Newspaper article The Canadian Press

Foreign Ownership Review Needs Flexibility, Says Former Ambassador to China

Newspaper article The Canadian Press

Foreign Ownership Review Needs Flexibility, Says Former Ambassador to China

Article excerpt

Foreign bid reviews need flexibility: ex-envoy

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OTTAWA - Canada needs to maintain some flexibility in the way it reviews foreign takeovers to prevent the rules from turning into a yes-no algorithm open to abuse by companies gaming the system, says a former Canadian ambassador to China.

Howard Balloch, now chairman of investment firm Canaccord Genuity Asia, says while the current rules, which have been widely criticized for their lack of clarity, need to be improved, the government needs to keep some room to manoeuvre.

"I would be surprised if that in doing so that they remove all flexibility," he said of the current review of the Investment Canada Act guidelines.

Under the rules in place, deals involving WTO member countries valued at more than $330 million must be a "net benefit" to Canada, however just what constitutes a "net benefit" exactly is unclear.

And while businesses may want a crystal clear definition, Balloch said he would preserve some flexibility in the approval process to prevent companies from artificially designing deals to pass muster even if they were not in the national interest.

The review comes as Industry Canada examines a $15.1-billion takeover offer by China National Offshore Oil Company for Calgary-based Nexen Inc. (TSX:NXY) and Malaysia's Petronas works to try to reverse a decision by the government to deny its bid for Progress Energy Resources Corp. (TSX:PRQ).

A report has suggested that Canada is looking at a possible two-track review system, one for typical companies and a second for state-owned companies.

The concern is the amount of influence a government may or may not have over the operations of state-owned companies.

"I think there is a tendency to see a state-owned company from China differently than a state-owned company from France or Norway," Balloch said.

But Balloch, who served as ambassador to China from 1996 to 2001, noted CNOOC and Nexen have made several commitments in hopes of winning approval, including a pledge to maintain the head office in Calgary and seek a Toronto Stock Exchange listing. …

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