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Canada: Ottawa Moves to Encourage Foreign Investment |
| Source: |
thestar.com |
| Source Date: |
Friday, May 25, 2012 |
| Focus: |
ICT for MDGs
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| Country: |
Canada |
| Created: |
May 29, 2012 |
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The Harper government is moving to make it easier for foreign interests to buy up Canadian corporations.
In a major shift certain to renew controversy over protecting Canada’s national interests, the government is gradually raising the threshold for reviewing foreign corporate takeovers to $1 billion over four years.
Currently, any foreign takeover of $330 million or more is studied to see if it is of “net benefit” to Canada. And federal officials can require non-Canadian buyers to guarantee investment and job levels in Canada as part of the approval process.
The new approach is meant “to ensure that the review process focuses on the most significant” takeovers, Industry Minister Chrisitan Paradis said Friday.
Critics of Ottawa’s handling of foreign buyouts have long complained the Investment Canada Act is toothless and has seldom been used to block acquisitions of Canadian companies by overseas interests.
And groups concerned about the so-called “hollowing out” of the Canadian economy as a result of foreign takeovers say the Harper government is now opening the way for a surge in unfettered acquisitions by non-Canadian companies.
“A $1 billion threshold is really quite high,” said Canadian Labour Congress (CLC) chief economist Andrew Jackson. “You’re talking about very large acquisitions,” he said, adding that once the $1-billion threshold is imposed, only a dozen or so of each year’s large foreign acquisitions will be subject to investigation by Ottawa.
NDP deputy industry critic Dan Harris said the government is for the most part “washing its hands” of the foreign review process. “This could have serious detrimental affects on the Canadian economy when jobs and intellectual property get moved,” he commented.
But the federal government says foreign investment strengthens Canada’s economy. “Our foreign investment review process is sound and encourages investment, economic growth and prosperity in Canada,” Paradis said Friday. “With these targeted changes, we will ensure that it continues to do so for years to come.”
He said raising the threshold at which officials must probe foreign takeovers is in keeping with recommendations from studies on how to make the economy more efficient and robust.
The investment review threshold is expected to rise later this from $330 million in asset value to $600 million in enterprise value. After two years, it will increase to $800 million for two years, and then to $1 billion.
“It will remove an important barrier for many transactions,” said Oliver Borgers, an expert on merger and acquisitions at McCarthy Tétrault law firm. “First, it promotes foreign investment and second, the fact that the government is embracing these changes, signals that the government is open for business.”
In another new wrinkle announced Friday, Paradis said Ottawa will provide dispute-resolution procedures in cases where the government believes a foreign investor has failed to comply with pledges on investment or jobs made during the acquisition approval process.
That change follows Ottawa’s lengthy legal dispute with U.S. Steel Corp. over the company’s actions following its acquisition of Stelco in Hamilton. The federal government sought millions of dollars in fines for alleged non-compliance with undertakings made by the American company. U.S. Steel rejected the allegations and the case was settled out of court in December.
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