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Tim Armstrong, a lawyer and formerly Ontario’s deputy minister of industry, trade and technology, was the province’s agent-general for the Asia-Pacific region from 1986 to 1990.
The proposed takeover of Calgary-based Nexen Inc. by the China National Overseas Oil Corp. (CNOOC) would be the biggest Chinese acquisition of a Canadian company, and possibly just the start of an expanding Chinese stake in Canada’s energy sector.
The deal is now under review, but is the Harper government genuinely contemplating a rejection of the CNOOC bid, or is it just tweaking its rationale for acceptance — as most commentators speculate?
Those who raise concerns are accused by supporters of the deal of being either chauvinistic or anti-free market. However, there can be little doubt that Chinese state-owned enterprises (SOEs) are intensifying efforts to dramatically increase their ownership of our oilsands sector.
It began in 2005 when CNOOC acquired a minority interest in MEG Energy Ltd. Since then, China’s other two huge energy SOEs — SINOPEC and the China National Petroleum Corp. (parent of Petro-China) — have established footholds.
The latest is the announced partnership between a Petro-China subsidiary and TransCanada Corp. to build a pipeline from Fort McMurray to Fort Saskatchewan.
Supporters say we need to take advantage of China’s enormous wealth to adequately develop this key sector. Opponents contend there are plenty of other private investors — domestic and offshore — to meet our needs. But most agree that SOE investments require special attention.
In 2008, SOE guidelines were issued under the Investment Canada Act. These reflected similar 2005 OECD guidelines that recognized the “major challenge . . . to find a balance between the state’s responsibility for actively exercising its ownership function,” such as the nomination and election of the board, “while refraining from imposing undue political interference in the management of the company.” Mention was made as well of ensuring “that there is a level playing field” allowing private sector companies to fairly compete.
Laudable aims, but the tests set out in both sets of guidelines are so vague and nebulous as to be of little practical use. Here are eight specific questions concerning the CNOOC-Nexen transaction that should be specifically addressed:
• If the deal is to be seriously considered, should CNOOC be permitted to acquire total control of Nexen? Or should Canada adopt the 50-50 joint venture approach followed by Australia — and China itself — when the acquisition involves a significant natural resource? The “total control” practice is the one China follows in most African developing countries, where there is a dearth of potential investors. Should the same apply to a developed economy like Canada?
For the rest of this columne, please go to the Toronto Star website: http://www.thestar.com/opinion/editorialopinion/article/1281332–nexen-cnooc-deal-eight-questions