Mr. Speaker, I would first like to say that I will be sharing my time with the hon. member for Brant. I wish to thank you for the opportunity to speak to the House today.
I will take this opportunity to describe how the Investment Canada Act works and how the Minister of Industry makes decisions. First, the administration of the act is shared between two ministers and their respective departments. The Minister of Canadian Heritage is responsible for the review of investments involving cultural businesses. The Minister of Industry is responsible for the review of all other investments. The Minister of Industry is also responsible for all other aspects of the administration of the act, including initiating enforcement measures.
Today, I will be talking about investments for which my department, Industry Canada, is responsible.
When a foreign investor proposes to purchase a Canadian company, that investor must obey the law. If a proposed investment must be reviewed in terms of its net benefit under the act, the investor cannot close the deal without the approval of the minister responsible. The investor must provide certain information in its application. This includes a business plan for the Canadian company.
Foreign investments are reviewable if the assets of the Canadian company are equal to or greater than a threshold established in the act. The threshold for World Trade Organization member countries is adjusted each year by an amount equivalent to the change in the gross domestic product of the investor’s home country. In 2012, this threshold is $330 million. The threshold for cultural businesses and non-WTO countries remains at the levels established in 1985: $5 million for direct acquisitions and $50 for indirect acquisitions.
Under the act, the Minister of Industry has an initial period of 45 days to consider the proposed investment and decide whether it will have a net benefit. If necessary, the minister can extend this period by 30 days. In addition, the period can be extended if the minister and the investor agree.
Industry Canada only approves applications for review when it is convinced that the plans, undertakings and other information from the investor make it clear that the investment is likely to be of net benefit to Canada.
Let me be clear that in my role as minister of industry, I must make sure that an application is approved only when we are satisfied, based on the plans, undertakings and representations of the investor, that the investment is likely to be of net benefit to Canada.
To determine the possibility of a net benefit, the following factors, listed in section 20 of the act, must be taken into account. They are:
(a) the effect of the investment on the level and nature of economic activity in Canada, including, without limiting the generality of the foregoing, the effect on employment, on resource processing, on the utilization of parts, components and services produced in Canada and on exports from Canada;
(b) the degree and significance of participation by Canadians in the Canadian business or new Canadian business and in any industry or industries in Canada of which the Canadian business or new Canadian business forms or would form a part;
(c) the effect of the investment on productivity, industrial efficiency, technological development, product innovation and product variety in Canada;
(d) the effect of the investment on competition within any industry or industries in Canada;
(e) the compatibility of the investment with national industrial, economic and cultural policies, taking into consideration industrial, economic and cultural policy objectives enunciated by the government or legislature of any province likely to be significantly affected by the investment; and
(f) the contribution of the investment to Canada’s ability to compete in world markets.
As part of the review process, the Investment Review Division of Industry Canada consults with federal government departments with policy responsibility for the industrial sector involved, with the Competition Bureau and with all the provinces and territories in which the Canadian business has substantial activities or assets.
Anyone who wishes to express their opinion regarding a specific investment can do so during the review process. This is outlined in the document entitled: “Guidelines—Administrative Procedures”.
According to these guidelines, when unsolicited representations are received that may be contrary to a net benefit determination, the applicants are advised of the nature of these representations and given enough time to respond if they so wish. Once the parties consulted have been able to explain their point of view, discussions are held with the investor and the subject of binding commitments is addressed.
The Investment Review Division also conducts an independent analysis of the acquisition on the basis of the six factors pertaining to net benefits that are set out in section 20 of the act. In the course of this review, the minister responsible for enforcing the act establishes benchmarks on the basis of which the proposed transaction is examined.
For this purpose, the profile of the Canadian business which the investor intends to acquire is examined with due regard to the future prospects of this business if it were to remain independent and not acquired. This would include determining whether the business in question is healthy and has good prospects, or whether instead it has financial problems. This is an important point.
Also taken into consideration are the main strengths of the business, areas for improvement and any challenges it may face. In addition to this, other factors involved in the planned investment are considered, such as the fact that the investor is providing capital or expertise that would not otherwise be accessible to the Canadian business.
In 2011, the Investment Review Division received and dealt with 634 notices of investment. It approved a total of 15 applications for review.
Our government has also been proactive and has updated the act to reflect new conditions.
More specifically, our government introduced the following measures: in 2007, it implemented the “Guidelines – Investment by stated-owned enterprises”; in 2009, it amended the provisions on national security; it amended the act to raise thresholds so that reviews could focus on the transactions that would have the greatest impact on Canada’s economy; it introduced targeted amendments so that the minister would be in a better position to communicate information concerning the review process to the public, and lastly, it published an annual report on the administration of the act.
We need to remember that the context in which international investments occur is constantly changing. We therefore continually review the act to make sure it is up to date and effective.
With respect to the proposed investment, as I said previously, all the time required will be taken to ensure that there is a detailed and attentive review of CNOOC’s plans to acquire Nexen.
The transaction will be approved only if it is likely to be of net benefit to Canada.
With reference to the proposed investment, as stated previously, the necessary time will be taken to conduct a thorough and careful review of CNOOC's proposed acquisition of Nexen. It will not be approved unless there is satisfaction that it is likely to be a net benefit for Canada.
I am happy to have had the opportunity to speak to the House and my colleagues in order to provide details about the Investment Canada Act.