Ottawa moves to limit foreign investment reviews
Federal government to start limiting its reviews of foreign investment over next four years
The federal government is raising to $1 billion the amount of foreign money that can go into a Canadian company before the investment is reviewed.
Right now, an investment or takeover of a Canadian business worth $330 million or more triggers a federal review under the Investment Canada Act. The industry minister looks at whether the investment is of "net benefit" to Canada, though current laws don't explain what that means.
If the change goes ahead, the limit will immediately rise to $600 million, then to $800 million two years after that. The threshold will sit at $800 million for another two years before rising to $1 billion. The final amount will be indexed to Canada's gross domestic product.
The Conservative government used the Investment Canada Act to block a proposed 2008 takeover of MacDonald, Dettwiler and Associates Ltd., the company behind the Canadarm, and a proposed 2010 takeover of Potash Corp.
In 2010, a media report quoted Prime Minister Stephen Harper saying he'd give more information about the act.
"The government will be in a position not only to give reasons for the decision, but to give broader guidance to the investment community on the kind of foreign investment it is and is not seeking," Harper said after the government refused to let Australian company BHP mount a $40 billion takeover of Potash Corp, according to Bloomberg.
Net benefit test 'fundamental issue'
The changes will be done through regulation rather than presented in front of Parliament and studied in committee. There's a 30-day public consultation period before they're final.
A news release from Industry Minister Christian Paradis' office says the changes were first proposed in 2009 and adjusted based on consultations.
The regulations also propose a change to look at the enterprise value of a company's assets rather than the book value, according to the business' financial statements. The news release says the enterprise value "better reflects the value of a business as a going concern and the increasing importance of service and knowledge-based industries." That change will take effect as soon as the limit rises to $600 million.
NDP industry critic Hélène LeBlanc said the changes will negatively impact communities. The NDP wants the threshold lowered to $100 million, she said.
"We have seen a lot of foreign takeovers followed by lay-offs and broken promises," she said, pointing to Caterpillar closing its Electro-Motive Diesel plant in London, Ont.
"We see that small- and medium-sized enterprises, quite often when they become attractive, will be bought by global companies that don't have deep roots in the community and don't have the same objectives as building communities, offering long-term jobs," LeBlanc said.
The NDP also want to see the definition of net benefits clarified, she added.
Liberal Industry critic Geoff Regan says the change doesn't deal with the major problem in the act.
"The government's decision to raise the threshold for reviewing foreign takeovers to $1 billion fails to address a fundamental issue, which is clarification of the net benefit test," Regan said in an email to CBC News.
"It is very disappointing that the Conservatives have again refused to clarify the net benefit test and continue to block all attempts to have the [House] industry committee study the Investment Canada Act. What Canadians and investors really want is to know what constitutes a net benefit to Canada."