The media are describing Canadian PM Stephen Harper's decision to permit two large foreign takeovers in the energy sector as the biggest decision yet in his term in office. Odd that he chose to make the announcement late on a Friday afternoon. The Toronto Star's coverage of the decision can be found here.
The Government is allowing China's state-owned CNOOC to take over Nexen Petroleum of Calgary, as well as giving the green light to a smaller takeover by Malaysia's Petronas that it had previously turned down. In making the announcement, Harper made ample reference to the mental twists and turns he had agonized through in making the decision. He noted that Canadians had not spent years unwinding state control over key resource assets, only to see them fall under the control of unaccountable foreign governments. At the same time, having only recently visited China on a trade and investment-promoting mission, he could hardly turn down the first major inward investment that came along. However, Harper also made it clear that no further takeovers of major oil assets would be permitted in the future -- unless there were "exceptional circumstances". We'll come back to that later.
Friday's decisions are of a piece with the schizophrenic nature of Canadian foreign investment policies over the years. Until not very long ago, the main aim of the country's generally restrictive policies was to prevent excess US influence over the national economy. These days, thanks to the shift in economic and financial power to Asia, the bogeyman wears a different disguise. Indeed, in the energy sector, the US has opened the way for Chinese involvement through its dithering over the Keystone pipeline proposal, which would have seen much of the output from the Alberta oil sands heading south.
The added complication is that much of the foreign capital now circling key Canadian assets is controlled by governments, either directly (as in the case of CNOOC) or through sovereign wealth funds. As a result, opposition to the latest takeovers has produced an unholy alliance of left (the NDP, always leery about foreign capitalists) and right (in favour of investment but antsy about governments, especially communist ones). By suggesting that approval of the CNOOC and Petronas deals is being provided on an exceptional basis, Harper is clearly hoping to defang these critics (which may be why the announcement was made at such an odd time), while preserving what he portrays as Canada's openness to foreign investment generally, as long as it's made on a commercial basis.
Problem is, that's not generally how Canada's investment policies are seen in the rest of the world. The business press in the UK regularly castigates Canada for its anti-investment decisions. The most recent casus belli for The Times and others was the Harper government's rejection, in 2011, of a planned takeover of Potash Corp by BHP Billiton, which is not by any stretch of the imagination a state controlled company. It's unlikely that anyone at BHP would agree with Harper that Canada is open to foreign investment.
What's more, Harper's suggestion that future takeovers will only be allowed in "exceptional circumstances", the nature of which he declined to specify, leaves the Government with plenty of wriggle room when the next controversial deal comes along. Despite Harper's attempt at sounding tough and decisive, it looks as if Canadian foreign investment policy will continue to be made on the fly.
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