Prime Minister Stephen Harper.
Credits: Andre Forget/QMI Agency
OTTAWA -- The Harper government is expected to make a trio of decisions -- the first of which could come as early as this week -- on some business deals that could have broad implications for the overall health of Canada's economy now and for years to come.
These decisions, among the most important the Harper government has ever had to make, are centred around the issue of control of Canadian companies by foreign governments and each decision is fraught with political and economic peril.
At stake is literally hundreds of billions of dollars of foreign investment that the government, by its own admission, says are needed to develop Canada's natural resources, to create thousands of new jobs here, and to ensure Canada's economic prosperity. There simply is not enough money in Canada to pay for all the roads, mines, dams, pipelines and other energy infrastructure Canada needs to unlock its resource wealth. Most of that money, the government itself says, will have to come from overseas investors.
And yet, several polls show Canadians are nervous and even hostile towards the idea of too much foreign control of those natural resources. That's the political peril.
The first major decision facing the government is what to do about CNOOC, a state-owned-enterprise or SOE, controlled by the government of communist China that is ready to spend $15 billion to buy Calgary-based oil and gas producer Nexen.
Then, likely at the same time it decides on CNOOC, it must decide if it will let Petronas, another SOE, snap up Calgary-based natural gas producer Progress Energy Resources. Petronas, owned and controlled by the government of one of Canada's Commonwealth cousins, Malaysia, is ready to pay $5.4 billion for Progress.
Both CNOOC and Petronas have, by all accounts, bent over backwards to convince Ottawa that they will be responsible corporate citizens and that the Canadian economy will benefit from their ownership of these Canadian firms.
Managers of billions of dollars in investment funds from London to New York to Hong Kong say if the deals are not approved, the Harper government will be saying it doesn't want the foreign investment that will create Canadian jobs. That's the economic peril.
Several polls show that the deal involving China's CNOOC will be the toughest for the government to sell.
"Canadian public opinion is a hurdle for the government," Abacus Data CEO David Coletto said when he released a poll in mid-September that showed two-thirds of Canadians said the CNOOC deal should be spiked. "Not only do opposition party supporters want the government to reject the deal, but a majority of Conservative Party supporters want the deal to be rejected as well.
By law, no foreign company can buy a big Canadian company unless Ottawa determines it passes a vague "net benefit" test set out in the Investment Canada Act.
That act has been in place since 1985 but no foreign company's bid was ever rejected until the Harper Conservatives came to office. In 2008, the Conservatives became the first government ever to invoke the Investment Canada "net benefit" test when they blocked the takeover of B.C.-based Macdonald Dettwiler by an American firm.
Since then, many have pressed the government for clearer guidelines on what constitutes a "net benefit." With its third key decision expected soon, the government now plans to define the term when it announces a general rule -- the government is calling it a framework -- that Ottawa will use as a guide in evaluating future bids by foreign state-owned enterprises.
It's a tricky issue. The government must balance the need for foreign capital against the desire many Canadians have to maintain control over their resources. Trickier still are bids such as the one from China's CNOOC where the government of the home country does not share the same commitments Canadians have to free market principles, human rights and transparency.