Mr. Speaker, it is my pleasure to speak to the opposition day motion. I am honoured to share my time with the terrific member for Ajax—Pickering.
Foreign investment plays an important role in the Canadian economy. Foreign investors bring with them knowledge, capabilities and technology, which can increase the productivity, efficiency and competitiveness of Canadian firms. These investments frequently help Canadian-based companies to expand and create jobs for Canadians. Recognizing the importance of investment flows into the country, Canada has a broad framework in place to promote trade and investment, while at the same time protecting Canadian interests.
It is important to note that investment flows both into and out of Canada. In fact, in the past several years Canadian companies have invested more abroad than foreign companies have invested in Canada. According to Statistics Canada, the stock of foreign investments into Canada reached $607.5 billion in 2011, while Canadian investments abroad reached $684.5 billion. The Investment Canada Act provides a mechanism to review significant acquisitions of Canadian enterprises by non-Canadian companies to determine if they are likely to be of net benefit to Canada. It also provides a mechanism to review investments that could be injurious to our national security.
I will take this opportunity to describe for members how the Investment Canada Act works and how decisions are taken by the Minister of Industry.
The administration of the act is shared between two ministers and their respective departments. The Minister of Canadian Heritage and Official Languages is responsible for the review of investments involving cultural businesses and 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. My comments today will focus only on those investments that are the responsibility of the Minister of Industry.
When a foreign investor proposes to acquire a Canadian business, the investor has certain responsibilities under the act. Foreign investors must either file a notification or an application for a review.
An investor must file a notification where there is an establishment of a new Canadian business or where there is a direct acquisition of control of a Canadian business with assets below the established threshold. Indirect acquisitions of control by investors from WTO countries are also subject to notification. This is triggered when a foreign investor requires control of a Canadian business indirectly by acquiring a company incorporated outside of Canada, which has a Canadian subsidiary.
For an investment which is not subject to a net benefit review under the act, where an investor has provided the information required by the regulations respecting the Investment Canada Act, the investor has met its obligations under the act. Information required under the regulations includes the names of the investors and the Canadian business, their respective addresses, a description of the business of the latter and the level of its assets.
Where a proposed investment is subject to a net benefit review under the act, the investor cannot implement the transaction without the approval of the minister responsible for the act. The investor must provide certain information as part of the filing of an application, including his or her plan for the Canadian business. Acquisitions are subject to review when the assets of the Canadian business to be acquired are equal to or above thresholds established under the act.
The threshold which applies to WTO members is adjusted each year by an amount equal to the change in the nominal gross domestic product. For 2012, the threshold for WTO members is $330 million. The threshold for cultural businesses and non-WTO members remains at a level established in 1985. It is $5 million for direct acquisitions or $50 million for indirect acquisitions, a much lower threshold for those industries.
The act provides the Minister of Industry with an initial 45 days to complete the review of the proposed investment and to make a determination of the net benefit. The Minister of Industry can extend that review period, if necessary, by 30 days. The review period can be extended further if both the investor and the Minister of Industry both agree.
The Minister of Industry approves an application for review only where he or she is satisfied, based on the plans, undertakings and other representations of the investor, that the investment is likely to be of net benefit to Canada. In making this determination of net benefit, the Minister of Industry must consider the factors listed in section 20 of the act.
For those in the House who do not know this, these six criteria are clearly indicated on the website and are easily found. They state:
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 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.
Also, for investors of state-owned enterprises, which has been an issue of late, the guidelines for the net benefit assessment investments by state-owned enterprises published under the Investment Canada Act applies to these proposed investments. The guidelines clarify that in the review under the ICA, as part of the assessment of the factors listed in section 20 of the act, the minister will examine: one, the corporate governance and reporting structure of the non-Canadian, including adherence to free market principles and Canadian laws and practices; two, how and the extent to which the non-Canadian is owned or controlled by a state; and three, whether the Canadian business can be acquired while continuing to have the ability to operate on a commercial basis.
As indicated in these guidelines, the examples of undertakings that address these issues include: the appointment of Canadians as independent directors on the board; employment of Canadians in senior management positions; the incorporation of the business in Canada; and a Canadian stock exchange listing.
The Investment Canada Act has a very clear net benefit test listed for all to see in writing on Industry Canada's website, including specific criteria on state-owned enterprises. Our government has acted to ensure that these criteria are up-to-date and reflect the evolution of foreign investment proposals to ensure that while Canada remains open for business, it is not for sale to foreign governments.