A Guarded Welcome for State-Owned Enterprises: C.D. Howe Institute
TORONTO, Nov. 26, 2012 /CNW/ – If Canada wants to benefit from Asia’s
long-term growth potential, there is no getting around the need to do
business, carefully, with state-owned enterprises (SOEs), according to
a report released today by the C.D. Howe Institute. In “Speed Dating or
Serious Courtship? Canada and Foreign State-Owned Enterprises,” author
Daniel Schwanen discusses how Canada can address concerns about the
potential impacts of investment by foreign SOEs in Canadian companies.
The proposed acquisitions of Nexen, a medium-sized Canadian oil and gas
producer, by CNOOC, majority-owned by the Chinese state, and of
Progress Energy by Malaysia’s state-owned Petronas, have put Canada’s
“net benefit” test for foreign acquisitions of Canadian businesses back
in the spotlight, he notes. Together, they have raised fresh concerns
about the impact of foreign state-owned enterprise (SOE) investment in
Canada, ranging from worries about national security and governance
standards to reciprocal access to markets.
While Ottawa’s current screening rules and guidelines are likely
adequate to address most concerns, says Schwanen, mechanisms should be
created to more explicitly address possible anti-competitive impacts of
SOE investments and to review whether SOEs keep their good governance
commitments. For example, Canada could draw on its competition law, and
straightforwardly clarify that related entities controlled by a single
foreign state will not be allowed to dominate its oil and gas or other
sectors. Governance undertakings could be subject to follow-up audits.
To promote reciprocity, Schwanen counsels the launch of a formal
governmental dialogue to address barriers to Canadian investments in
SOE home countries.
Canada needs to facilitate trade and investment deals other economies
where the state currently plays a determining role, including China,
concludes Schwanen, and that means learning to engage with economies
that do not function like ours, while enforcing and promoting
pro-competitive rules of the game in Canada.
SOURCE C.D. Howe Institute