China says CNOOC-Nexen deal will have 'mutual benefits'
Published Saturday, December 8, 2012 4:58PM EST
Last Updated Sunday, December 9, 2012 12:07AM EST
A day after Ottawa announced its approval of a multi-billion-dollar takeover of Nexen by the state-owned China National Offshore Oil Company, the Chinese government heralded the historic deal, calling it a “win-win co-operation” that would benefit both countries.
“We welcome the decision on the CNOOC-Nexen transaction by the Canadian Government,” the Chinese Embassy in Canada said in a statement posted on its website Saturday. “This is market-driven win-win co-operation based on mutual benefits, which we believe will surely bring tangible benefits to both companies and peoples of our two countries.”
At a press conference Friday, Prime Minister Stephen Harper announced his government had given the greenlight to the controversial $15.1-billion takeover of Calgary-based Nexen Inc. but made it clear that such deals will be allowed under “exceptional circumstances” in the future.
Ottawa also approved Malaysian state-owned company Petronas’s $6-billion purchase of Alberta’s Progress Energy.
However, Harper said those acquisitions are “the end of a trend,” rather than a beginning.
“When we say that Canada is open for business, we do not mean that Canada is for sale to foreign governments,” he said at a press conference.
The Nexen and Progress deals were deemed to have a significant economic benefit to Canada, but from now on, bids by state-owned foreign companies on our oilsand businesses will only be considered in “exceptional circumstances,” Harper said.
Any more foreign hands in Canada’s lucrative natural resource sector would not benefit the country, he said, noting that only 15 companies operate in the oilsands.
Harper said his government has been concerned for some time that “a series of large-scale controlling transactions by foreign state-owned companies could rapidly transform (the oilsands) industry from one that is essentially a free market to one that is effectively under control of a foreign government.”
But, “there is an awful lot of room between those two extremes,” Harper said.
Harper said under major changes to policies under the Investment Canada Act, all state-owned enterprises looking to buy Canadian companies will face greater scrutiny.
The threshold for a government review of a takeover by foreign private investors has also been increased to $1 billion from $330 million, so that Ottawa can focus on big proposals.
However, the $330-million threshold will remain in place for state-owned companies.
Michael Hyatt, business commentator and CEO of Bluecat Networks, told CTV News Channel that Ottawa wants to show Canadians more structure around how they will allow foreign companies to buy into Canada’s assets in the future.
“But that’s a slippery slope because a lot of these companies in foreign countries have really strong influence by their governments so it’s kind of hard to say what you’re really getting,” Hyatt said.
In a news release, the government said Industry Minister Christian Paradis will “continue to carefully monitor SOE transactions throughout the Canadian economy.
“In particular, the minister will closely examine: the degree of control or influence a state-owned enterprise would likely exert on the Canadian business that is being acquired; the degree of control or influence a state-owned enterprise would likely exert on the industry in which the Canadian business operates; and the extent to which a foreign state is likely to exercise control or influence over the state-owned enterprise acquiring the Canadian business,” the release said.
From an economic standpoint, Canadians have the opportunity to benefit from the deal, Patrick LeBlond, a professor at the Graduate School of Public and International Affairs at the University of Ottawa told CTV News.
“If we have the guarantees that Nexen and CNOOC are going to continue … maintaining employment, head offices and other higher value jobs in the country, I think overall this is a net benefit,” LeBlond said.
“Let’s not forget: the resources are in Canadian soil -- they cannot just be moved like that. And we certainly have the powers and the resources that as soon as they come out of the ground we can tax them.”
Harper’s announcement came three days before the deadline to make a decision on the Nexen deal.
Many critics also have concerns about national security issues and China’s poor record when it comes to labour rights.
The Canadian Security Intelligence Service has expressed its fears over foreign investment by state-owned companies, although it did not single out specific countries as potential threats in its annual report.
But Harper said that all deals involving foreign companies, regardless of whether they are state-owned or not, are subject to a national security test.
Ottawa also said non-controlling foreign interests in Canadian businesses “will continue to be welcome.”
Alberta Premier Alison Redford welcomed Harper’s announcement, but critics were quick to voice their disapproval.
NDP natural resource critic Peter Julian accused the Conservatives of “trying to sugar-coat…a rather bitter pill,” saying the public should have been consulted on the Nexen and Progress bids.
"This is a farce. While Conservatives admit that under the new rules this transaction is not a net benefit to Canadians, they have approved it anyway," he said.