State-Owned Firms Threatens Security: Canada Spy Agency

Foreign investment by some state- owned enterprises may represent a threat to Canada’s natural security, the country’s spy agency warned in its annual report.

“While the vast majority of foreign investment in Canada is carried out in an open and transparent manner, certain state- owned enterprises and private firms with close ties to their home governments have pursued opaque agendas or received clandestine intelligence support for their pursuits here,” the Ottawa-based Canadian Security Intelligence Service said in its annual report released yesterday.

“When foreign companies with ties to foreign intelligence agencies or hostile governments seek to acquire control over strategic sectors of the Canadian economy, it can represent a threat to Canadian security interests,” the intelligence agency said in the report, without citing any countries or companies.

Investment by Chinese state-owned companies in Canada’s energy industry has become a contentious issue among lawmakers returning from a three-month summer break this week as Prime Minister Stephen Harper’s government reviews a $15.1 billion bid by China’s Cnooc Ltd. (883) for Calgary-based Nexen Inc. (NXY)

Foreign state-owned companies may “exploit that control in an effort to facilitate illegal transfers of technology or to engage in other espionage and other foreign interference activities,” the agency said.

Canada always takes security into account when it negotiates trade and investment agreements, Trade Minister Ed Fast said today when asked about the CSIS report. “In fact, it would be our top priority to make sure Canada remains safe and secure,” he told reporters in Ottawa.

While Canada welcomes foreign investment, the government is “also looking for a level playing field,” he said. “We look for a balancing of opportunities as we engage with our key trade partners around the world.”

To contact the reporter on this story: Andrew Mayeda in Ottawa at amayeda@bloomberg.net

To contact the editor responsible for this story: Chris Wellisz at cwellisz@bloomberg.net

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