Foreign investment’s murky politics

This is deliberate. The Harper government knows Canadians are passive/aggressive about foreign investment. Some investments — such as those in the oilsands by Statoil, a sovereign investor from Norway — go unnoticed. Others, like the proposed takeover of Calgary-based Nexen Inc. by China National Overseas Oil Corp. (CNOOC), a China-based, state-owned company, strike fear within the body politic.

Other foreign deals, such as the ill-fated takeover of Calgary-based Progress Energy Resources Corp. by Petroliam Nasional Bhd, a sovereign company based in Malaysia, are pawns in a game that has come a long way from the laissez-faire attitude about foreign investment the Harper government had when it first took office.

The turning point probably came in 2010, when Ottawa turned down the takeover of Regina-based Potash Corp. of Saskatchewan Inc. by an Australia-based mining giant. There were definitely signs the Prime Minister’s Office (PMO) wanted that deal to go through. In fact, insiders say, the deal was approved on the day before the rejection was announced. But the Saskatchewan caucus revolted en masse.

With CNOOC, Harper is in a situation similar to the 1944 conscription crisis that MacKenzie King faced. He can’t afford to say yes; he can’t afford to say no.

The oilsands may badly need foreign capital, but the extent of “sinophobia” in the West, within Harper’s own caucus and in the U.S. is astonishing. And after the government has blocked planned takeovers in the potash and aeronautics industries with political success, people will expect it to do the same with the next takeover deal that is unpopular.

That’s why the new Parti Québécois government in Quebec seriously expected Ottawa to block the takeover of Boucherville, Que.-based Rona Inc. — because it’s a strategic asset. A chain of hardware stores.

But saying no to the CNOOC deal would be very expensive. How does Canada achieve reciprocity for Canadian investment in China after such rejection?

The oilsands need foreign capital to continue driving the domestic economy and develop more exports. In addition, corporate Canada is still sore about the Foreign Investment Review Act of the Trudeau era. And it is losing patience with the Harper government over this issue.

What to do?

Make things nice and murky, as Mackenzie King did (“Conscription if necessary but not necessarily conscription”).

First, the PMO delays a decision on the Petroliam/Progress Energy deal for as long as possible.

Then, the PMO gets Natural Resources Minister Joe Oliver to announce that public opinion would be taken into consideration — something contrary to the Investment Canada Act.

Reject the Progress Energy takeover within 30 days, and do so with a mysterious, 127-word news release 15 minutes before midnight on a Friday night without giving any reason to let the Chinese know you are capable of rejecting any deal.

Then, let it be known you are bargaining hard to extract so many concessions from CNOOC that the Chinese might walk away.

When Ottawa finally does have a decision one way or the other in the middle of this month, the negative reaction will be tempered and diluted.

A similar play is being made about the deficit. The very day that Finance Minister Jim Flaherty announced elimination of the deficit would be delayed for a year and then also warned of a possible economic slowdown, Conservative MPs fanned out across the country and doled out cheques worth more than $46 million in goodies for everything from a gluten-free bakery in Alberta to a new snowmobile club in Quebec.

Gluten-free bread and snowmobiles must be strategic sectors, too.

Harper announced the next day that Ottawa would indeed make its target date for balancing the budget after all — in direct contradiction of statements made by the finance minister. The more ambiguous a government is on an issue, the more difficult it is to criticize.  IE