Canadians urged to follow Australia on luring China cash
Canada has been urged to follow Australia's example by allowing more Chinese investment in resources.
The Conference Board of Canada, a Toronto and Calgary-based think-tank, has called on the Canadian government to model its foreign investment law on Australia's. This would involve replacing the need for foreign investors to demonstrate “net benefit” to less onerous requirement of showing the project is not “contrary to the national interest”.
Under the Canadian law, foreign investors must show their investments will bring positive benefits to the country. Under Australian laws investors only need to show that their projects will not harm Australia's national interest.
“We believe that Chinese investments in Canada are in the Canadian national interest. A more explicit regime that reduced arbitrary political interference would be better for Chinese investments in Canada,” according to its report by the board, Fear the Dragon? Chinese Foreign Direct Investment in Canada.
The report notes that Australia enjoys a far greater trade and investment relationship with China than Canada and says Chinese investment in the country is only one-third of that in Australia.
Canadians are alarmed by this intimate relationship and fear they are falling behind their key competitor. The report says when it comes to competition for Chinese foreign direct investment, it is not Germany, France, or Italy that should concern Canada—it is resource-rich countries like Australia.
There is significant popular concern in Canada over the Chinese investment. One in 10 respondents in a 2012 survey thought Chinese companies taking a majority interest in Canadian companies was a not good thing.
"For Canada, China is as politically sensitive as it gets... There is an inherent distrust of the regime among many Canadians and this is manifested in its investment relationship with Canada," the report says.
However, it finds the political risks of the Chinese investment to be manageable and argues that an open investment regime has the added benefit of socialising a non-democratic country into a better political behaviour.
The Conference Board has urged the Canadian government to change its current "opaque, politically charged review process” in favour of a more open and accommodating Australian approach.
It specifically recommends the government adopt the Australian approach of asking Chinese companies to separate their operations from marketing.
The existing state-owned enterprise guidelines should include "specific undertakings on arm's length marketing requirements with prices benchmarked to international levels, along the lines of the Australian approach," it says.
Canadians believe the adaption of Australian-style screening regime will go some way to addressing the wide-spread fear of Chinese investments.
BusinessDay understands that the Foreign Investment Review Board has been in contact with its Canadian counterpart in the past discussing the management of the Chinese investment.
Australian miner BHP Billiton had also fallen foul of the Canadian foreign investment law and its bid for the Potash Corporation of Saskatchewan was rejected last year.
Read more: http://www.theage.com.au/business/canadians-urged-to-follow-australia-on-luring-china-cash-20120709-21qjx.html#ixzz20A6iCoeX
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