How does the federal government determine if a foreign investment is of "net benefit" to Canada? The answer isn't straightforward (hence the pending review of the guidelines). Currently, when assessing a takeover under the Investment Canada Act, the industry minister considers the following areas:
1. The investment's effect on the level and nature of economic activity in Canada.
Examples of questions considered: Does it create jobs or slash them? Will the company import goods used in its operations, or does it plan on buying them from Canadian firms?
2. The degree and significance of Canadian participation in the investment.
Will there be a Canadian headquarters? If so, will it be staffed by Canadians, or will foreigners come in and take control?
3. The investment's effect on productivity, industrial efficiency, technological development, product innovation and product variety in Canada.
Will the acquired firm produce more after the takeover? Will there be an investment in new machinery? Does the takeover encourage or stifle innovation?
4. How the investment affects competition within any industry in Canada.
Will the entrance of a new global player put other smaller Canadian firms out of business? Can any Canadian businesses compete with the acquirer's economies of scale?
5. Whether the investment help Canada compete in world markets
Does the acquirer have global distribution channels to sell Canadian resources and products? How is the acquirer viewed? Will it enhance Canada's image, or tarnish it?
6. Whether the investment is compatible with Canadian industrial, economic and cultural policies.
This guideline is the most difficult to pin down; it would involve questions about a wide variety of issues against a political backdrop.
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BHP BILLITON'S $1-BILLION PROMISES
Global miner BHP Billiton failed in its $38.6-billion (U.S.) bid for fertilizer maker Potash Corp., despite offering more than $1-billion of pledges to win Ottawa's approval
* Remain in Canpotex, the export arm of Potash Corp., Mosaic and Agrium, for five years.
* $450-million (U.S.) exploration and development investment over the next five years, over and above spending already planned on BHP's Jansen potash project in Saskatchewan. Jansen is set to be the world's biggest potash mine.
* $370-million additional spending on infrastructure in Saskatchewan and New Brunswick.
* Commitment to forego certain tax benefits. Saskatchewan estimated the province stood to lose between $3-billion (Canadian) and $6-billion over 10 years in taxes and potash royalties if the takeover had proceeded.
* Move more than 200 jobs from outside Canada to Saskatchewan and Vancouver.
* Maintain current job levels at Potash Corp.'s Canadian mines for five years and increase overall employment in Canadian potash businesses by 15 per cent in that time.
* $250-million (U.S.) performance bond to ensure the company fulfilled its undertakings.
* $8-million a year in spending on community programs, mainly in Saskatchewan and New Brunswick.
* Investment in the University of Saskatchewan.
Reuters