On Dec. 7, Prime Minister Stephen Harper announced the approval of two highly anticipated deals - China National Offshore Oil Co.'s (CNOOC) $15.1-billion acquisition of Calgary oil company Nexen Inc. and Malaysia's Petronas $5.3-billion acquisition of Progress Energy Resources Corp.
Harper also announced new guidelines that present a balanced approach to foreign direct investment. The guidelines essentially forbid future takeovers of Canadian oilsands companies by state-owned enterprises (SOEs), but simultaneously allow for foreign capital through minority investments and joint venture partnerships.
The message from Ottawa is clear: Canada still welcomes foreign investment and capital from SOEs, but they will be highly scrutinized if they seek control of a current Canadian company.
In other words, Canadian companies will continue to operate commercially, and be employed and managed by Canadians.
A statement by John Manley, president and CEO of the Canadian Council of Chief Executives, stated "the decision to approve the acquisitions of Nexen Inc. and Progress Energy Resources Corp. sends a positive signal to investors in Canada and around the world. Canada welcomes foreign investment because it is good for our economy, good for job creation and increases competition, which in turn strengthens productivity."
However, due to our relatively small population, foreign capital is necessary to ensure Canada remains a leading exporter in the oil and energy sectors. The new guidelines allow Canadians can continue to benefit from foreign investment but "at the same time, companies looking to invest in Canada must play by our rules and respect our values, adhering to Canadian laws, regulations, and environmental and labour standards."
The new rules are a refreshing shift from current trend of foreign takeovers in the natural resource sector. Further, they are also congruent with Canada's attempt to rid the oilpatch of Crown corporation ownership. It only makes sense to limit entry to foreign-owned state companies.
"To be blunt, Canadians have not spent years reducing ownership of sectors of the economy by our own governments only to see them bought and controlled by foreign governments instead," Harper told reporters.
Notwithstanding the new and emerging prevalence of state-owned companies in the global marketplace, this sends the message to other countries that Canada will welcome foreign investment, but only on its own terms.