The Canadian government has introduced emergency measures to protect vulnerable companies from takeover by “predatory foreign investors,” a move similar to the Indian government’s decision to remove the automatic approval route for investments from countries sharing a border with India.
Ottawa announced a slew of measures that will “subject certain foreign investments into Canada to enhanced scrutiny” under these “extraordinary circumstances.” Canadian Prime Minister Justin Trudeau addressed these concerns during his daily media briefing and said his government “will be strengthening our oversight and paying close attention to foreign investment in this country to ensure that there aren’t people taking advantage of this crisis.”
As with New Delhi’s decision, no country has been named in the announcement from Ottawa, though there have been fears within the country that Chinese state-owned companies may take advantage of the situation. A statement from Innovation, Science and Economic Development Canada appears to underscore this point. In a statement, it noted that some investments by state-owned enterprises “may be motivated by non-commercial imperatives that could harm Canada’s economic or national security interests, a risk that is amplified in the current context.” In this context, it decided that all foreign investments by such companies or by “private investors assessed as being closely tied to or subject to direction from foreign governments” will be subject to the enhanced scrutiny under the Investment Canada Act.
The statement added the rationale for these steps: “Many Canadian businesses have recently seen their valuations decline as a result of the pandemic, consistent with patterns in other major economies. These sudden declines in valuations could lead to opportunistic investment behaviour.”
The Canadian government will pay “particular attention” to investments to businesses related to public health or involved in the supply of critical goods and services.
It said that the government “will ensure that in-bound investment does not introduce new risks to Canada’s economy or national security, including the health and safety of Canadians.”
These protectionist measures will remain in place till “the economy recovers from the effects of the COVID-19 pandemic.”
