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.
For the report go to:
Daniel Schwanen, Associate Vice President, International and Trade Policy,
C.D. Howe Institute. 416-865-1904; email:firstname.lastname@example.org
SOURCE: C.D. Howe Institute
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