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Any ‘net benefit’ depends on managerial decisions that have yet to be made
When Prime Minister Stephen Harper announced the new provisions on investments by state-owned enterprises (SOEs) on Friday, one thing he said was unarguable: “Our statements today will not satisfy everybody.” His government has been attacked both for approving the acquisition of Nexen by Chinese SOE CNOOC and of Progress Energy by Malaysian SOE Petronas, and for restricting future SOE investment in Canada.
He has been particularly criticized for nixing SOE takeovers of oil sands companies except in “exceptional circumstances.” Alberta was bound to harrumph about legislation that, after all, is mainly about developing the province’s resources. But perhaps the most important hole in Friday’s announcement was that the vague and essentially impossible “net benefit” test remains in place.
When it comes to Nexen, Progress and SOEs, Mr. Harper steered a skilful course between offending the majority of Canadians who were against the Nexen deal, and offending the Chinese government at a time when he was seeking further commercial engagement. The oil sands acquisition ban on SOEs does not single out Beijing, which is also hardly in a position to criticize minority-ownership stipulations since it has similar rules of its own.
Mr. Harper’s claim that “the government of Canada has determined that foreign state control of oil sands development has reached the point at which further such foreign state control would not be of net benefit to Canada” was necessarily disingenuous, since no possible council of the wise could come to such a conclusion on purely economic grounds.
Arbitrary political power is always to be feared, but SOEs require considerable diplomacy. At least we know that Mr. Harper is at heart dedicated to as free markets as possible.
This orientation increasingly sets him apart from the re-Obama-fied U.S. My colleague Terence Corcoran wrote yesterday of the danger of another form of SOE, “state-operated entrepreneurialism,” the kind of rancid dirigisme favoured by Mr. Obama. This insight was immediately confirmed by Jeff Immelt, who is both head of GE and chairman of President Barck Obama’s Council on Jobs and Competitiveness. Mr. Immelt — a big booster of legislation to force the use of his own company’s alternative-energy products — declared that “state-run communism … may not be your cup of tea, but their government works.”
You would never hear Stephen Harper say that.
The SOE restrictions have inevitably been criticized by those who were hoping for more dumb, state-backed cash to overpay for their assets. Certainly, the shares of some of the smaller oil sands players have dipped this week.
For the rest of this column, please go to the National Post website: http://opinion.financialpost.com/2012/12/11/peter-foster-harper-fails-to-toss-perverse-net-benefit-rule/