no one else would because it judged Teck to be a solid investment opportunity. And it has been: In 2009, Teck stock traded in the $4 range, and today it is over $31. Arguably, this cash infusion saved Teck, a very significant Canadian enterprise.

In the case of Petronas, this Malaysian SOE is the only partner Progress found that had the capacity and willingness to proceed with dispatch to build a multibillion-dollar LNG plant in Prince Rupert. That investment would represent hundreds of jobs in a place sorely in need of them.

Some fear "foreigners are taking over Canada's natural resources." Wrong. Our governments own resources and lease the rights to them. Furthermore, all Canadian laws apply to companies operating within our borders and we exercise the same diligence in enforcing them with everybody.

The 2008 Competition Policy Review Panel chaired by Red Wilson provided sensible guidance that Ottawa has ignored. "Compete to Win" reinforced the basic idea that Canada should be open to business, welcoming to foreign investment, and our future prosperity depends on both. Canadians have nothing to fear from foreign investment, and we have a lot to gain.

Ottawa didn't see these deals coming, but should have. The institutional thinking capacity has been decimated under the Harper government. They can't systematically and rigorously think through and anticipate looming issues by drilling deeper into trends and developments around the world. Rational policy is being replaced by the political calculations of public opinion research.

Commodity prices are taking a dip. Global capital markets are stuck and uncertain. People are putting their money in fixed income and other safe haven instruments. Meanwhile, Ottawa's negligence is giving reason for the world to reconsider Canada as an investment destination.

In the meantime, shareholders are taking a shellacking. Shares in Progress Energy took a 13-per-cent hit.

Ottawa's action – and inaction – is destroying billions in wealth.

Daniel Veniez is a Vancouver-based entrepreneur, a former political aide in the Mulroney government and a former candidate for the Liberal Party of Canada.